quality management ch 6 SOM

Capacity Planning

Determines the maximum output a system can sustain over time.

Objective of Capacity Planning

Ensure the organization has enough capacity to meet demand efficiently while minimizing costs.

Balancing Supply and Demand

Key consideration in capacity planning to manage resource utilization effectively.

Output-based Capacity Measures

Measured when a company produces a single standardized product.

Example of Output-based Capacity Measure

A factory can produce 240 units per day.

Input-based Capacity Measures

Measured when multiple products share resources.

Example of Input-based Capacity Measure

Machine hours available.

Long-Term Capacity Planning

Focus on major strategic decisions related to facilities, workforce and large equipment.

Example of Long-Term Capacity Planning

Expanding production facilities.

Intermediate-Term Capacity Planning

Adjustments to workforce and equipment to align with market demand.

Example of Intermediate-Term Capacity Planning

Hiring or laying off employees.

Short-Term Capacity Planning

Immediate adjustments to meet fluctuating demand.

Example of Short-Term Capacity Planning

Overtime work.

Capacity Utilization

Measures how much of the available capacity is being used.

Capacity Utilization Formula

Capacity Utilization = (Actual Output / Maximum Capacity) × 100.

Example of Capacity Utilization Calculation

If a factory produces 80 units/day with 100 units/day capacity, utilization is 80%.

Capacity Cushion

The extra capacity available to handle sudden demand increases.

Capacity Cushion Formula

Capacity Cushion = 100% - Capacity Utilization.

Economies of Scale

As production volume increases, the average cost per unit decreases.

Diseconomies of Scale

Beyond a certain output level, the cost per unit increases due to inefficiencies.

Steps in Systematic Capacity Planning

1. Determine capacity requirements. 2. Identify capacity gaps. 3. Develop alternative plans. 4. Evaluate and select the best plan.

Total Production Hours Calculation

(Processing Time A × Forecast Demand A) + (Processing Time B × Forecast Demand B).

Example of Total Production Hours Calculation

For products A and B, total required is 5200 hours.

Machine Requirements Calculation

Calculate machine hours needed; round up for whole machines.

Decision Trees in Capacity Planning

Evaluate different capacity options when demand is uncertain.

Best Choice in Decision Trees Example

Building a new facility is the best choice based on highest expected value.

Decision Tree Example Evaluation

Options A, B, and C assess potential profitability under varying demand.

Capacity Gap Assessment

Compare current capacity versus future demand to determine resource needs.

Subcontracting in Capacity Planning

An option for expanding capacity when demand increases.

Diversifying Capacity Approaches

Using a mix of short-term, intermediate-term, and long-term strategies to manage capacity.

Importance of Capacity Planning

Essential for aligning production with market demands and minimizing costs.