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Strategic Capacity Planning
Determine the overall capcity level of captial-intensive resources that best supports the company's long range competitive strategy
Best operating level
The level of capacity for which the process was designed and the volume of output at which average unit cost is minimized.
A facility with a limited set of production objectives.
Plant within a plant
Designate smaller areas of the plant to serve as a kind of mini-plant for a specific function.
Capacity in excess of expected demand. This is often expressed as a percentage.
If demand is expected to be 10 million units, and we are expecting to produce 12 million units, we have a 20% capacity cushin.
Capacity utilization rate
Capacity used / best operating level
if the optimum capacity is 500 cars a month and the current production rate is 480 cars a month, the capacity utilization rate is 96%
Short range management
Less than one month, make changes such as scheduling, personnel transfers and alertantive production routings
Intermediate range planning
Monthly or quarterly.
Can use alerternatives such as hiring, layoffs, new tools, subcontracting
Long range planning
greater than one year.
Uses Top management decisions and purchasing and liquidating expensive assets
Economies of scope
A gain in efficiency by increasing scope size such as combining several product production proccesses together.
A system where each process has the same number of inputs.
e.g. process 1 produces 90 units an hour, process 2 produces 90 units an hour and so does process 3.
If process 1 produces 80 units an hour and process 2 produces 150 units an hour there is an imbalance.