Chapter 8 Capacity management - cc.sspu.cncc.sspu.cn/download/b6e37a9f-9a5e-402d-8299-ac0347636e0d.pdf · Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st

Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011

Chapter 8

Capacity management


Slack et al’s model of operations management

Design

Deliver

Direct

Develop

Operations Management

Lean synchronis-

ation

Planning and control

Capacity manag-ement

Supply network

management

Inventory management


In Chapter 8 - Capacity planning and control – Slack et. al. identify the following key questions…….

What is capacity management?

How are demand and capacity measured?

What are the alternative ways of coping with demand

fluctuation?

How can operations plan their capacity level?

How can queuing theory be used to plan capacity?

Key operations questions


Capacity is in the static, physical sense means the scale of an operation,

What is capacity?

But this may not reflect the operation’s processing capability

So we must incorporate a time dimension appropriate to the use of assets.

For example 24 000 litres per day.

10,000 calls per day

57 patients per session

Etc.


The objectives of capacity planning and control

To provide an “appropriate” amount of capacity at any point in time.

The “appropriateness” of capacity planning in any part of the operation can be judged by its effect on…...

CostsRevenue

Working Capital

Service Level


Objectives of capacity planning and control

Forecast demand

Time

Aggr

egat

ed o

utpu

t

Estimate of current capacity

Measure aggregate capacity and demand

Identify the alternative capacity plansChoose the most appropriate capacity plan


The nature of aggregate capacity

- rooms per night;

- ignores the numbers of guests in each room.

- tonnes per month;

- ignores types of alloy, gauge and batch variations.

Aggregate capacity of a hotel:

Aggregate capacity of an aluminium producer:


Climatic Festive Behavioural Political Financial Social

Causes of seasonality

Construction materialsBeverages (beer, cola)Foods (ice-cream)Clothing (swimwear, shoes)Gardening items (seeds)Fireworks

Travel servicesHolidaysTax processingDoctors (influenza epidemic)Sports servicesEducation services


Demand fluctuations in four operations


Good forecasts essential for effective capacity planningBut so is an understanding of demand uncertainty because it allows you to judge the risks to service level.

When demand uncertainty is high the risks to service level of under provision of capacity are high.

Dem

and

Time

Only 5% chance of demand being lower than this

Dem

and

Time

Distribution of demandOnly 5% chance of demand being higher than this


Loading time

Equipment “idling”

Speed losses

Slow running equipment

Net operating time

Not worked (unplanned)

Breakdown failure

Set-up and change-overs

Total operating time

Availability losses

Operating equipment effectiveness (OEE)

Availability rate = a = total operating time

loading time

Performance rate = p= net operating time

total operating time

Quality rate = q= valuable operating time

net operating timeQuality losses

Valuable operating

time

Quality losses


How capacity and demand are measured

Design capacity

168 hours per week

Effective capacity

109 hours per week

Planned loss of 59 hours

Actual output –51 hours per

week

Avoidable loss –58 hours per

week

EfficiencyActual output

Effective capacity=

Utilization Actual outputDesign capacity=


Ways of reconciling capacity and demand

Level capacity

Demand

Capacity

Chase demand Demand management

CapacityCapacity

Demand Demand


How do you cope with fluctuations in demand?

Absorb Demand

Change demand

Adjust output to match demand

Level capacity

Chase demand

Demand management

Ways of reconciling capacity and demand


Absorb demand

Part finishedFinished goods, orCustomer Inventory

QueuesBacklogs

Have excess capacity

Make to stock

Keep output level

Make customer

wait

Absorb demand



Hire Fire

Temporary labour Lay-off

Overtime

Subcontract

Short time

3rd party work



Change demand

Change pattern of demand

Develop alternative products and/or services

Change demand


Moving a peak in demand can make capacity planning easier


ShortagesQueues

InventoryActual demand

and actual capacity

Period t - 1

OutcomeHow much capacity

next period?

Current capacity

estimatesUpdated forecasts

Period t

DecisionHow much capacity

next period?

Current capacity

estimatesUpdated forecasts

Period t + 1

DecisionCapacity level

ShortagesQueues

Inventory

CostsRevenues

Working capitalCustomer satisfaction

etc

Actual demand

and actual capacity?

CostsRevenues

Working capitalCustomer satisfaction

etc

Outcome

Capacity planning and control as a dynamic sequence of decisions


Demand for a manufacturing operation’s output

8000

Fore

cast

in a

ggre

gate

d un

its

of o

utpu

t per

mon

th

7000

6000

5000

4000

3000

2000

1000

0J F M A M J J A S O N D

Months


For capacity planning purposes demand is best considered on a cumulative basis. This allows alternative capacity and output plans to be evaluated for feasibility.

Fore

cast

cum

ulat

ive

aggr

egat

ed

outp

ut (t

hous

ands

)

60

50

40

30

20

10

00 40 80 120 160 200 240

Cumulative operating days

But will not satisfy demand at all points throughout the year

Producing at average demand

Producing at average demand allows inventory to be accumulated


Cumulative representations

Cumulative demand

Time

Building stock

Unable to meet orders

Cap

acity

and

Dem

and

Cumulative capacity


Time

Time

Low variability -narrow distribution of process times

High variability -wide distribution of

process times

Simple queuing system


Boundary of system

Queue or “waiting line”

Served customers

Rejecting Balking Reneging

Server 1

Server 2

Server m

Distribution of arrival times

Distribution of processing times

Simple queuing system

Source of customers

Documents

Chapter 8 Capacity management - cc.sspu.cncc.sspu.cn/download/b6e37a9f-9a5e-402d-8299-ac0347636e0d.pdf · Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st