Card Set Information
What is Capacity?
Maximum rate of output
List some measures of capacity?
: Rates for different products
: Machine hours available, seating capacity, # beds.
List the importance of Capacity Decisions?
1. Impacts ability to meet future demands
2. Affects operating costs (under/over capacity)
3. Major determinant of initial costs
4. Involved long-term commitment
5. Affects competitiveness (del speed/barrier to entry)
6. Affects ease of management (capacity =?demand)
Examples of fluctuating demand?
Time of day>>Movies, Bowling alleys
Days of week>>Repairing, Painting, U-Haul
Times of the month>>Financial Services, Paydays
Seasons of the year>>Roofing, income tax
Why is it easier to manage capacity and demand in manufacturing than services?
1. Processing time varies due to customer involvement
2. Intangible service Output (qualitative & subjective)
3. Time perishable capacity
4. Service can't be inventoried
How do you manage capacity and demand?
: What type? (money, time, equipment, human, etc)
Types of Capacity?
-Number, Skills-Level and mix
-credit card firms can carry limited receivables
-Hrs/day, days/week service provided
-subcontract or lease resources
Two Strategies for managing capacity?
1. Lead Strategy (flexibility)
-Build in idle capacity
-Expand in anticipation of increase in demand
(Economics of small increases vs. a large increase FP&L)
2. Lag Strategy (price)
-Expand only after capacity has fallen below demand
Capacity increases in _____________?
Chunks or Increments
Define and Measure Capacity?
: maximum obtainable output
: Max capacity given product mix, scheduling difficulties, and other doses of reality
: rate of output actually achieved -
cannot exceed effective capacity.
Efficiency = Actual Output / Effective Capacity
Utilization = Actual Outpu / Design Capacity
Yield Management with Efficiency Utilization
Developing Capacity Alternatives?
Design flexibility into systems
Differentiate between new and mature products or services
Take a big picture approach (motel rooms/parking)
Prepare to deal with capacity chunks
Smooth out capacity requirements
Identify optimal operating levels