Chapter 8 - Capacity

1
Chapter 8 - Capacity

• Capacity Planning
• Measuring capacity
• Economies of scale
• Diseconomies of scale
• Theory of Constraints
• Capacity strategy

2
Utilization
Fabrication can make 100 engines/day Management
wants 45 engines/day Currently producing 50
engines/day
50 100
Utilizationpeak x 100 50
50 45
Utilizationeffective x 100 111
Example 8.1
3
Capacity Bottlenecks
Figure 8.2
4
Theory of Constraints

1. Identify the system bottleneck(s)
2. Exploit the bottleneck(s)
3. Subordinate all other decisions to step 2
4. Elevate the bottleneck(s)
5. Do not let inertia set in

5
Economies and Diseconomies of Scale
250-bed hospital
750-bed hospital
500-bed hospital
Average unit cost (dollars per patient)
Diseconomies of scale
Economies of scale
Output rate (patients per week)
Figure 8.3
6
Capacity Strategies
Forecast of capacity required
Planned unused capacity
Capacity increment
Capacity
Time between increments
Time
(a) Expansionist strategy
Figure 8.4
7
Capacity Strategies
Forecast of capacity required
Planned use of short-term options
Capacity increment
Capacity
Time between increments
Time
(b) Wait-and-see strategy
Figure 8.4
8
Linking Capacity and Other Decisions

• Competitive Priorities
• Quality Management
• Capital Intensity
• Resource Flexibility
• Inventory
• Scheduling

9

• A Systematic Approach to Capacity Decisions
• Step 1 Estimate Capacity Requirements
• Step 2 Identify Gaps
• Step 3 Develop Alternatives
• Step 4 Evaluate the Alternatives
• Qualitative Concerns
• Quantitative Concerns

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Tools for Capacity Planning

• Waiting- Line Models (Suppl C)
• Simulation (Suppl D)
• Decision Trees

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Capacity Decisions
Decision Trees
Low demand 0.40
70
Dont expand
90
High demand 0.60
Small expansion
Expand
135
Low demand 0.40
Large expansion
40
High demand 0.60
220
Figure 8.4