Capacity

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Capacity Aggregate PlanningChapter 9

• Teri Richardson
• David Burner
• Akhtar Mahsud
• Roxana Damian

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Capacity Planning

• Long term strategic decisions that establish a
  firms overall level of resources

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Strategies for Capacity Expansion in Relation to
Demand

• Capacity lead strategy
• Capacity lag strategy
• Average capacity strategy

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How much to increase capacity...

• The volume and certainty of anticipated demand
• Strategic objectives in terms of growth, customer
  service, and completion
• The costs of expansion and operation

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Facts

• An alternative to expansion is outsourcing
• Best operating level is the percent of capacity
  utilization that minimizes average unit cost
• Capacity cushion is for unexpected surges in
  demand or temporary work stoppages

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Economies of Scale

• Occurs when it costs less per unit to produce or
  operate at high levels of output

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Diseconomies of Scale

• Occurs above a certain level of output

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Aggregate Production Planning

• Determines the resource capacity a firm will need
  to meet its demand over an intermediate time
  usually six to twelve months

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Aggregate Plans

• Developed for product lines or product families,
  rather than individual products

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Aggregate Objectives

• To establish a company-wide game plan for
  allocating resources
• To develop an economic strategy for meeting demand

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Methods of Adjusting Capacity

• Producing at a constant rate and utilizing
  inventory to absorb fluctuations in demand
• Hiring and firing demands
• Maintaining resources for high-demand times
• Overtime, undertime, part-time, and
  sub-contracting
• Backorders

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Strategies

• Pure Strategy
• Mixed Strategy
• Level Production Strategy
• Chase Demand Strategy

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Quantitative Methods

• Trial and Error
• General Linear
• Transportation Method