capacity planning for production management

7/29/2019 capacity planning for production management

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Shaun Manuel J. ApolinarioEvan Ephraim P. Medina

Vincent N. Montes

Jasper Kim G. Zarraga


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Concepts of Capacity Planning Capacity- Refers to an upper limit or ceiling on the

load that an operating unit can handle.

- An upper limit on the rate of output Goal to achieve a match between the long termsupply capabilities of an organization and thepredicted level of long-term demand.


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Concepts of Capacity Forecast are key inputs used to answer the questionsof how much capacity is needed and when is it needed.

Design Capacity The maximum output rate or service capacity an

operation, process, or facility is design for.

- Is the maximum rate of output achieved under idealconditions


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Effective Capacity Design Capacity minus allowancessuch as personal time, maintenance and scrap.

- Is usually less than design capacity owing to realities ofchanging product mix, the need for periodicmaintenance of equipment, lunch breaks, coffee breaks,problems in scheduling and balancing operations andsimilar circumstances.

- Actual output cannot exceed the effective capacity and itis often less


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Efficiency Ratio of actual output to effective capacity

Efficiency = Actual OutputEffective Capacity


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Utilization Is the ratio of actual output to design capacity

Utilization = Actual OutputDesign Capacity


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Determinants of Effective Capacity 1. Facilities

2. Product and Service Factors

3.Process Factors 4. Human Factors

5. Operational Factors

6. Supply Chain Factors

7. External Factors


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Facilities Design of facilities

Work would run smoothly if the workplace or layout of

the work area is good. Personnel can perform effectively if they are

comfortable in the workplace, and they would struggleif is the contrary.


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Product and Service Factors Simplicity can beat extensiveness

Simple products are easy to prepare


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Process Factors Output of quality is important.

If there are irregularities in the output, the rate of

production would be sluggish since inspections wouldbe made to determine the problem.


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Human Factors Skills and experience would affect the output.

Employee motivation could make or break the output.


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Operational FactorsJobs and equipments must be designated equally so

that it would not affect the output.

Availability of the equipments and personnel must betaken in to consideration so that the process shouldnot be halted.


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Supply Chain Factors Changes in operation


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External Factors Product standards can restrict managements options

for increasing and using capacity.

Pollution standards and paperworks pertaining toregulatory standards required by the governmentshould be also be taken into consideration.


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Cost Volume Relationships Focuses on relationships between cost, revenue, and

volume of output.

Purpose: estimate the income of an organizationunder different operating conditions.

Useful as a tool for comparing capacity alternatives.


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Cost Volume Relationships Fixed Costs- constant regardless of volume of output.

Ex: rental costs, property taxes

Variable Costs- varies directly with volume of output.

Major components: materials and labor costs. Total Costs = FC + VC

VC = Quantity of volume per output x Variable cost perunit. ( VC=Q x v)


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Strategy Formulation Organizations typically bases its capacity strategy on

assumptions and predictions about long-term demandpatterns, technological changes and behavior ofcompetitors.


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Strategy Formulation Key decisions of capacity planning:

1. Amount of capacity needed.

2. The timing of changes3. Need to maintain balance throughout the system

4. Extent of flexibility of facilities and the workforce.


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Strategy Formulation Capacity Cushion extra demand intended to offset

uncertainty.

Steps in the Capacity Planning Process:

1. Estimate future capacity requirements

2. Evaluate existing capacity and facilities and identifygaps

3. Identify alternatives for meeting requirements


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4. Conduct financial analyses of each alternative.

5. Assess key qualitative issues for each alternative.

6. Select one alternative to pursue.7. Implement the selected alternative.

8. Monitor results.


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Facilities Layout Layout refers to the configuration of departments,

work centers and equipment, with particular emphasison movement of work through the system


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Basic Layout typesI. Product Layouts

II. Process Layouts

III. Fixed position LayoutsIV. Combination Layouts

V. Cellular Layouts


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Product Layouts Layout that uses standardized processing operations to

achieve smooth, rapid, high volume flow.


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Process LayoutAre designed to process items or provide services that

involve a variety of processing requirements


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Fixed Position Layouts In FPL, the item being worked on remains stationary

and workers, materials and equipment are movedabout needed.


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Combination Layouts Is the combination of the three basic layouts that are

ideal models but altered to satisfy the needs of aparticular situation.


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Cellular Layouts Is a type of layout in which work stations are grouped

into what is referred to as Cell. Groupings aredetermined by the operations needed to perform work

for a set of similar items that requires similarprocessing.


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Need for Layout Decisions1. They require substantial investments of money and

effort

2. They involve long term commitments which makesmistakes difficult to overcome

3. They have a significant impact on the cost andefficiency of operations.


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Cycle Time Period required to complete one cycle of an operation

or to complete a function, job, or task from start tofinish.

capacity planning for production management

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