MGSC 346 Chp. 6 Strategic Capacity Management

Capacity Business

the amount of output that a system is capable achiving over a specific period of time

Capacity in Service

the number of customers served over a specific period of time

Capacity in Manufacturing

the output is the number of units produces over a specific period of time

Goal of Capacity Management

to determine optimal capacity quantity, reach a high level of capacity utilization, and level out capacity utilization

Best Operating Level

the level of capacity for which process was designed and defined as a volume of output at which average unit cost is minimized

Capacity Utilization Rate

measure of how close the firm is to its best possible operating level

ex. 480/500 =0.96 or 96% 4% capacity cushion.

Economies of Scale

the idea that as a plant gets larger and volume increases, the average cost per unit drops

Diseconomies of Scale

at some point, the plant becomes too large and average cost per unit begins to increase

Capacity Focus

The idea that production facility works best when it is concentrated on a limited set ot production objectives

• focused factory- limited output types (only 1 car model;In N Out Burgers)

• Plant within a Plant (PWP) - areas in larger facility dedicated 1 type og output (chapman u law building)

Capacity Flexibility

the ability to rapidly increased or decreased production levels, or the ability to shift rapidly from one product or service to another; CNC Machines - Computerized numerical control