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Capacity Planning
Capacity Planning
Capacity is the upper limit or ceiling on the load that an operating unit can handle. The basic questions in capacity handling are:
Capacity
Design capacity
maximum obtainable output Maximum capacity given product mix, scheduling difficulties, and other doses of reality. rate of output actually achieved--cannot exceed effective capacity.
Effective capacity
Actual output
Design capacity
Efficiency/Utilization Example
Design capacity = 50 trucks/day Effective capacity = 40 trucks/day Actual output = 36 units/day
Actual output Efficiency = Effective capacity Utilization = Actual output Design capacity 40 units/ day 36 units/day 50 units/day = 72% = 36 units/day = 90%
Volume
Volume
Growth
Time
Decline
Time
Volume
Volume
Cyclical
Stable
Time
Time
Make or Buy
After determined the capacity requirements an organization decide whether to produce a good or provide a service itself, or to outsource (buy) from another organization.
Cost-Volume Relationships
Figure- 4
Amount ($)
Cost-Volume Relationships
Figure -5
Amount ($) 0
Q (volume in units)
Cost-Volume Relationships
Figure -6
Amount ($) 0
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