Capacity planning

Capacity
It is the ability to hold, receive , store or
accommodate.

It is viewed as the amount of output that a

system is capable of achieving over a
specific period of time.
 Types of Planning Over a
Time Horizon

Long Add Facilities

Range Add long lead time
equipment *
Planning
Intermediate Sub-Contract
Add Equipment Build or Use
Inventory
Range Add Shifts
Planning
Schedule Jobs
Short *Personnel
Schedule
Range Allocate
Machinery
Planning
*Limited options Modify Use
exist Capacity Capacity
Measures of Capacity
Design capacity/ Best Operating level
 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--cannot
exceed effective capacity.
 Capacity Utilization
Capacity used
Capacity utilization rate =
Best operating level

Capacity used
 rate of output actually achieved

Best operating level

 capacity for which the process was designed
Capacity Utilization--Example
Best operating level = 120 units/week

Actual output = 83 units/week

Utilization = ?

Capacity used 83 units/wk

Utilization = = = .692
Best operating level 120 units/wk
 Efficiency and Utilization
Actual output
Efficiency =
Effective capacity

Actual output
Utilization =
Design capacity

Both measures expressed as percentages

 Efficiency/Utilization Example
Design capacity = 50 trucks/day
Effective capacity = 40 trucks/day
Actual output = 36 units/day

Actual output = 36 units/day

Efficiency = =
90%
Effective capacity 40 units/ day

Utilization = Actual output = 36 units/day

=
72% Design capacity 50 units/day
 Approaches to Capacity
Expansion
Expected Demand Expected Demand

New Capacity New Capacity

Demand
Demand

Time in Years Time in Years

Capacity leads demand with a one-step expansi
Capacity leads demand with an incremental expansion

Expected Demand Expected Demand

New Capacity
New Capacity
Demand

Demand

Time in Years Time in Years

Attempts to have an average
Capacity lags demand with an incremental expansion
capacity, with an incremental
expansion
 Approaches to Capacity
Expansion
Expected Demand

New Capacity
Demand

Time in Years

Capacity leads demand with an incremental expansion

 Approaches to Capacity
Expansion
Expected Demand

New Capacity
Demand

Time in Years
Capacity leads demand with a one-step expansion
 Approaches to Capacity
Expansion
Expected Demand
New Capacity
Demand

Time in Years
Capacity lags demand with an incremental expansion
 Approaches to Capacity
Expansion
Expected Demand
New Capacity
Demand

Time in Years
Attempts to have an average capacity,
with an incremental expansion
 Strategies for Matching Capacity
to Demand
1. Making staffing changes (increasing or
decreasing the number of employees)
2. Adjusting equipment and processes – which
might include purchasing additional machinery
or selling or leasing out existing equipment
3. Improving methods to increase throughput;
and/or
4. Redesigning the product to facilitate more
throughput