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Slide 11.

Chapter 11
Capacity management

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.2

Capacity management
Direct

Operations
management
Design Develop

Capacity Deliver
management

The market requires…


the availability of
products and services

The operation supplies... the


capacity to deliver products
and services

Figure 11.1 A definition of capacity planning and control


Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.3

Key operations questions

In Chapter 11 – Capacity planning and control – Slack et


al. identify the following key questions…

What is capacity management?

How is capacity measured?

What are the ways of coping with demand fluctuation?

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.4

What is capacity?

 Capacity means the scale of an operation.

 But this may not reflect the operation’s processing


capability.
 So we must incorporate a time dimension appropriate
to the use of assets.
 For example 24,000 litres per day

 10,000 calls per day

 57 patients per session

 Etc.
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.5

The objectives of capacity management

To provide an ‘appropriate’ amount of capacity at any


point in time.
The ‘appropriateness’ of capacity planning in any part of
the operation can be judged by its effect on…
Costs

Revenue

Working capital

Service level, in terms of…


 Quality
 Speed
 Dependability
 Flexibility
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.6

The step in capacity planning and control

Step 1. Measure aggregate capacity and demand

Step 2. Identify the alternative capacity plans

Step 3. Choose the most appropriate capacity plan

Figure 11.2 The steps in capacity management

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.7

1. Measure aggregate capacity

Aggregate capacity of a hotel:


– rooms per night;
– ignores the numbers of guests in each room.

Aggregate capacity of an aluminium producer:

– tonnes per month;


– ignores types of alloy, gauge and
batch variations.

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.8

1. Measure aggregate demand

Figure 11.3 Aggregate demand fluctuations for four organizations


Sources: Shutterstock/Cuiphoto, Shutterstock/yuyangc, Shutterstock/Light & Magic, Shutterstock/Lucky Photo

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.9

Input and output capacity measures for different operations

Operation Input measure of capacity Output measure of capacity

Air- Machine hours available Number of units per week


conditioner
plant
Hospital Beds available Number of patients treated per
week
Theatre Number of seats Number of customers
entertained per week
University Number of students Students graduated per year
Retail store Sales floor area Number of items sold per day
Airline Number of seats Number of passengers per
week
available on the sector
Table 11.1 Input and output capacity measures for different operations
Note: The most commonly used measure is shown in bold.
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.10

Case Discussion

Read the case: London Eye (Page 334)

Question:
What is the capacity of the London Eye?

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.11

Case Discussion

• Hourly Capacity

1 full revolution per 30 minutes. Thus, the hourly capacity is:


2 revs × 32 capsules × 25 passengers/capsule = 1,600 passengers/hour

• Summer Weekly Capacity (April to mid-September) 10:00 a.m10:00 p.m.


weekly capacity: 7 days × 12 hours × 1,600 passengers = 134,400

• Winter Weekly Capacity (mid-September to March) - 10 am - 6:00 p.m.


7 days × 8 hours × 1,600 passengers = 89,600

• Annual Design Capacity


365 days/year

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.12

Productivity measures (Capacity vs Demand)


– p.331
Actual output
Efficiency =
Effective capacity

Planned loss of
Design 59 hours
capacity

Avoidable loss – 58
Effective
hours per week
capacity

168 hours 109 hours per Actual output – 51


per week week hours per week

Actual output
Utilization =
Design capacity

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.13

2. Ways of reconciling capacity and demand

Demand Demand Demand

Capacity Capacity Capacity

Demand
Level capacity Chase demand
management

Absorb Adjust output Change


demand to match demand
demand
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.14

Level capacity

Absorb
demand
Make to
stock
Keep output
level

Make
Inventory
customer
wait
Part finished
Queues
Finished goods, or
Customer inventory Backlogs

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.15

Chase demand

Adjust output to
match demand

Hire Fire

Temporary labour Lay-off

Overtime Short time

Subcontract 3rd party work

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.16

Demand management

Change
demand

Change pattern of demand.

Develop alternative products and/or services.

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.17

Manage the Level of Demand by:

• Pricing strategies
• Create Alternative products/services
• Modifying the time and location of delivery
• Communication efforts
• Developing reservation systems
• Developing complementary services

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.18

Case Discussion

Read the case: Working by the year (Page 339)

Question:
What do you see as being the major
advantages and disadvantages to both the
company and the staff of adopting the Annual
Hours Work Plan?

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.19

Class Discussion – What is your capacity decisions?

POOR NORMAL GOOD


Outlook < 1 Outlook = 1 Outlook > 1
POOR
Outlook < 1

NORMAL
Outlook = 1

GOOD
Outlook > 1

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.20

Class Discussion – What is your capacity decisions?

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.21

Capacity management – long and short-term outlook


Short-term outlook for volume
Decreasing below current Level with current Increasing above
capacity capacity current capacity

Reduce capacity (semi) Plan to reduce capacity Increase capacity


below current
Decreasing

permanently. For (semi) permanently. For temporarily. For example,


capacity
Long-term outlook for volume

example, reduce staffing example, freeze increase working hours,


levels, reduce supply recruitment, modify and/or hire temporary staff,
agreements. supply agreements. modify supply agreements.

Reduce capacity Maintain capacity at Increase capacity


Level with

temporarily. For example, current level. temporarily. For example,


capacity
current

reduce staff working increase working hours,


hours, modify supply and/or hire temporary staff,
agreements. modify supply agreements.

Reduce capacity Plan to increase capacity Increase capacity (semi)


above current
Increasing

temporarily. For example, above current level, plan permanently. For


capacity

reduce staff working to increase supply example, hire staff,


hours, but plant to recruit, agreements. increase supply
modify supply agreements.
agreements.

Figure 11.16 Capacity management strategies are partly dependent on the long- and short-term outlook for
volumes
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.23
Group Case

Freeman Biotest

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014

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