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Lecture Operations and supply chain management: The Core (3/e) – Chapter 4: Strategic capacity management

After reading the material in this chapter, you should be able to: Understand how to use decision trees to analyze alternatives when faced with the problem of adding capacity, describe the differences in planning capacity between manufacturing firms and service firms. | Strategic Capacity Management Chapter 04 McGraw Hill Irwin Copyright 2013 by The McGraw Hill Companies Inc. All rights reserved. Learning Objectives 1. Understand the concept of capacity and how important it is to manage capacity. 2. Explain the impact of economies of scale of a firm. 3. Understand how to use decision trees to analyze alternatives when faced with the problem of adding capacity. 4. Describe the differences in planning capacity between manufacturing firms and service firms. 4 2 Capacity Management in Operations Capacity the ability to hold receive store or accommodate In business viewed as the amount of output that a system is capable of achieving over a specific period of time Capacity management needs to consider both inputs and outputs 4 3 Capacity Planning Time Durations 4 4 Capacity Planning Concepts 4 5 Capacity Planning Concepts Capacity Focus the idea that a production facility works best when it is concentrated on a limited set of production objectives Focused factory or plant within a plant PWP concept Capacity Flexibility the ability to rapidly increase or decrease product levels or the ability to shift rapidly from one product or service to another Flexibility comes from the plant processes and workers or from strategies that use the capacity of other organizations 4 6 Capacity Flexibility 4 7 Considerations in Changing Capacity 4 8 Determining Capacity Requirements Excel Capacity Requirements 4 9 Determining Capacity Requirements Step 3 Project equipment and Ye ar labor availabilities 1 2 3 4 5 Percentage capacity 24 48 72 84 94 Plastic utilized Bag Machine requirement 1.2 2.4 3.6 4.2 4.7 Operation Labor requirement 3.6 7.2 10.8 12.6 14.1 Percentage capacity 30 41 54 66 77 utilized Bottle Operation Machine requirement 0.9 1.23 1.62 1.98 2.31 Labor requirement 1.8 2.46 3.24 3.96 4.62 Excel Components of Deman 4 10 Decision Trees for Capacity Analysis A decision tree is a schematic model of the sequence of steps in a problem including the