rev. 11/30/03sjsu bus. 140 - david bentley1 chapter 5 – capacity planning and control definitions,...
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Rev. 11/30/03 SJSU Bus. 140 - David Bentley 1
Chapter 5 – Capacity Planning and Control
Definitions, capacity measurement, MRP II and
capacity, utilization, efficiency, breakeven
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Definition of Capacity Upper limit on the work load that an
operating unit can handle during a given period of time Plant, production line, work center, work
station, employee Also defined as “Rate of output” Contrast to common definition of
capacity
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Capacity Decisions Affect…
Ability to meet customer demand Possible long term commitments Competitive capability Capital investment and operating
costs
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Capacity and Production Environments
Operation Types Project > Job > Batch > Repetitive > Continuous flow>
See Tables 5-1a and 5-1b
Time to Forecast Capacity Capacity & raw
materials Capacity & raw
materials Capacity, RM &
assemblies Capacity, RM &
products
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Capacity Considerations - 1
Definition: “Rate of output” Utilization (uses design capacity)
Relates actual output to theoretical output Paid for 8 hours, producing parts 6.4 hours;
utilization = 6.4 / 8 = 80% Efficiency (uses effective capacity)
Relates actual output to expected output Expect production of 100 parts, actual =
90; efficiency = 90%
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Capacity Considerations - 2
Design capacity Maximum output under normal conditions
Effective capacity Design capacity minus allowances for
certain efficiency losses Actual output
Recorded output for a given time period
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Utilization & Efficiency Utilization
Actual output_ Design capacity
Efficiency Actual output_ Effective capacity
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Productivity
Productivity Product of (utilization X efficiency) (.80)(.90) = 0.72 or 72%
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Theory of Constraints Developed by Eliyahu Goldratt – “The
Goal” Management of bottlenecks Attempts to schedule and feed work to
maximize the rate of work flow Utilizes “transfer batches” = operation
overlapping Optimized Production Technology (OPT)
software
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“The Goal” – Excellence in Manufacturing
“ ‘The Goal’ is about the OPT principles of manufacturing. It’s about trying to understand what makes our world tick so that we can make it better. When we think logically and consistently about our problems we can determine the ‘cause and effect’ relationships between actions and results.”
- from “The Goal” 1984 by Eliyahu M. Goldratt and Jeff Cox
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Cost-Volume RelationshipsA
mo
un
t ($
)
0Q (volume in units)
Total cost = VC + FC
Total variable cost (V
C)
Fixed cost (FC)
Operations Management, Seventh Edition, by William J. Stevenson
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved
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Cost-Volume RelationshipsA
mo
un
t ($
)
Q (volume in units)0
Total r
evenue
Operations Management, Seventh Edition, by William J. Stevenson
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved
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Cost-Volume RelationshipsA
mo
un
t ($
)
Q (volume in units)0 BEP units
Profit
Total r
even
ue
Total cost
Operations Management, Seventh Edition, by William J. Stevenson
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved
Rev. 02/20/06 SJSU Bus. 140 - David Bentley 14
Make or Buy Cost-volume or breakeven analysis QBEP = FC / (Rev – v)
Where FC = fixed cost, Rev = unit price (or revenue), v = unit variable cost
Example: candle manufacture FC = $50, Rev = $1, v = $.75 Solution: QBEP = 50 / (1 - .75)
= 200
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Breakeven related problems
QBEP = FC / (Rev – v) QX = (Profit + FC) / (Rev –v) Profit = Q (Rev – v) – FC Rev = [(Profit + FC) / Q] +v TR = Q × Rev
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Break-even and Step Fixed Costs
Quantity
FC + VC = TC
FC + VC = TC
FC + VC =
TC
Step fixed costs and variable costs.
1 machine
2 machines
3 machines
Operations Management, Seventh Edition, by William J. Stevenson
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved
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MRP IICapacity Planning
Levels Long Range
Long Range Resource Planning (LRRP) Intermediate Range
Rough Cut Capacity Planning (RCCP) Short Range
Capacity Requirements Planning (CRP)
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Long Range Resource Planning (LRRP)
Planning up to 5 years out Time intervals in quarters and years Broad categories of capacity
Land Buildings (square feet) Equipment (by type) Labor (by broad skill set) Money, etc.
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Rough Cut Capacity Planning (RCCP)
18 – 24 months Time intervals in weeks and months Critical resources needed to meet MPS Allows time to:
Hire / layoff Develop subcontractors Negotiate supply contracts Buy and install equipment
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Capacity Requirements Planning (CRP)
Probably about 12 month horizon Time intervals in days and weeks Considers all internal resources needed to
satisfy MRP May include vendor capacity Allows time to:
Buy parts Exercise or call in subcontracting Hire or lay off temps Schedule overtime
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Input-Output (I/O)Analysis
Measures at a work center not only Output, but also Input Also looks at changes in backlog Used to trace upstream and identify
problems in feeder work centers