CAPACITY PLANNING


LEARNING OBJECTIVE:

Contents

Measures

Increasing Capacity

The Waiting Line Problem

Performance Measures

Queuing Formulas

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Planning Production

With forecasts for demand completed organizations must plan production to meet demand. They must ensure that sufficient capacity is available to actually meet production targets. Capacity/production decisions occur at three main levels:

Long term - major decisions related to capacity changes by adding or eliminating capacity in the form of capital assets - manufacturing plants, new technology implementation

Medium term - facility capacity is generally fixed but capacity can be changed by adding labour, subcontracting and it can be allocated to different periods through the use of inventory and backorders.

Short term - smaller capacity changes may be made through the use of overtime and subcontracting but much of the focus is on efficient use and allocation of capacity already set.

Measures:

Output: Capacity to produce specific products or provide specific services.

 

Input: The ability to accept new customer business

 

Maximum Capacity - We must differentiate between what a system is designed to do, the design capacity, and what it can actually do over a sustained period, the effective capacity.

Utilization = Average Output Rate 100

Maximum Capacity

There is a tradeoff between having enough capacity to meet customer needs and having too much capacity resulting in low utilization of resources. Queuing Theory helps managers make capacity decisions.

Increasing Capacity

Most production service systems involve a series of production steps, each with its own capacity characteristics. Some will be at maximum capacity and will be limiting the output of the entire system. These are the bottleneck operations.

Bottleneck - the operation with the lowest effective capacity.

To increase capacity of the system bottleneck capacity must be increased. To understand how to deal with bottle necks we must understand queues

THE WAITING LINE PROBLEM: The Theory of Queues

Components of a Waiting Line System:

Arrivals - Inputs to the queue

 

Waiting Line - Customers waiting for service

 

Service Facility - Service configuration - number of servers

 

Performance Measures for a Waiting Line System

  1. Average time in the queue for each customer,
  2. Average queue length,
  3. Average time in the system for each customer,
  4. Average number of customers in the system,
  5. Average server utilization, etc.

QUEUING FORMULAS

Waiting Line System:

- mean number served per period

Performance Measures for a Single-Server Model with Infinite Queue:

example: Suppose customers to a bank arrive at a rate of 150/hour over the lunch hour. To make sure that their average waiting time is 5 minutes or less, how many tellers must be available. What is the average utilization in this situation?


Modeling more complex systems - Requires simulation software of some sort. These allow managers to test the effect of process changes in the system inexpensively and quickly.

Your text came with EXTEND simulation software that can perform complex simulations of production and service facilities.

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