operman 5

Capacity

Volume of production an organization is capable of / The upper limit or ceiling on the load that an operating unit can handle

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)

Efficiency

Ratio of actual output to effective capacity, calculated as Actual Output / Effective Capacity

Utilization

Ratio of actual output to design capacity, calculated as Actual Output / Design Capacity

Input Measures of Capacity

Capacity measured in terms of resources used (e.g., labor hours, available beds, floor space)

Output Measures of Capacity

Capacity measured in terms of units produced or served (e.g., cars per shift, patients per month, pizzas per day, revenue per sq. ft.)

Facility Factors

Determinants of effective capacity related to expansion potential and strategic location

Product and Service Factors

Determinants of effective capacity related to uniformity within the product manufactured or service executed

Process Factors

Determinants of effective capacity related to reducing inspections and efficient equipment adjustments

Human Factors

Determinants of effective capacity related to employee motivation, absenteeism, and labor turnover

Policy Factors

Determinants of effective capacity related to management decisions such as overtime and additional shifts

Operational Factors

Determinants of effective capacity related to inventory management and scheduling delays

Supply Chain Factors

Determinants of effective capacity related to adaptable distributors

External Factors

Determinants of effective capacity related to quality and performance standards

Long-Term Capacity Needs

Relates to overall level of capacity such as facility size, trends, and cycles

Short-Term Capacity Needs

Relates to variations from seasonal, random, and irregular fluctuations in demand

Need to be Near Customers

Service capacity factor requiring location close to customers for convenience

Inability to Store Service

Service capacity factor where delivery speed and customer waiting time are major concerns

Degree of Volatility

Service capacity factor involving fluctuations in demand timing and service duration

Make or Buy Decision

The choice between producing a good or providing a service in-house versus outsourcing it

Available Capacity

Make or buy factor considering whether equipment, skills, and time are available internally

Expertise

Make or buy factor where lack of internal skill justifies outsourcing

Introduction Phase Capacity Strategy

Cautious approach to making large or inflexible capacity investments during initial product launch

Growth Phase Capacity Strategy

Strategy considering market share, competitors' moves, and establishing competitive advantages

Maturity Phase Capacity Strategy

Strategy focused on increasing profitability by reducing costs and making full use of capacity

Decline Phase Capacity Strategy

Strategy focused on eliminating excess capacity by selling it or introducing new products

Bottleneck Operation

An operation in a sequence of operations whose capacity is lower than that of the other operations / A point of congestion in a production system that stops or severely slows the system

Economic Considerations

Capacity evaluation based on cost, useful life, compatibility, and revenue

Non-Economic Considerations

Capacity evaluation based on public opinion, employee reactions, and community pressure