operations management capacity design
Download
Skip this Video
Download Presentation
Operations Management Capacity Design

Loading in 2 Seconds...

play fullscreen
1 / 21

Operations Management Capacity Design - PowerPoint PPT Presentation


  • 103 Views
  • Uploaded on

Operations Management Capacity Design. Long Range Planning. Add Facilities. Intermediate Range Planning. Sub-Contract Add Equipment Add Shifts. Add Personnel Build or Use Inventory. Schedule Jobs Schedule Personnel Allocate Machinery. Short Range Planning.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' Operations Management Capacity Design' - norton


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
types of planning over a time horizon

Long Range Planning

Add Facilities

Intermediate Range Planning

Sub-Contract

Add Equipment

Add Shifts

Add Personnel

Build or Use Inventory

Schedule Jobs

Schedule Personnel

Allocate Machinery

Short Range Planning

Modify Capacity

Use Capacity

Types of Planning Over a Time Horizon
definition and measures of capacity
Definition and Measures of Capacity

Design

Capacity:

The maximum “throughput,” or number of units a facility can produce in a period of time.

Capacity a firm can expect to achieve given its product mix, methods of scheduling, maintenance, and standards of quality.

Effective capacity:

Utilization:

Actual output as a percent of design capacity.

Efficiency:

Actual output as a percent of effective capacity.

utilization
Utilization

Measure of planned or actual capacity usage of a facility, work center, or machine

Actual Output

=

Utilization

Design Capacity

efficiency
Efficiency

Measure of how well a facility or machine is performing when used

Actual output

=

Efficiency

Effective Capacity

example
Example

Facility produces breakfast rolls

  • Last week, produced 148,000 rolls
  • Effective capacity is 175,000 rolls
  • Line operates 7 days a week with three 8-hour shifts per day
  • Line designed to produce 1200 rolls per hour
  • Determine
    • Design Capacity
    • Utilization
    • Efficiency
calculating actual output
Calculating actual output

Same facility adding one more line due to increase in demand for deluxe rolls

  • Effective capacity is 175,000 rolls of this line
  • Efficiency of this second line will be 75%
  • What is the expected output?
managing demand
Managing Demand
  • Demand exceeds capacity – curtail demand by raising prices, scheduling long lead times, etc
  • Capacity exceeds demand – stimulate demand through price reductions, aggressive marketing, etc
  • Adjusting to seasonal demands– offer products with complementary demand patterns – pdts for which demand is high for one when low for the other
managing capacity
Managing Capacity
  • Making staffing changes (increasing or decreasing the number of employees)
  • Adjusting equipment and processes – which might include purchasing additional machinery or selling or leasing out existing equipment
  • Improving methods to increase throughput; and/or
  • Redesigning the product to facilitate more throughput
breakeven analysis
Breakeven Analysis
  • Technique for evaluating process & equipment alternatives
  • Objective: Find the point ($ or units) at which total cost equals total revenue
  • Assumptions
    • Revenue & costs are related linearly to volume
    • All information is known with certainty
break even analysis
Break-Even Analysis
  • Fixed costs: costs that continue even if no units are produced: depreciation, taxes, debt, mortgage payments, salaries, etc
  • Variable costs: costs that vary with the volume of units produced: labor wages, materials, portion of utilities
breakeven chart
Breakeven Chart

Total revenue line

Profit

Breakeven point

Total cost = Total revenue

Profit

Total cost line

Cost in Dollars

Variable cost

Loss

Fixed cost

Volume (units/period)

crossover chart

Process A: low volume, high variety

Process B: Repetitive

Process C: High volume, low variety

Total cost - Process A

Total cost - Process B

Total cost - Process C

Fixed cost - Process C

Fixed cost - Process B

Fixed cost - Process A

Lowest cost process

Process A

Process B

Process C

Crossover Chart
break even contd
Break Even Contd..
  • BEPx= FC (units)

P-V

BEPrs.= FC (amount)

1-(V/P)

BEPrs.= FC (multi product)

∑[(1-Vi/Pi)*(Wi)]

P=Selling price, V=variable cost

FC=fixed cost

bep calc
BEP Calc.
  • A company has fixed costs of 10000/- this period. Direct costs are 1.5/- per unit and material cost is 0.75/- per unit. The selling price is 4/- per unit. Calculate the BEPs.
slide18
If the fixed costs are 3500,
  • BEPrs.= FC ∑[(1-Vi/Pi)*(Wi)]

3500*12 = 67200

0.625

decision trees application
Decision trees application
  • A company is considering capacity expansion. it has 3 alternatives. the new facility would produce new type of product and currently the marketability of the product is unknown.
  • Types of plant favorable mkt. unfavorable mkt.
  • Large plant 100 k -90k
  • Medium plant 60k -10k
  • Small plant 40k -5k
  • The probability of fav and unfav. Markets are 0.4 and 0.6 respectively.
slide20
EMV (large plant)=0.4(100k)+(.6)(-90k)=-14k
  • EMV (medium plant)=0.4(60k)+(.6)(-10k)=18k
  • EMV (small plant)=0.4(40k)+(.6)(-5k)=13k
  • Based on Expected market value, the company should build a medium plant
net present value
Net Present value
  • A co. having two capacity expansion alternatives A and B have useful lives of 4 years. Initial outlay for A is 25k and that for B is 26k. The cost of capital is 8%.the cash flow pattern is as follows.

year A B

1 10k 9k

2 9k 9k

3 8k 9k

4 7k 9k

ad