CAPACITY PLANNING AND CONTROL PRESNTED BY M.

SHEZAD AFRIDI MBAITM/F09

Capacity Planning Definitions

What is Capacity Planning & Control?

The process of determining the production capacity needed by an organization to meet changing demands for its products. Wikipedia Capacity planning "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time

Systematic determination of resource requirements for the projected output, over a specific period. Business dictionary.com `

Forward planning to relate production needs to anticipated demand. Commerce Dictionary. No single measure of capacity will be applicable in every situation. (Shim and Siegel, 1999, ) Capacity is the amount of work that can be done in a specified time period. Capacity is defined as the capability of a worker, machine, work center, plan, or organization to produce output per period of time.
Ninth edition of the APICS dictionary

Capacity Planning
The basic questions in capacity planning are: What type of capacity is needed? How much is needed? When is it needed? How does productivity relate to capacity?

Capacity Flexibility: Having the ability to respond rapidly to demand volume changes and product mix changes.

Flexible plants Flexible processes Flexible workers

Capacity Planning
Is the process of monitoring production output, comparing it with capacity plans, and taking corrective action when needed.

Capacity Management
Is responsible for determining the capacity needed to achieve the priority plans as well as providing, monitoring, and controlling that capacity so the priority plan can be met.
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Capacity required
Is the capacity of a system or resource needed to produce a desired output in a given time period. A term closely related to capacity required is load.

This is the amount of released and planned work assigned to a facility for a particular time period.
It is the sum of all the required capacities.

Ways of Coping with demand fluctuation

Three options that can be considered for coping with the demand fluctuations.
Level Capacity Plan An approach to medium-term capacity management that attempts to keep output from an operation or its capacity, constant irrespective of demand. Chase demand Plan An approach to medium-term capacity management that attempts to adjust output and/or capacity to reflect fluctuations in demand. Demand Management An approach to medium-term capacity management that a attempts to change or influence demand to fit available capacity .

How is Capacity measured?

The usage of capacity is measured by the factors utilization and efficiency. A more recent measure is that of overall equipment effectiveness (OEE).

Overall equipment effectiveness (OEE) A method of judging the effectiveness of how operations equipment is used.

Immediate Capacity
The amount of production capacity that can be made available in the short-term. This is the maximum potential capacity - assuming that it is used productivity. Effective Capacity An important concept. Not all productive capacity is actually used or usable. It is important for production mangers to understand what capacity is actually achievable.

Long term capacity Planning

Involving the firms major production facilities.

Issues are interrelated with location decisions.

Technology and transferability of the process to other products also related.

It may be desirable to add additional plant space or construct a new a new facility.

Short Term Capacity Planning

Concerns with issues of scheduling, labor shifts & balancing resource capacities. Goal is to handle unexpected shifts in demand in an efficient economic manner. Time for short term planning frequently few days but may run as long six months. Commonly used method to increase capacity in the short term is working overtime.

Measuring Capacity
Design capacity: The 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.

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Steps for Capacity Planning

Estimate future capacity requirements Evaluate existing capacity Identify alternatives Conduct financial analysis Assess key qualitative issues Select one alternative Implement alternative chosen Monitor results

Determinants of Effective Capacity

Facilities Design Location Layout Environment Product/service Design Product or service mix Process Quantity capabilities Quality capabilities Human factors Job content Job design Training and experience Motivation Compensation Learning rates Absenteeism and labor turnover

Policy Operational Scheduling Materials management Quality assurance Maintenance policies Equipment breakdowns Supply chain External factors Product standards Safety regulations Unions Pollution control standards

Developing Capacity Alternatives

Design flexibility into systems. The long-term nature of many capacity decisions and the risks inherent in long-term forecasts suggest potential benefits from designing flexible systems. Take stage of life cycle into account. Capacity requirements are often closely linked to the stage of the life cycle that a product or service is in. Take a big-picture (i.e., systems) approach to capacity changes. When developing capacity alternatives, it is important to consider how parts of the system interrelate.

How can operations control their capacity level?

By considering the capacity decision as a dynamic decision which periodically updates the decisions and assumptions upon which decisions are based.

Capacity Strategy Formulation

Assumptions and Predictions the growth rate and variability of demand, the costs of building and operating facilities of various sizes, the rate and direction of technological innovation, the likely behavior of competitors, availability of capital and other inputs. Key decisions of capacity planning relate to: The amount of capacity needed. The timing of changes. The need to maintain balance throughout the system. The extent of flexibility of facilities and the workforce.

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