tools for capacity planning, measurement of capacity, capacity planning process

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Tools for Capacity Planning Measurement of Capacity Capacity Planning Process

Tools for Capacity PlanningMeasurement of CapacityCapacity Planning ProcessRohan Monis1416120Capacity Planning is the study of the level of capacity the organization provides at each stage of the production or service delivery system to meet its objectives.

Tools for Capacity PlanningCapacity planning requires demand forecasts for an extended period of time.Forecast accuracy declines as the forecasting horizon lengthens.Anticipating what competitors will do increases the uncertainty of demand forecasts.Demand during any period of time may not be evenly distributed.Need for capacity cushion.

Tools that deal more formally with Demand Uncertainty and VariabilityWaiting line modelsSimulationDecision treesEnhancing capacity through the supply chainImproving competitiveness by creating complex resources

Waiting Line ModelsUseful in capacity planning such as selecting an appropriate capacity cushion for a high customer-contact process.Airport ticket counter, a machine center, or a central computer.Arrival time between jobs or customers varies, and the processing time may vary from one customer to the next.WLM uses probability distributions to provide estimates of average customer wait time, average length of waiting lines and utilization of the work center.

SimulationMore complex waiting line problems must be analyzed with simulation.It can identify the processs bottlenecks and appropriate capacity cushions, even for complex processes with random demand patterns and predictable surges in demand during a typical day.SimmQuick, Extend, Simprocess, ProModel and Witness

Decision TreesDecision Trees are most commonly used in capacity planning.They are excellent tools for helping choose between several courses of action.They provide a highly effective structure within which you can lay out options and investigate the possible outcomes of choosing those options.They also provide a balanced picture of the risks and rewards associated with each possible course of actionA decision tree can be particularly valuable for evaluating different capacity expansion alternatives when demand is uncertain and sequential decisions are involved.

Enhancing capacity through the Supply Chain

Complex productsMost companies are dependent on others for crucial elementsCompanies design and make only a portion of what makes up their productsExternal linkage to the internal requirements of the organization is the Supply Chain

Improving competitiveness by creating complex resources

Each firm is shaped by its existing resources and information, and is to that extent uniqueOpportunities occur due to the ability of the firm to create complex resourcesFactory buildings with permanent fixtures, diverse types of equipment derived from standardized ones by physical modifications that are costly to move and customized pieces of equipment derived from standardized ones by physical modifications that are costly to reverse

Measurement of CapacityNo single capacity measure is best for all situationsCapacity can be expressed in one of two ways: in terms of output measures or input measures.

Output measures of capacityBest utilized when applied to individual processes within the firm, or when the firm provides a relatively small number of standardized services and products.Many processes produce more than one service or products the amount of customization and variety in the product mix increases, output-based capacity measures become less useful.Input measures of capacityAre generally used for low volume, flexible processes, such as those associated with a custom furniture maker.

Capacity Planning ProcessWhyCapacity Planning has to address the external environment of the firm.One needs to assess the companys situation and think about why should the decision to alter capacity be considered.Management before taking a decision on capacity, needs to take the following steps:Forecast demand for individual products within each product lineCalculate the array of assets required to meet product line forecastsProject availabilities of the existing array of assets over the planning horizon.The timing and sizing of expansion are related.Capacity Gap Analysis is essential in determining when demand will exceed capacity and by how much.Tactics for matching capacity to demandAdding people to the production processIncreasing the motivation of the production employeesAdjusting equipment and processesRedesigning the product to facilitate more throughputImproving the operating rate of equipmentCapacity Planning ProcessWhenTypes of capacity can be separated into technological or engineering question and an economy of scale or business question.Capacity Planning ProcessWhat KindThere is a cost involved in having too much capacity, versus what the cost of having too little capacity and impact on the reputation and growth in the businessThe decision about how much capacity to be added is again critical. It is complicated by the uncertainly in the estimates of future demand and technological changes. There can be two extreme strategiesExpansionist strategy: involves large, infrequent jumps in capacityWait-and-see Strategy: Involves smaller, more frequent incremental jumpsCapacity Planning ProcessHow MuchSouth west airlines Case studyCapacity Planning

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