Scribd
Upload
24 views

Capacity: Meet Demand

The document discusses capacity planning and meeting demand. It defines capacity as the maximum ability to produce and discusses strategic, medium-term, and short-term capacity planning. It also covers measuring and types of capacity, comparing capacity to demand, and managing demand through expansion or reduction strategies.

Uploaded by

Ansh Talwar
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
24 views

Capacity: Meet Demand

The document discusses capacity planning and meeting demand. It defines capacity as the maximum ability to produce and discusses strategic, medium-term, and short-term capacity planning. It also covers measuring and types of capacity, comparing capacity to demand, and managing demand through expansion or reduction strategies.

Uploaded by

Ansh Talwar
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 17

CAPACITY

MEET DEMAND

Maximum Capability to Produce


Capacity is the maximum ability to produce -can be
defined as the ability to hold, receive, convert, store
and despatch.

Strategic capacity planning is an approach for


determining the overall capacity level of capital
intensive resources, including facilities, equipment,
and overall labor force size.

Capacity defines overall scale, numbers & sizes of


different sites between which capacity is distributed,
the specific activity allocated & location of each site.

Output should preferably less than capacity.


Levels of capacity planning
Strategic long-term capacity - Extends over
years-months long enough to obtain
resources Buildings, facilities, technology
How much, distribution, where???
Medium-term capacity Months-weeks
People, out sourcing, make OR buy.
Short-term capacity weeks-days-hours
people positioning, scheduling, machine
loading.
Long Range Capacity Planning
Usually long-term strategic decisions.
How much long-range production capacity firms ability to
meet customer demand.
Objective Determines capital intensive resources
facility, machinery, equipment, labor force required.
Decides resource required to match output requirement.
Impacts cost structure, inventory policy, resource &
management support and man-power requirement.
Affects product lead time, customer response time, cost
(price) > firms competitiveness.
Excess capacity > under utilisation, excess inventory >
higher cost & lower profitability.
Activity for LRP
Forecasting long-range demand & hence
capacity required for all products.
Present capacity.
Identify the gaps.
Analyse on how to bridge the gap identify
sources & select alternates.
Capacity Measurement
Production capacity Maximum production
rate considering employee absence,
equipment maintenance, material delays,
quality issues and product mix.
Also consider work schedules, working
hours, over time, temporary workers, out
sourcing, sub-contracting.
Establish SUSTAINABLE PRACTICAL CAPACITY.
PRODUCT MIX
Single Product OR a few homogenous
products Cars per month, Mega Watt power
per month.
Multiple OR heterogonous products soap +
tooth paste + detergents + face cream >
Hindustan Lever. Air conditioners+ washing
machine + refrigerator > Voltas, Godrej.
TYPES OF CAPACITY
Rated Capacity Based on capability of
machines to produce. CRITICAL MACHINE.
Maximum OR Peak Capacity Possible under
ideal conditions for a short term.
Effective Capacity output with divergent
product mix with constraints like absenteeism,
machine breakdown, material delay, quality
hold ups, scheduling sustainable over longer
duration.
the maximum output rate that a Average output
process or facility can achieve Utilization=
in the short term under ideal Peak capacity
conditions

the maximum output that a Average output


company or process can Efficiency=
economically sustain under Effective capacity
normal circumstances for
an extended time period

Capacity Cushion = 1 - Utilization

Focused Factory
Plant within Plant
Comparing Capacity and Demand
Customers turned away
Maximum
capacity
Poor service
Demand

Optimal
capacity

Idle capacity

Time
Capacity Expansion
Capacity lead strategy Match expected demand.
Divert customer from capacity constrained
customer, surge demands, better service level at
peak demands.
Average capacity strategy to meet average
expected demand. 50% of time,
demand<capacity & demand>capacity.
Capacity lags strategy Capacity increased to
meet demand. Possible lost customer.
Decision volume & accuracy of prediction,
strategic objectives growth, customer service &
investment cost.
Capacity Expansion Strategy
MANAGING DEMAND
Demand stable resources acquired &
maintained over time.
Variations over time / under time, hiring /
firing, part time persons.
Demand specific Seasonal demands,
discount sales, emergencies.
Accommodation Customer satisfaction >
operational efficiency.
Reduction strategy Operational efficiency>
Customer satisfaction.
Strategic Decisions - Capacity
EXPANSION
Subcontract / Outsource.
Upgrade / modify / expand existing.
Acquire Facilities, Companies.
New facility Build buildings, buy equipment, recruit
people.

REDUCTION
Develop new products.
Accept contract manufacturing.
Temporary lay-offs, idling till demand picks up.
Worst case scenario - Sell facilities, equipments, inventory
& lay off people.
Economies & Diseconomies of Scale
Economies of scale incremental Increase in Capacity

You might also like