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Flashcards in Ch.9 Deck (9)
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1
Q

What is capacity? What is capacity planning?

A

Capacity is the maximum output rate of a facility.

  • Capacity planning is the process of establishing the output rate that can be achieved at a facility.
  • Capacity is usually purchased in “chunks”.
  • Strategic issues: how much and when to spend for additional facility and equipment. (Long-term questions)
  • Tactical issues: workforce and inventory levels, day-to-day use of equipment. (Day-to-day use)
2
Q

Why capacity planning is important to a business? Is it difficult to modify capacity planning at the tactical level?

A

You need to make sure to plan and forecast the future demand of you clients.

-Difficult to modify at the tactical level (very hard) because everything is planned… At the strategic level you can add people/plants

3
Q

How do you measure capacity?

A

Depends of your business. What you are producing or the service you are offering.

4
Q

What are the 2 measures of capacity?

A

Output measures: # of pizzas per day, cars per shift - kegs per day are easier to understand
Input measures: multiple products (ex: 5 different types of cake, chocolate/vanilla..)

5
Q

What information is needed when you want to measure capacity?

A
  1. Amount of available capacity (actual output rate)
  2. Design capacity - maximum output rate under ideal conditions (ex: holiday season)
  3. Effective capacity - usually lower than design capacity
6
Q

What are considerations for capacity planning (6)?

A
  1. Best operating level: output that results in the lowest average unit cost.
  2. Economies of scale (BOOK)
  3. Diseconomies of scale (BOOK)
    * Each facility will have economies of scale
  4. Focused factories: small & specialized products.
  5. Plant within a plant: Segmenting larger operations into smaller operating units with focused objectives.
  6. Subcontractor networks: Outsource non-core items to free up capacity for what you do well; a fast growing trend today. (Risks: quality control, costly, opening doors for competition, challenging to develop a relationship)
7
Q

What are the 3-steps for making capacity planning decisions?

A
  1. Identify capacity requirements
  2. Develop capacity alternatives
  3. Evaluate capacity alternatives
8
Q

What are the planning capacity decisions (3)?

A
  1. Forecasting capacity
  2. Capacity cushions
  3. Strategic implications
9
Q

What are the capacity alternatives? (3)

A
  1. Do nothing
  2. Expand large now
  3. Expand small now with option to add later