CAPACITY REQUIREMENTS DETERMINATION

Determinants:• Di = Number of units forecast (demand) per period, item i

• ti = Standard processing time (hours per unit or customer), for operations required on item i

• Qi = Lot size, item i

• Si = Set-up time, item i

• N = Total number of process operating hours per period

• U = Capacity utilization

• Y = Yield ratio

• E = Efficiency of process w.r.t. standard

• M = Number of resource units (machines) required

Calculating Capacity Requirements

M = {Σi [Di • ti + (Di / Qi) • Si] }/ {N • U • E • Y}

Given the following information about a business document production center serving two major clients:

Item Client X Client Y Annual demand forecast (copies) 2,000 6,000 Standard processing time (hours/ copy) 0.5 0.7 Average lot size (copies per period) 20 30 Standard setup time (hours) 0.25 0.40

.412.3

)100151()day/hours8(.)yr/days250(

40.030/000,67.0000,625.020/000,25.0000,2M

Capacity Calculations Example

The operation works 8 hours each day, 250 days per year.The aggregate losses due to breakdowns, absenteeism/ inefficiency, and rejections etc. are estimated at 15%.

Another Capacity Requirements Example

Example of Capacity Requirements

A manufacturer produces two lines of mustard, FancyFine and Generic line. Each is sold in small and family-size plastic bottles. The following table shows forecast demand for the next four years.

Year 1 2 3 4

Fancy Fine

Small (000s) 50 60 80 100

Family (000s) 35 50 70 90

Generic

Small (000s) 100 110 120 140

Family (000s) 80 90 100 110

Example of Capacity Requirements (Contd.): Equipment and Operator Requirements

• Three 100,000 units-per-year machines are available for small-bottle production. Two operators are required per machine.

• Two 120,000 units-per-year machines are available for family-sized-bottle production. Three operators are required per machine.

Year 1 2 3 4

Small (000s) 150 170 200 240

Family (000s) 115 140 170 200

Year: 1 2 3 4Small (000s) 150 170 200 240Family (000s) 115 140 170 200

Small Mach. Cap. 300,000 Labor 6Family-size Mach. Cap. 240,000 Labor 6

Small

Percent capacity used 50.00%Machine requirement 1.50Labor requirement 3.00Family-size

Percent capacity used 47.92%Machine requirement 0.96Labor requirement 2.88

Determining the Year 1 values for capacity, machine & labour:Determining the Year 1 values for capacity, machine & labour:

150,000/300,000=50%

At 2 operators for 100,000, it takes 3 operators for 150,000

At 1 machine for 100,000, it takes 1.5 machines for 150,000

Year: 1 2 3 4Small (000s) 150 170 200 240Family (000s) 115 140 170 200

Small Mach. Cap. 300,000 Labor 6Family-size Mach. Cap. 240,000 Labor 6

Small

Percent capacity used 50.00%Machine requirement 1.50Labor requirement 3.00Family-size

Percent capacity used 47.92%Machine requirement 0.96Labor requirement 2.88

Determining the values for columns 1 - 4 in the table below:Determining the values for columns 1 - 4 in the table below:

56.67%1.703.40

58.33%1.173.50

66.67%2.004.00

70.83%1.424.25

80.00%2.404.80

83.33%1.675.00

Capacity & Bottleneck Analysis in Process Flows

A Bottleneck in the Flow

Capacity Analysis

(Text Chapter 7 Supplement)

Capacity Analysis Example - 1

► Series-cum-Parallel sandwich lines► Each station has one worker ► All completed sandwiches are individually wrapped

Wrap/Deliver

37.5 sec/sandwich

Order

30 sec/sandwich

Bread Fill

15 sec/sandwich 20 sec/sandwich

20 sec/sandwichBread Fill

Toaster15 sec/sandwich 20 sec/sandwich

Text p. 304

Capacity Analysis -1

Wrap/Deliver

37.5 sec

Order

30 sec

Bread Fill

15 sec 20 sec

20 secBread Fill

Toaster15 sec 20 sec

► Each of the two lines can deliver a sandwich every 20 seconds

► At 37.5 seconds, wrapping and delivery has the longest processing time and is the bottleneck

► Capacity per hour is 3,600 seconds/37.5 seconds/sandwich = 96 sandwiches per hour

► Flow time is 30 + 15 + 20 + 20 + 37.5 = 122.5 sec.► Adding one worker at Wrapping/ Delivery shifts the

bottleneck to ? ► And results in a capacity of 3600/ ? = ??► What if demand is constrained?

Text p. 305

► Standard process for cleaning and examining teeth► Cleaning teeth and examining X-rays can happen

simultaneously

Checkout

6 min/unit

Check in

2 min/unit

DevelopsX-ray

4 min/unit 8 min/unit

DentistTakesX-ray

2 min/unit

5 min/unit

X-rayexam

Cleaning

24 min/unit

Text p. 305

Capacity Analysis Example - 2

Capacity Analysis - 2

► All possible paths must be compared

► Bottleneck is the hygienist at 24 minutes

► Hourly capacity is 60/24 = 2.5 patients

► X-ray exam path is 2 + 2 + 4 + 5 + 8 + 6 = 27 minutes

► Cleaning path is 2 + 2 + 4 + 24 + 8 + 6 = 46 minutes

► Longest path involves the hygienist cleaning the teeth, patient will take at least 46 minutes to complete

► What if Cleaning could start immediately after X-ray is taken: Change in Flow Time? In throughput?

Checkout

6 min/unit

Check in

2 min/unit

DevelopsX-ray

4 min/unit 8 min/unit

DentistTakesX-ray

2 min/unit

5 min/unit

X-rayexam

Cleaning

24 min/unit

Text p. 305

Simple Steel Production Flow

More Detailed Steel Production Flow

The numbers listed below the departments represent capacity in tons per day.The numbers on the arrows represent the number of parts (ratio) that must be combined to meet the needs of the next department.

Determining System Capacity ..

• The numbers above the departments represent the production rate required to produce a system output of 5,000 tons per day. • The bottleneck department is the Basic oxygen furnace which has a capacity utilization of 119% (Blast furnace and scrap handling are also overloaded at 111%).

(5,000 tpd)(5,000 tpd)(5,000 tpd)(3,333 tpd)(2,500 tpd)

(1,666 tpd)(833 tpd)

.. Determining System Capacity

• The numbers above the departments represent the production rate required to produce a system output of 4,200 tons per day. • The bottleneck department is the Basic oxygen furnace (Blast furnace and scrap handling are now 93% utilized).

Lifting the Bottleneck

The System capacity can be increased if the capacity of the Basic Oxygen Furnace is increased by 300 tons per day.Then the bottleneck becomes Blast Furnace and Scrap Handling (as well as the Basic Oxygen Furnace).

(4,500 tpd)

CAPACITY MANAEMENT APPROACHES

Good Planning andEfficient Adjustment

Planning Over a Time Horizon

Figure S7.1

Modify capacity Use capacity

Intermediate-range planning (aggregate planning)

Subcontract Add personnelAdd equipment Build or use inventory Add shifts

Short-range planning (scheduling)

Schedule jobsSchedule personnel Allocate machinery*

Long-range planning

Add facilitiesAdd long lead time equipment *

* Difficult to adjust capacity as limited options exist

Options for Adjusting CapacityTime Horizon

Eliminate or Reduce the Need for Capacity Adjustment

• Cushions: Maintain excess capacity or use stock to absorb variations

• Reduce Service: Adjust backlog, increase queues, refuse business

• Price changes: vary margins based on demand/ supply position

• Combination approaches e.g. Buy land, build facility to final size, but defer machinery purchases

Provide for Smooth and Efficient Adjustment of Capacity

• Offloading/ in-loading (may have cost and independence implications)

• Vary workforce size/ timings/ allocations

• Alternate routings, speed/load changes, run lengths etc.

• Substitute material content, adjust supply schedules etc.