Capacity & Constraints Maangement

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33 Terms

1
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Capacity

The throughput, or the number of units a facility can hold, receive, store, or produce in a period of time

2
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Capacity determines

the fixed cost

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Capacity determines if

demand will be satisfied

4
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Design Capacity

The maximum theoretical output of a system

5
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Effective capacity

The capacity a firm expects to achieve given current operating constraints

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Effective capacity is often

lower than design capacity because design capacity is the max

7
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Capacity is expressed as a

rate

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3 capacity rates

Hourly Capacity (units/hours), Weekly capacity (units/week), monthly capacity (units/month)

9
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Utalization is the

% of design capacity actually achieved

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Efficiency is the

% of effective capacity actually achieved

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Utilization (effective capacity) formula

Actual Output / Design Capacity

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Efficiency output formula

actual output / effective capacity

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Capacity Analysis

Determines the throughput capacity of workstations in a system and the entire system as a whole

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Bottleneck is a

limiting factor or constraint

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A bottleneck has the ___ effective capacity in a system

lowest

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The capacity is the # of units,,

produced per sec/min/hour/day/week

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The bottleneck time is the time

taken by the slowest workstation to produce ONE unit

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The throughput time of the System is the

TOTAL TIME it takes for ONE unit to get through production (Start to end)

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The 3 processes

Sequential, Parallel, and Simultaneous

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Throughput time is the sum of

Sum of past time on the longest path

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Bottleneck is the operation with the

Longest (slowest) process time

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System capacity is the

inverse of the bottleneck time

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Throughput time is the total..

time through the longest path in the system, assuming no waiting

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Break-Even analysis is the technique for

evaluating process and equipment alternatives

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Break-Even Analysis objective is to

find the point in $ and units at which cost equals revenue

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Break-Even analysis is understanding how profits and losses

change for each option as the total # of units varies

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Fixed costs are

costs that continue even if no units are produced

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Examples of fixed costs

Depreciation, Taxes, Debt, Mortgage payments, rent

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Variable Costs are

Costs that vary with the volume of units produced

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Example of variable costs

Labor, materials, portion of utilities

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Varaible costs contribution is the

difference between selling price and variable costs

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Revenue function begins at the origin and proceeds upward to the right increasing

by selling price of each unit

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Revenue function crosses the

Total cost line is the break-even point