Case study
Process design
Management questions addressed in process design

Q1) what level of capacity is needed from the process to serve market demand?
Answer:
Process management is a continuing activity. Processes used by companies are never static, instead they must change as customer demands evolve, competitive opportunities emerge, and new technologies improve. In this aspect capacity is often challenging to specify for particular activities and operations, and even more so far the entire process. In general, capacity captures the maximum rate of items processes per unit time. Capacity Level means ability to produce. The term is synonymous as Activity Level or Volume. Industries producing homogeneous units may express their capacity level in terms of units of output, whereas.
Maintaining the economic balance between your capacity and sales performance requires an explicit capacity strategy. The specifics of capacity strategies vary widely. One strategy would set capacity to deliberately lag demand; Harley-Davidson is a frequently cited example using the lag strategy where backlog and long quoted lead times are used to buffer capacity changes. Another is to have capacity lead demand: examples where this strategy could be used include competitive consumer markets, markets that demand short lead times with low inventories, or blocking a competitor's entrance into a prized market. The most prevalent strategy generally tries to match capacity and demand. An interesting variation on all three strategies is often used with product families having significant seasonal sales; they basically match capacity and demand over time while both leading and lagging sales with production at different points in time. Since most companies operate in different markets and have multiple products, it is important to set a strategy to serve each.

Q How should capacity be measured for each process operation or step? What is the capacity of each operation?
Ans: Capacity is usually assumed to mean the maximum rate at which a transformation system produces or processes inputs. Sometimes, this rate may actually be "all at once"—as with the capacity of an airplane. A more usable definition of capacity would be the volume of output per elapsed time and the production capability of a facility.
Capacity planning is the process used to determine how much capacity is needed (and when) in order to manufacture greater product or begin production of a new product. A number of factors can affect capacity—number of workers, ability of workers, number of machines, waste, scrap, defects, errors, productivity, suppliers, government regulations, and preventive maintenance. Capacity planning is relevant in both the long term and the short term. However, there are different issues at stake for each.
One key attribute of any activity is its capacity to produce the output intended. On this basis we should be looking at the ability of the activity to produce its capacity. Further, the expenses should be matched to the activity's capacity.
Q which factors or operations limit the output rate of the process? What are the bottlenecks?
Ans: At the very basic level, the overall process output is limited by the activity or operation with the lowest capacity, otherwise known as bottleneck. A bottle neck is the activity or operation that has the lowest capacity in the process. Thus the critical first step in analyzing or designing a process is to identify the bottleneck. Bottlenecks can be extremely frustrating. Sometimes they are unavoidable, and restricted by the performance of a particular demand or geographical setting. Despite this, there are still ways to help out the bottleneck and improve your operation. You want to make sure that your bottlenecked operation is running as much as possible. This may mean staggering lunch breaks so an employee keeps your bottlenecked operation operating. Your bottlenecked operation should never stop. There are also many other problems associated with this : * Higher fixed costs per unit mean reduced profitability; if prices were raised to cover these costs, this would probably lead to reduced sales unless the product was price inelastic * Spare capacity can portray a negative image, particularly in a business where it can be seen that it is no longer busy – such as a shop or a health club - signifying loss of popularity * Staff can become bored and demoralised if they don’t have as much to do, especially if they fear losing their jobs

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