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Capacity Planning

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OPERATIONS MANAGEMENT
Chapter 5: Strategic Capacity Planning
 Learning Objective:
 You should be able to:
1. Summarize the importance of capacity planning
2. Discuss ways of defining and measuring capacity
3. Describe the determinants of effective capacity
4. Discuss the major considerations related to developing capacity alternatives
5. Briefly describe approaches that are useful for evaluating capacity alternatives
 Capacity Planning
 Capacity
1. The upper limit or ceiling on the load that an operating unit can handle
2. Capacity needs include
 Equipment
 Space
 Employee skills
 Capacity Planning Questions
 Key Questions:
1. What kind of capacity is needed?
2. How much is needed to match demand?
3. When is it needed?
 Related Questions:
1. How much will it cost?
2. What are the potential benefits and risks?
3. Are there sustainability issues?
4. Should capacity be changed all at once, or through several smaller changes
5. Can the supply chain handle the necessary changes?
6. Capacity

Design capacity
 Maximum output rate or service capacity an operation, process, or facility is designed for
Effective capacity
 Design capacity minus allowances such as personal time, maintenance, and scrap
Actual output
 Rate of output actually achieved--cannot exceed effective capacity.
 Defining and Measuring Capacity
 Measure capacity in units that do not require updating
 Why is measuring capacity in dollars problematic?
 Two useful definitions of capacity
 Design capacity
 The maximum output rate or service capacity an operation, process, or facility is designed for
 Effective capacity
 Design capacity minus allowances such as personal time and maintenance
 Measuring System Effectiveness
 Actual output
 The rate of output actually achieved
 It cannot exceed effective capacity
 Efficiency
 Utilization

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