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OM (Chapter 10)

CAPACITY MANAGEMENT

CAPACITY MANAGEMENT

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Language English
Category Macro-Economics
Level University
Created / Updated 28.05.2013 / 04.12.2014
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capacity

Capability of a manufacturing or service resource such as a facility, process, workstation, or piece of equipment to accomplish its purpose over a specified time period.

  • Maximum rate of output per unit of time
  • Units of resource availability

short-term vs. long-term capacity decisions

short-term:

  • amout of overtime scheduled for the next week
  • numberof emergency room nurses on call during a downtown festival weekend
  • number of all center workers to staff during the holiday season

long-term:

  • Construction of a new manufacturing plant
  • expanding the size and number of beds in a hospital
  • number of branch banks to establish in a new market territory

5 ways to adjust short-term capacity levels

  1. Add or share equipment (Leasing of equipment)
  2. Sell unused capacity (to other firms)
  3. Change labor capacity and schedules (overtime)
  4. change labor skill mix (hire the right people)
  5. shift work to slack periods

5 ways to shift or stimulate demand

  1. Vary the price (cheap on weekends)
  2. Provide customers with information (automated messages)
  3. Advertising and promotion ( After holiday sales)
  4. Add peripheral goods/ services (movie theatre rentals at slow times)
  5. Provide reservations

Theory of constraints (TOC)

Set of principles that focuses on increasing total process throughput by maximizing the utilization of all bottleneck work activities and workstations.

Throughput

Amount of money generated per time period through actual sales.

Constraint:

Anything that limits an organization from moving toward or achieving its goal.

physical constraint

Constraint of the capacity of a resource (Machine, employee)

bottleneck work activity

Avtivity that effectively limits capacity of the entire process.

nonphysical constraint

environmental or organizational constraint (low product demand or and inefficient management policy or procedure)

Basic principles of the theory of constraints

Nonbottleneck Management principles

  • Idle time is acceptable (low resource utilization)
  • Use smalles order sizes
  • An hour lost at nonbottl. has no effect on entire process

Bottleneck Management principles

  • Critical to achieving process, should be scheduled first
  • An hour lost at bottlen. is an hour lost for whole process.
  • Use large order sizes for minimizing setup time
  • Bottlen. should work at all times