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Chapter 8 - Capacity. Utilization. Utilization. Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day. Example 8.1. Average output rate Peak capacity. Utilization peak =. Utilization. Fabrication can make 100 engines/day

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## Chapter 8 - Capacity

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**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day Example 8.1**Average output rate**Peak capacity Utilizationpeak = Utilization Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day 50 100 Utilizationpeak = Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day 50 100 Utilizationpeak = x 100% = 50% Example 8.1**Average output rate**Effective capacity Utilizationeffective = Utilization Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day 50 100 Utilizationpeak = x 100% = 50% Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day 50 100 Utilizationpeak = x 100% = 50% 50 45 Utilizationeffective = Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day 50 100 Utilizationpeak = x 100% = 50% 50 45 Utilizationeffective = x 100% = 111% Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day Utilizationpeak = 50% Utilizationeffective = 111% Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day Utilizationpeak = 50% Utilizationeffective = 111% Capacity cushionpeak = 100% – 50% = 50% Capacity cushioneffective = 100% – 111% = – 11% Figure 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day Utilizationpeak = 50% Utilizationeffective = 111% Capacity cushionpeak = 100% – Utilizationpeak Capacity cushioneffective = 100% – Utilizationeffective Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day Utilizationpeak = 50% Utilizationeffective = 111% Capacity cushionpeak = 100% - 50% Capacity cushionpeak = 100% – 50% Capacity cushioneffective = 100% – 111% Example 8.1**Utilization**Fabrication can make 100 engines/day Management wants 45 engines/day Currently producing 50 engines/day Utilizationpeak = 50% Utilizationeffective = 111% Capacity cushionpeak = 100% – 50% = 50% Capacity cushioneffective = 100% – 111% = – 11% Example 8.1**To customers**Inputs 1 2 3 200/hr 200/hr 50/hr (a) Operation 2 a bottleneck Capacity Bottlenecks Figure 8.2**To customers**Inputs 1 2 3 200/hr 200/hr 200/hr Capacity Bottlenecks (b) All operations bottlenecks Figure 8.2**Theory of Constraints**Identify the system bottleneck(s) Exploit the bottleneck(s) Subordinate all other decisions to step 2 Elevate the bottleneck(s) Do not let inertia set in**Economies and Diseconomies of Scale**Average unit cost (dollars per patient) Output rate (patients per week) Figure 8.3**Economies and Diseconomies of Scale**250-bed hospital Average unit cost (dollars per patient) Output rate (patients per week) Figure 8.3**Economies and Diseconomies of Scale**250-bed hospital 500-bed hospital Average unit cost (dollars per patient) Output rate (patients per week) Figure 8.3**Economies and Diseconomies of Scale**250-bed hospital 500-bed hospital Average unit cost (dollars per patient) Economies of scale Output rate (patients per week) Figure 8.3**Economies and Diseconomies of Scale**250-bed hospital 750-bed hospital 500-bed hospital Average unit cost (dollars per patient) Economies of scale Output rate (patients per week) Figure 8.3**Economies and Diseconomies of Scale**250-bed hospital 750-bed hospital 500-bed hospital Average unit cost (dollars per patient) Economies of scale Diseconomies of scale Output rate (patients per week) Figure 8.3**Capacity Strategies**Forecast of capacity required Capacity Time Figure 8.4**Capacity Strategies**Forecast of capacity required Planned unused capacity Capacity Time (a) Expansionist strategy Figure 8.4**Capacity Strategies**Forecast of capacity required Planned unused capacity Capacity Time (a) Expansionist strategy Figure 8.4**Capacity Strategies**Forecast of capacity required Planned unused capacity Capacity increment Capacity Time between increments Time (a) Expansionist strategy Figure 8.4**Capacity Strategies**Forecast of capacity required Capacity Time (b) Wait-and-see strategy Figure 8.4**Capacity Strategies**Forecast of capacity required Planned use of short-term options Capacity Time (b) Wait-and-see strategy Figure 8.4**Capacity Strategies**Forecast of capacity required Planned use of short-term options Capacity increment Capacity Time between increments Time (b) Wait-and-see strategy Figure 8.4**Linking Capacity and Other Decisions**• Competitive Priorities • Quality Management • Capital Intensity • Resource Flexibility • Inventory • Scheduling**Item Client X Client Y**Annual demand forecast (copies) 2000.00 6000.00 Standard processing time (hour/copy) 0.50 0.70 Average lot size (copies per report) 20.00 30.00 Standard setup time (hours) 0.25 0.40 Capacity Decisions Estimate Capacity Requirements Example 8.2**Item Client X Client Y**Annual demand forecast (copies) 2000.00 6000.00 Standard processing time (hour/copy) 0.50 0.70 Average lot size (copies per report) 20.00 30.00 Standard setup time (hours) 0.25 0.40 [Dp + (D/Q)s]product 1 + ... + [Dp + (D/Q)s]product n N[1 – (C/100)] M = Capacity Decisions Estimate Capacity Requirements Example 8.2**Item Client X Client Y**Annual demand forecast (copies) 2000.00 6000.00 Standard processing time (hour/copy) 0.50 0.70 Average lot size (copies per report) 20.00 30.00 Standard setup time (hours) 0.25 0.40 [2000(0.5) + (2000/20)(0.25)]client X + [6000(0.7) + (6000/30)(0.4)]client Y (250 days/year)(1 shift/day)(8 hours/shift)(1.0 – 15/100) M = Capacity Decisions Estimate Capacity Requirements Example 8.2**Item Client X Client Y**Annual demand forecast (copies) 2000.00 6000.00 Standard processing time (hour/copy) 0.50 0.70 Average lot size (copies per report) 20.00 30.00 Standard setup time (hours) 0.25 0.40 [2000(0.5) + (2000/20)(0.25)]client X + [6000(0.7) + (6000/30)(0.4)]client Y (250 days/year)(1 shift/day)(8 hours/shift)(1.0 – 15/100) M = Capacity Decisions Estimate Capacity Requirements Example 8.2**Item Client X Client Y**Annual demand forecast (copies) 2000.00 6000.00 Standard processing time (hour/copy) 0.50 0.70 Average lot size (copies per report) 20.00 30.00 Standard setup time (hours) 0.25 0.40 5305 1700 M = = 3.12 4 machines Capacity Decisions Estimate Capacity Requirements Example 8.2**Capacity Decisions**Identify Capacity Gaps**Capacity Decisions**Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Example 8.3**Demand**Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Example 8.3**Demand**Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Kitchen Capacity Gaps Example 8.3**Demand**Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Kitchen Capacity Gaps Year 1: 90,000 – 80,000 = 10,000 Example 8.3**Kitchen Capacity Gaps**Year 1: 90,000 – 80,000 = 10,000 Year 2: 100,000 – 80,000 = 20,000 Year 3: 110,000 – 80,000 = 30,000 Year 4: 120,000 – 80,000 = 40,000 Year 5: 130,000 – 80,000 = 50,000 Demand Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Example 8.3**Dining Room Capacity Gaps**Year 1: Year 2: Year 3: Year 4: Year 5: Demand Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Example 8.3**Dining Room Capacity Gaps**Year 1: no gaps Year 2: no gaps Year 3: Year 4: Year 5: Demand Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Example 8.3**Dining Room Capacity Gaps**Year 1: no gaps Year 2: no gaps Year 3: 110,000 – 105,000 = 5,000 Year 4: Year 5: Demand Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Example 8.3**Dining Room Capacity Gaps**Year 1: no gaps Year 2: no gaps Year 3: 110,000 – 105,000 = 5,000 Year 4: 120,000 – 105,000 = 15,000 Year 5: 130,000 – 105,000 = 25,000 Demand Year 1: 90,000 meals Year 2: 100,000 meals Year 3: 110,000 meals Year 4: 120,000 meals Year 5: 130,000 meals Capacity Decisions Identify Capacity Gaps Kitchen capacity = 80,000 meals Dining room capacity = 105,000 meals Example 8.3**Capacity Decisions**Evaluate Alternatives

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