Lecture Principle of inventory and material management - Lecture 11

Lecture 11 - Capacity Management and Planning. The contents of this chapter include all of the following: Capacity, capacity management, matching capacity and demand, capacity planning process, resource planning, inputs to capacity planning.

Lecture 11 Capacity Management and Planning Books • Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming  College, Emeritus, Stephen N. Chapman, Ph.D., CFPIM, North Carolina State University, Lloyd M.  Clive, P.E., CFPIM, Fleming College • Operations Management for Competitive Advantage, 11th Edition, by Chase, Jacobs, and Aquilano, 2005,  N.Y.: McGraw­Hill/Irwin • Operations Management, 11/E, Jay Heizer, Texas Lutheran University, Barry Render, Graduate School of  Business, Rollins College, Prentice Hall Objectives • • • • • • Capacity Capacity Management Matching Capacity and Demand Capacity Planning process Resource Planning Inputs to capacity planning Capacity • • • • The throughput, or the number of units a  facility can hold, receive, store, or produce  in a period of time Determines  fixed costs Determines if  demand will  be satisfied Three time horizons Capacity Management • Capacity management is planning and controlling  resources needed to meet production objectives – Planning ­ determining resources needed to meet the  priority plan; selecting methods to make that capacity  available – Controlling ­ monitoring output, comparing it with the  plan, and taking corrective action Matching Capacity and Demand • Demand Management – – – • vary prices change lead times encourage/discourage business Capacity Management – – – – adjust staffing adjust equipment and processes change methods to facilitate production redesign the product to facilitate production Capacity Planning Process • • • • Determine the capacity available at each work center Translate the released and planned orders into the  capacity required at each work center in each time  period Sum up the capacities required for each work center to  determine the load on each work center in each time  period Resolve differences between available capacity and  required capacity Planning Over a Time Horizon Long-range planning Intermediaterange planning Add facilities Add long lead time equipment * Subcontract Add equipment Add shifts Short-range planning * Modify capacity * Limited options exist Add personnel Build or use inventory Schedule jobs Schedule personnel Allocate machinery Use capacity Resource Planning • • • RP involves long­range capacity resource  requirements and is directly linked to production  planning RP involves changes in manpower, capital  equipment, product design, or other facilities that  take a long time to acquire and eliminate The production plan and RP set the limits and  levels for production Rough­Cut Capacity Planning RCCP is the process to check the feasibility of the master  production schedule (MPS) (end items), provide warnings of  any bottlenecks, ensure utilization of work centers, and  advise vendors of capacity requirements Capacity Requirements Planning • • CRP is directly linked to the material requirements plan  (MRP) (component items) CRP is the most detailed, complete, and accurate of the  capacity planning techniques and is highly important in the  immediate time periods DesignandEffectiveCapacity ỵ Design capacity is the maximum theoretical output of a system ỵ ỵ Normally expressed as a rate Effective capacity is the capacity a firm expects to achieve given current operating constraints ỵ Often lower than design capacity Utilization and Efficiency Utilization is the percent of design capacity achieved Utilization = Actual output/Design capacity Efficiency is the percent of effective capacity  achieved Efficiency = Actual output/Effective capacity Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4% Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4% Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4% Efficiency = 148,000/175,000 = 84.6% Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4% Efficiency = 148,000/175,000 = 84.6% Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Efficiency = 84.6% Efficiency of new line = 75% Expected Output = (Effective Capacity)(Efficiency) = (175,000)(.75) = 131,250 rolls Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 ­ 8 hour shifts Efficiency = 84.6% Efficiency of new line = 75% Expected Output = (Effective Capacity)(Efficiency) = (175,000)(.75) = 131,250 rolls Capacity and Strategy Capacity decisions impact all 10 decisions of operations management as well as other functional areas of the organization ỵ Capacity decisions must be integrated into the organizations mission and strategy ỵ CapacityConsiderations ỵ þ þ þ Forecast demand accurately Understand the technology and capacity  increments Find the optimum  operating level  (volume) Build for change Average unit cost (dollars per room per night) Economies and Diseconomies of Scale 25 - room roadside motel 50 - room roadside motel Economies of scale 25 75 - room roadside motel Diseconomies of scale 50 Number of Rooms 75 Build In Flexibility Percent of North American Vehicles Made  on Flexible Assembly Lines 100% – 80% – 0– Ford Toyota GM Honda 20% – Chrysler 40% – Nissan 60% – End of Lecture 11 ... Controlling ­ monitoring output, comparing it with the  plan,? ?and? ?taking corrective action Matching Capacity? ?and? ?Demand • Demand? ?Management – – – • vary prices change lead times encourage/discourage business Capacity? ?Management – – – –... Available time depends on the number? ?of? ? machines, the number? ?of? ?workers,? ?and? ?the hours? ?of? ? operation. The number? ?of? ?hours a work center can  be used If a work center has three equivalent machines? ?and? ? works eight hours a day for five days a week, what is ... output compared with the standard expected output Standard hours of work Efficiency = x 100% Hours actually worked What is the efficiency if a work center is used 100 hours  per week? ?and? ?produces 120 standard hours? ?of? ?work?