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Capacity Management 2020 Ses9

The document discusses capacity management. It defines capacity as the amount of output a system can achieve over time. Capacity planning involves estimating future capacity needs, evaluating existing capacity, identifying alternatives to meet needs, and selecting and implementing the best alternative. The document also discusses capacity utilization, the factors that determine effective capacity, and strategies for developing capacity like designing flexibility and smoothing requirements.

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Deblina Mukherjee
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100 views

Capacity Management 2020 Ses9

The document discusses capacity management. It defines capacity as the amount of output a system can achieve over time. Capacity planning involves estimating future capacity needs, evaluating existing capacity, identifying alternatives to meet needs, and selecting and implementing the best alternative. The document also discusses capacity utilization, the factors that determine effective capacity, and strategies for developing capacity like designing flexibility and smoothing requirements.

Uploaded by

Deblina Mukherjee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Capacity Management

N Siva Prasad
Capacity
 The ability to hold, receive, store or accommodate
 In business terms it is the amount of output that a system is
capable of achieving over a period of time.( Plant capacity,
service capacity etc.)
 Capacity planning is generally viewed in three time durations
 Long Range
 Intermediate Range
 Short range
 Strategic Capacity Planning
 Finding the overall capacity level of capital intensive resources
to best support the firm’s long-term strategy.
Capacity Utilisation
 It is attainable rate of output
 Normally compared with best operating level
 Capacity utilisation = Capacity used/Design capacity X100
 Efficiency= capacity used/effective capacity or best
operating level X 100
 How to define and arrive at “Best Operating Level or
effective capacity”?
 Internal decision
 Benchmarking
 Compare similar type of industries
Determinants of effective capacity
 Facilities
 Product and service factors
 Process factors
 Human factors
 Policy factors
 Operational factors
 Supply chain factors
 External factors
Steps in Capacity Planning Process
 Estimate future capacity requirements
 Evaluating existing capacity and identify gaps
 Identify alternatives to meet requirement
 Conduct financial analyses of each alternative
 Assess key qualitative issues with each alternative
 Select the best alternative
 Implement and
 Monitor for effectiveness
Developing Capacity Strategies
 Design flexibility into systems
 Take stage of life cycle into consideration
 Take a system approach to capacity changes
 Prepare to deal with capacity chunks
 Attempt to smooth out capacity requirements
 Identify the optimal operating level.
 Choose a strategy if expansion is involved
Capacity Analysis
 Considerations in Changing Capacity
 Maintaining System Balance
 Frequency of Capacity Additions
 External Sources of Operations and Supply Capacity
 Decreasing Capacity
 Determining Capacity Requirements
 Use forecasting techniques
 Calculate resource requirements
 Availability of resources to be analysed
Decision Tree Analysis
 Evaluating capacity alternatives using decision tree
 Consider alternatives and list them
 Associated probabilities for alternatives are mapped
 Construct a decision tree with all possibilities ( with
associated cost)
 Cost analysis is done ( different pay offs are calculated)
 Compare all decision points wrt cost ( final value)
 Choose the best alternative
 NPV should be considered for long durations
Constraint management (TOC)
Categories
 Market: insufficient demand
 Resource: shortage of manpower etc.
 Material: Shortage of some material
 Financial : Insufficient funds
 Supplier: unreliable
 Knowledge: insufficient knowledge
 Policy: Local laws or regulations
Service Capacity-Challenges
 Need to be near customer
 No inventory possible
 Unpredictable variations in demand

 Use demand management strategies like discounts,


promotions, pricing etc.
 Stagger the demand
 Augment the resources

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