MODULE 6 – CAPACITY PLANNING FOR PRODUCTS AND SERVICES

Flashcards covering key concepts, definitions, and processes related to capacity planning for products and services.

Capacity

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; it cannot exceed effective capacity.

Efficiency

The ratio of actual output to effective capacity, expressed as a percentage.

Utilization

The ratio of actual output to design capacity, expressed as a percentage.

Capacity Cushion

Extra capacity intended to offset uncertainty, calculated as (100% - Utilization).

Bottleneck Operations

Stages in the production process that limit overall output due to limited capacity.

Economies of Scale

The cost advantage of producing more units as increasing output leads to decreasing average unit costs.

Diseconomies of Scale

Increased average unit costs that occur when output exceeds the optimal capacity.

Decision Trees

Diagramming technique for decision analysis, using nodes for decision points and circles for chance events.

Expected Value Analysis (EVA)

A weighted average of chance events used in decision tree analysis to maximize profits.

Forecasting Capacity Requirements

The process of estimating long-term and short-term capacity needs based on industry and demand trends.

Financial Analysis

Assessment of cash flow and present value to evaluate investment proposals for capacity planning.

Capacity Alternatives

Different options for managing capacity, including do nothing, expand now, or expand later.

Key Factors in Capacity Design

Include facilities, product and service factors, process factors, human factors, and operational factors.