Scribd
Upload
63 views12 pages

Strategic Capacity Planning For Products and Services

The document discusses strategic capacity planning for products and services. It defines capacity, design capacity, effective capacity, and actual output. It identifies key questions to consider in capacity planning, such as the type and amount of capacity needed and when. It discusses factors that influence capacity like facilities, processes, employees, and external factors. It outlines a 7-step process for capacity planning and selection of make-versus-buy alternatives. Finally, it introduces analytical tools for capacity planning like cost-volume analysis and break-even point analysis.

Uploaded by

Muhammad Munib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
63 views12 pages

Strategic Capacity Planning For Products and Services

The document discusses strategic capacity planning for products and services. It defines capacity, design capacity, effective capacity, and actual output. It identifies key questions to consider in capacity planning, such as the type and amount of capacity needed and when. It discusses factors that influence capacity like facilities, processes, employees, and external factors. It outlines a 7-step process for capacity planning and selection of make-versus-buy alternatives. Finally, it introduces analytical tools for capacity planning like cost-volume analysis and break-even point analysis.

Uploaded by

Muhammad Munib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 12

Strategic Capacity

Planning for Products


and Services
Capacity
The upper limit or ceiling on the load that an
operating unit can handle
Capacity needs include
Equipment
Space
Employee skills

5-2
Key Questions:
What kind of capacity is needed?
How much is needed to match demand?
When is it needed?
Related Questions:
How much will it cost?
What are the potential benefits and risks?
Are there sustainability issues?
Should capacity be changed all at once, or through
several smaller changes
Can the supply chain handle the necessary changes?

5-3
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.

5-4
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

5-5
Actual output
The rate of output actually achieved
It cannot exceed effective capacity
Efficiency
actual output
Efficiency
effective capacity
Utilization
actual output
Utilization
design capacity
Measured as percentages

5-6
MAJORS FACTORS:
Facilities
Product and Service Factors
Process Factors
Human Factors
Policy Factors
Operational Factors
Supply Chain Factors
External Factors

5-7
1. Estimate future capacity requirements
2. Evaluate existing capacity and facilities; identify gaps
3. Identify alternatives for meeting requirements
4. Conduct financial analyses
5. Assess key qualitative issues
6. Select the best alternative for the long term
7. Implement alternative chosen
8. Monitor results

5-8
Once capacity requirements are determined, the
organization must decide whether to produce a good or
service itself or outsource
Factors to consider:
Available capacity
Expertise
Quality considerations
The nature of demand
Cost
Risks

5-9
1. COST VOLUME ANALYSIS
2. FINANCIAL ANALYSIS
3. DECISION THEORY
4. WAITING LINE ANALYSIS

5-10
Cost-volume analysis
Focuses
on the relationship between cost,
revenue, and volume of output
Fixed Costs (FC)
tend to remain constant regardless of output volume
Variable Costs (VC)
vary directly with volume of output
VC = Quantity(Q) x variable cost per unit (v)
Total Cost
TC = FC + VC
Total Revenue (TR)
TR = revenue per unit (R) x Q

5-11
BEP
The volume of output at which total cost and
total revenue are equal
Profit (P) = TR TC = R x Q (FC +v x Q)
= Q(R v) FC

FC
QBEP
Rv

5-12

You might also like