Capacity & Constraints Maangement

Capacity

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

Capacity determines

the fixed cost

Capacity determines if

demand will be satisfied

Design Capacity

The maximum theoretical output of a system

Effective capacity

The capacity a firm expects to achieve given current operating constraints

Effective capacity is often

lower than design capacity because design capacity is the max

Capacity is expressed as a

rate

3 capacity rates

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

Utalization is the

% of design capacity actually achieved

Efficiency is the

% of effective capacity actually achieved

Utilization (effective capacity) formula

Actual Output / Design Capacity

Efficiency output formula

actual output / effective capacity

Capacity Analysis

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

Bottleneck is a

limiting factor or constraint

A bottleneck has the ___ effective capacity in a system

lowest

The capacity is the # of units,,

produced per sec/min/hour/day/week

The bottleneck time is the time

taken by the slowest workstation to produce ONE unit

The throughput time of the System is the

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

The 3 processes

Sequential, Parallel, and Simultaneous

Throughput time is the sum of

Sum of past time on the longest path

Bottleneck is the operation with the

Longest (slowest) process time

System capacity is the

inverse of the bottleneck time

Throughput time is the total..

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

Break-Even analysis is the technique for

evaluating process and equipment alternatives

Break-Even Analysis objective is to

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

Break-Even analysis is understanding how profits and losses

change for each option as the total # of units varies

Fixed costs are

costs that continue even if no units are produced

Examples of fixed costs

Depreciation, Taxes, Debt, Mortgage payments, rent

Variable Costs are

Costs that vary with the volume of units produced

Example of variable costs

Labor, materials, portion of utilities

Varaible costs contribution is the

difference between selling price and variable costs

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

by selling price of each unit

Revenue function crosses the

Total cost line is the break-even point