Capacity

1
Capacity

• Capacity Definition
• Capacity Types
• Capacity of the Supply Chain
• Calculating Capacity

2
Defining Capacity

• Now
• the rate of output from an OM system per unit of
  time
• OR
• the rate at which the firm withdraws work from
  the system

3
Supply Chain Capacity

• Tactical perspective
• output driven
• units of output, hours worked
• strategic perspective
• capability
• what you can and cannot do
• match capabilities with marketing needs

4
Types of Capacity

• Maximum
• Effective
• Demonstrated
• Planning Effects of Capacity Types

5
Types of CapacityMaximum Capacity (aka Design)

• Defined The highest rate of output that a
  process can achieve
• Calculation involves the following assumptions
• equally skilled workers
• no time loss due to changeovers or product
  differences
• no loss of capacity due to PM or planned downtime
• no OT work or heroic employee efforts
• Are these assumptions realistic?

6
Types of Capacity Effective Capacity

• Defined the output rate that managers expect for
  a given process
• Why would you operate below maximum?

7
Types of Capacity Demonstrated Capacity

• Defined the actual level of output for a process
  over a period of time, i.e., the average of
  output over time
• Why might this number be different than maximum
  or effective capacity?

8
Types of Capacity Demonstrated Capacity

• Demonstrated capacity
• what we actually observe
• can be affected by numerous factors
• problems with input
• problems internally
• nature of the product
• new vs standard

9
Capacity within the Supply Chain

• Must deal with the issue of bottlenecks and
  system constraints.
• Capacity defined by
• information systems
• infrastructure
• physical capacity
• logistics capacity
• supplier capacity
• relationship management

10
Bottlenecks

• Must look for bottleneck
• constraining resource
• how identified
• too much or too little inventory
• overtime
• why important
• limits output
• determines lead time
• determines ability of system to make money

11
Bottlenecks - Cont

• Types of bottlenecks
• output based
• time-based
• These bottlenecks may the same or they may be
  different
• Keys to success
• keep the bottlenecks busy
• inventories/signals
• invest in bottlenecks

12
Capacity - calculating

• Level of output of a plant or system is dependent
  on how it is organized
• capacity in sequence
• linear operations
• capacity in parallel
• multiple alternative operations
• any machine can be used

13
Capacity - Sequential

• Capacity of a system or process is based on the
  operation with the lowest amount of capacity
• Keys
• convert into the same units of measurement
• ensure that we are talking about the same
  dimensions
• effective vs design vs demonstrated
• capacity taken over the same time

14
Capacity - Sequential

• We have a process that makes cans
• Operation 1 - punches out tops and bottoms
• 2 lids for every can
• produces 250 lids per minute
• Operation 2 - body
• 1 body for every can
• produces 175 bodies per minute
• Operation 3 - mating
• makes the can
• produces 7500 cans per hour

15
Capacity - Parallel

• Capacity of the system or operation is based on
  the sum of the capacities of the various machines
  that make up the operation.
• Operation 3 has 4 machines
• machine 1 - 90 pieces per minute
• machine 2 - 110 pieces per minute
• machine 3 -120 pieces per minute
• machine 4 - 80 pieces per minute
• Total capacity for operation 3 400 pieces/min

16
Capacity Management Tools Calculating Capacity

• 1. Describe the general flow of activities within
  the process
• 2. Establish the time period
• 3. Establish a common unit
• 4. Identify the Maximum capacity for the overall
  process
• 5. Identify the Effective capacity for the
  overall process
• 6. Determine the Demonstrated capacity
• 7. Compare the Demonstrated, Effective and
  Maximum Capacities and take appropriate actions

17
Capacity - Example

• Mondavi Plant
• Draw a diagram
• What is its capacity
• Why is it hard to calculate

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Other Factors to Consider

• Setups
• reduce the capacity of the facility
• capacity is finite wrt time
• Relevant vs irrelevant
• relevant also depends on the options considered
• also depends on the level of capacity utilization

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Relevant Analysis

• Consider the following
• for a machine, what is the impact of one
  additional hour of setup if the machine is 50
  utilized?
• What is the impact of one additional hour of
  setup if the machine is 85 utilized?

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Importance of Setup Reduction

• Setup reduction (SMED) can reduce setup times by
  30 to 50 without significant investments.
• When teams work to reduce process variation or to
  improve safety, handling, preventive maintenance
  or housekeeping, they also tend to reduce setup
  times.
• When setup times decrease, setup labor and
  startup problems decrease.

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Setup Reductions

• When setup times decrease, it is economical to
  run smaller lots, which tend to reduce
  inventories, scrap, and rework.
• The habit of continuous improvement must not be
  discouraged (even if your equipment is not the
  bottleneck).
• As conditions change, a non-bottleneck can easily
  become a bottleneck.

22
Capacity Management Tools Input/Output Control

• A tool that manages work flows to match the
  demonstrated capacity of process
• Prevent problems by using plan your work, work
  your plan rule