Capacity Management

Capacity: capability of a manufacturing or service resource to accomplish its purpose over a specified time period (the ability to hold, receive, store, or accommodate)

Viewed in two ways:

  • Maximum rate of output per unit of time or

  • Units of resource availability

Long range (1- 5 years)

  • Greater than one year

Intermediate range (3-18 months)

  • Monthly or quarterly plans covering the next 6 to 18 months

Short range (1 day to 3 months)

  • Less than one month

Strategy capacity planning: determining the overall level of capacity-intensive resources that best supports the company’s long-range competitive strategy

  • Facilities

  • Equipment

  • Labor force size

Capacity utilization rate: a measure of how close the firm is to its best possible operating level

Capacity efficiency: how well the available effective capacity is being used to produce the actual output.

Capacity efficiency = 36/40 = 90%

Utilization = 36/60 = 60%

Lag Strategy: The lag method entails having sufficient resources to fulfill demand rather than planned demand estimations. This capacity planning technique is advantageous for smaller firms with limited capacity requirements.

  • works best when demand is fairly stable

Lead Strategy: The primary strategy entails having enough resources to satisfy demand estimates. The lead strategy planning technique is beneficial since your extra capacity can accommodate the rising demand.

  • Excess resources

  • Good for big events

Match Strategy: This technique combines the lead and lag capacity planning approaches. In this instance, project managers must monitor actual demand, demand planning estimates, and market developments to modify capacity.

  • Cost efficient

  • Always changing and hard to plan

  • Might miss the sudden demand peak

4500 × 52 = 234000

1000000/234000 = 766000

1000000 - 234000 = 766000/ 234000

A bottleneck is a point of congestion in a production system that occurs when workloads arrive too quickly for the production process to handle.

(6/h) 6×8×7 = 336

B, 60/16 = 3.25/h, increase by 1.5.

7.5×8×7= 420