Capacity Planning For Products and Services
Capacity Planning For Products and Services
Capacity Planning For Products and Services
Capacity Planning
For Products and Services
5-2 Capacity Planning
Capacity Planning
Related questions
How much will it cost, and what is the expected
return?
What are the potential benefits and risks?
Capacity
Design capacity
maximum output rate or service capacity an
operation, process, or facility is designed for
under ideal condition
Effective capacity
Design capacity minus allowances such as
personal time, maintenance, and scrap
Actual output
rate of output actually achieved--cannot
exceed effective capacity.
5-8 Capacity Planning
Actual output
Efficiency =
Effective capacity
Actual output
Utilization =
Design capacity
Facilities
Product and service factors
Process factors
Human factors
Operational factors
Supply chain factors
External factors
5-10 Capacity Planning
Strategy Formulation
Make or Buy
1. Available capacity
2. Expertise
3. Quality considerations
4. Nature of demand
5. Cost
6. Risk
5-16 Capacity Planning
Evaluating Alternatives
Cost-volume analysis
Financial analysis
5-19 Capacity Planning
Cost-Volume Relationships
F C
+
Amount ($)
VC C)
s
=
t t (V
s
c o co
t al le
b
To ri a
l va
o ta
T
Fixed cost (FC)
0
Q (volume in units)
5-20 Capacity Planning
Cost-Volume Relationships
ue
en
Amount ($)
e v
l r
ta
To
0
Q (volume in units)
5-21 Capacity Planning
Cost-Volume Relationships
u e
e n fi t
Amount ($)
ev ro
r P
al t
t o s
To t a l c
To
0 BEP units
Q (volume in units)
5-22 Capacity Planning
C =
+ V
FC
TC
= TC
V C
+
FC 3 machines
T C
C =
V
F C + 2 machines
1 machine
Quantity
Step fixed costs and variable costs.
5-23 Capacity Planning
$
BEP
3
TC
BEP2
TC
3
TC
2
TR 1
Quantity
Multiple break-even points
5-24 Capacity Planning
Cost-Volume-Profit Analysis
How can production management be improved
with your knowledge and understanding of Cost-
Volume-Profit Relationship?
Read the following references:
http://www.fao.org/docrep/w4343e/w4343e06.htm
http://www.swlearning.com/ibc/albrecht9e/pdf/67
604_c02_42-113.pdf
5-25 Capacity Planning
Financial Analysis