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Capacity Planning

Capacity Planning. Manufacturing : Inventory can be used to cushion fluctuations in demand More focused on machinery as a constraint than people Services : No Inventory People are primary constraint. Planning Horizons. Business Plan. LONG. Production Plan. Master Production Schedule.

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Capacity Planning

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  1. Capacity Planning Manufacturing: • Inventory can be used to cushion fluctuations in demand • More focused on machinery as a constraint than people Services: • No Inventory • People are primary constraint

  2. Planning Horizons Business Plan LONG Production Plan Master Production Schedule SHORT Individual Machine/ Workcenter Matl. Reqs. Plan (MRP)

  3. Capacity must be matched carefully with Marketing strategy! America on(OFF)line - How NOT to plan!

  4. AOL: Number of members on-line at once

  5. Me? I thought YOU were going to tell operations!! Marketing Marketing Operations

  6. How to Deal with Uneven Demand? • Vary inventory • Change Production Rate • Change workforce size ............... REACTIVE alternatives!!

  7. Proactive/Aggressive Alternatives • Complementary products • Promotional campaigns • Creative pricing

  8. Two Capacity Expansion Strategies ..... EXPANSIONIST Capacity Demand Forecast Time

  9. Expansionist Strategy CONCEPT: • Large, Infrequent jumps in capacity • Stays ahead of demand ADVANTAGES: • Lost Sales unlikely • Economies of scale (construction and learning) • Preempt Competition

  10. Two Capacity Expansion Strategies ..... WAIT-and-SEE Capacity Time

  11. Two Capacity Expansion Strategies ..... WAIT-and-SEE Capacity Demand Forecast Time

  12. Two Capacity Expansion Strategies ..... WAIT-and-SEE Capacity Demand Forecast Time

  13. Wait and See Strategy CONCEPT: • Small, Frequent jumps in capacity • Lags behind demand, relying on short-term operations ADVANTAGES: • Minimize risk • Greater flexibility

  14. Capacity Cushion Maximum Capacity (100%) Cushion Average Utilization

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