
Capacity Planning: Long-Term & Short-Term. This presentation explores: The nature of strategic capacity planning Capacity terminology Determining capacity requirements Decision trees Service capacity planning. Strategic Capacity Planning. Capacity
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Average
unit cost
of output
Underutilization
Over Utilization
Best Operating
Level
Volume
....
100-unit
plant
Average
unit cost
of output
200-unit
plant
400-unit
plant
300-unit
plant
Volume
....
A manufacturer produces two lines of ketchup, FancyFine and a Generic line. Each is sold in small and family-size plastic bottles – differentiator here, is size of bottles.
The following table shows forecast demand for the next four years.
....
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.
....
A glass factory specializing in crystal is experiencing a substantial backlog, and the firm's management is considering three courses of action:
A) Arrange for subcontracting,
B) Construct new facilities.
C) Do nothing (no change)
The correct choice depends largely upon demand, which may be low, medium, or high. By consensus, management ranks the respective probabilities as .10, .50, and .40. A cost analysis that reveals the effects upon costs is shown in the following table.
....
....
$90k
High demand (.4)
$50k
Medium demand (.5)
$10k
Low demand (.1)
A
$200k
High demand (.4)
$25k
B
Medium demand (.5)
-$120k
Low demand (.1)
C
$60k
High demand (.4)
$40k
Medium demand (.5)
$20k
Low demand (.1)
....
High demand (.4)
Medium demand (.5)
Low demand (.1)
$90k
$50k
$62k
$10k
A
EVA=.4(90)+.5(50)+.1(10)=$62k
Exercise: Complete the decision tree analysis.
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2
1. Each time you perform a task it takes less time than the last time you performed the same task
2. The extent of task time decreases over time
3. The reduction in time will follow a predictable pattern
3
100
90
80
90 % Learning Curve
70
60
50
Production Cost ($)
40
30
20
10
0
1
3
5
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9
11
13
15
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21
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25
27
29
31
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35
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39
Unit number
5
7