Shaun Manuel J. Apolinario Evan Ephraim P. Medina Vincent N. Montes Jasper Kim G.

Zarraga

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 term

supply capabilities of an organization and the predicted level of long-term demand.

Conceptskey inputs used to answer the questions of Capacity Forecast are

Design Capacity The maximum output rate or service capacity an operation, process, or facility is design for.

of how much capacity is needed and when is it needed.

- Is the maximum rate of output achieved under ideal conditions

 Effective Capacity Design Capacity minus allowances

such as personal time, maintenance and scrap. - Is usually less than design capacity owing to realities of changing product mix, the need for periodic maintenance of equipment, lunch breaks, coffee breaks, problems in scheduling and balancing operations and similar circumstances. - Actual output cannot exceed the effective capacity and it is often less

Efficiency
Ratio of actual output to effective capacity
Efficiency = Actual Output Effective Capacity

Utilization
Is the ratio of actual output to design capacity

Utilization = Actual Output Design Capacity

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

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 struggle if is the contrary.

Product and Service Factors

Simplicity can beat extensiveness
Simple products are easy to prepare

Process Factors
Output of quality is important.
If there are irregularities in the output, the rate of

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

Human Factors
Skills and experience would affect the output.
Employee motivation could make or break the output.

Operational Factors
Jobs and equipments must be designated equally so

that it would not affect the output. Availability of the equipments and personnel must be taken in to consideration so that the process should not be halted.

Supply Chain Factors

Changes in operation

External Factors
Product standards can restrict managements options

for increasing and using capacity. Pollution standards and paperworks pertaining to regulatory standards required by the government should be also be taken into consideration.

Cost Volume Relationships

Focuses on relationships between cost, revenue, and

volume of output. Purpose: estimate the income of an organization under different operating conditions. Useful as a tool for comparing capacity alternatives.

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 per unit. ( VC=Q x v)

Strategy Formulation
Organizations typically bases its capacity strategy on

assumptions and predictions about long-term demand patterns, technological changes and behavior of competitors.

Strategy Formulation

1. 2. 3. 4.

Key decisions of capacity planning: Amount of capacity needed. The timing of changes Need to maintain balance throughout the system Extent of flexibility of facilities and the workforce.

Strategy Formulation

1. 2. 3.

Capacity Cushion extra demand intended to offset uncertainty. Steps in the Capacity Planning Process: Estimate future capacity requirements Evaluate existing capacity and facilities and identify gaps Identify alternatives for meeting requirements

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.

Facilities Layout
Layout refers to the configuration of departments,

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

Basic Layout types

I.
II. III. IV. V.

Product Layouts Process Layouts Fixed position Layouts Combination Layouts Cellular Layouts

Product Layouts
Layout that uses standardized processing operations to

achieve smooth, rapid, high volume flow.

Process Layout
Are designed to process items or provide services that

involve a variety of processing requirements

Fixed Position Layouts

In FPL, the item being worked on remains stationary

and workers, materials and equipment are moved about needed.

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

ideal models but altered to satisfy the needs of a particular situation.

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

into what is referred to as Cell. Groupings are determined by the operations needed to perform work for a set of similar items that requires similar processing.

Need for Layout Decisions

They require substantial investments of money and effort 2. They involve long term commitments which makes mistakes difficult to overcome 3. They have a significant impact on the cost and efficiency of operations.
1.

Cycle Time
Period required to complete one cycle of an operation

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