CL3
CL3
CL3
CHASE
AQUILANO JACOBS
ninth edition
Operations Management
For Competitive Advantage
Chapter 9
Strategic Capacity
CHASE AQUILANO JACOBS
ninth edition
ninth edition
Strategic Capacity Planning Defined Capacity Utilization & Best Operating Level Economies & Diseconomies of Scale The Experience Curve Capacity Focus, Flexibility & Planning Determining Capacity Requirements Decision Trees Capacity Utilization & Service Quality
CHASE AQUILANO JACOBS
Operations Management
ninth edition
Capacity can be defined as the ability to hold, receive, store, or accommodate. Strategic capacity planning is an approach for determining the overall capacity level of capital intensive resources, including facilities, equipment, and overall labor force size.
CHASE AQUILANO JACOBS
Operations Management
ninth edition
Capacity Utilization
Capacity used
rate of output actually achieved capacity for which the process was designed
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
Volume
CHASE AQUILANO JACOBS
Operations Management
ninth edition
During one week of production, a plant produced 83 units of a product. Its historic highest or best utilization recorded was 120 units per week. What is this plants capacity utilization rate? Answer:
Capacity utilization rate = Capacity used . Best operating level
Operations Management
ninth edition
Operations Management
ninth edition
Operations Management
ninth edition
Capacity Focus
The concept of the focused factory holds that production facilities work best when they focus on a fairly limited set of production objectives. Plants Within Plants (PWP) (from Skinner)
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
10
Capacity Flexibility
Flexible plants
Flexible processes
Flexible workers
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
11
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
12
Capacity Planning
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
13
Forecast sales within each individual product line. Calculate equipment and labor requirements to meet the forecasts. Project equipment and labor availability over the planning horizon.
CHASE AQUILANO JACOBS
Operations Management
ninth edition
14
1 1 1 1 1 11 1 1 1
JACOBS
1 1 1 1 1 11 1 11 1
1 11 1 1 1 11 1 11 1
AQUILANO
Operations Management
ninth edition
15
Question: Are we really producing two different types of mustards from the standpoint of capacity requirements? Answer: No, its the same product just packaged differently.
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
16
Three 100,000 units-per-year machines are available for small-bottle production. Two operators required per machine. Two 120,000 units-per-year machines are available for family-sized-bottle production. Three operators required per machine.
CHASE AQUILANO JACOBS
17
Question: What are the Year 1 values for capacity, machine, and labor?
1 150 115
2 170 140
3 200 170
4 240 200
Small Mach. Cap. 300,000 Labor 6 Family-size Mach. Cap. 240,000 Labor 6 150,000/300,000=50% At 1 machine for 100,000, it takes 1.5 machines for 150,000 Small Percent capacity used 50.00% Machine requirement 1.50 Labor requirement 3.00 At 2 operators for Family-size 100,000, it takes 3 Percent capacity used 47.92% operators for 150,000 Machine requirement 0.96 Labor requirement 2.88
The McGraw-Hill Companies, Inc.,
18
Question: What are the values for columns 2, 3 and 4 in the table below?
Year: Small (000s) Family (000s) Small Family-size Small Percent capacity used Machine requirement Labor requirement Family-size Percent capacity used Machine requirement Labor requirement
4 240 200 6 6
50.00% 56.67% 1.50 1.70 3.00 3.40 47.92% 58.33% 0.96 1.17 2.88 3.50
Operations Management
ninth edition
19
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
20
A B C
11 . High 1 1 11 1 1 1
Operations Management
ninth edition
21
Example of a Decision Tree Problem: Step 1. We start by drawing the three decisions
A B C
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
22
Example of Decision Tree Problem: Step 2. Add our possible states of nature, probabilities, and payoffs
High demand (.4) Medium demand (.5) Low demand (.1)
A B C
High demand (.4) Medium demand (.5) Low demand (.1) High demand (.4) Medium demand (.5) Low demand (.1)
CHASE AQUILANO JACOBS
Operations Management
ninth edition
23
Example of Decision Tree Problem: Step 3. Determine the expected value of each decision
High demand (.4)
$62k
A
EVA=.4(90)+.5(50)+.1(10)=$62k
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
24
$62k
A B C
Medium demand (.5) Low demand (.1) High demand (.4) Medium demand (.5) Low demand (.1) High demand (.4)
$80.5k
$46k
Alternative B generates the greatest expected profit, so our choice is B or to construct a new facility.
CHASE AQUILANO JACOBS
Operations Management
ninth edition
25
Time
Location
Volatility of Demand
CHASE
AQUILANO
JACOBS
Operations Management
ninth edition
26
From 70% to 100% of service capacity, what do you think happens to service quality?
CHASE
AQUILANO
JACOBS