1. Contrast design capacity and effective capacity.
Design Capacity vs. Effective Capacity
1. Design Capacity
o Definition: Maximum rate of output achieved under ideal conditions.
o Characteristics:
▪ Assumes optimal conditions without disruptions.
▪ Not typically achieved in real-world operations.
2. Effective Capacity
o Definition: Design capacity minus allowances for personal time, maintenance,
scheduling problems, and product mix changes.
o Characteristics:
▪ Always less than design capacity due to real-world constraints.
▪ Reflects practical achievable output.
Key Points
• Design capacity sets the theoretical maximum output.
• Effective capacity accounts for inevitable inefficiencies.
• Actual output often falls below effective capacity due to additional factors like machine
breakdowns, turnover and absenteeism
2. List and briefly explain three factors that may inhibit capacity utilization.
Factors Inhibiting Capacity Utilization
1. Equipment Maintenance and Breakdowns
o Explanation: Regular maintenance and unexpected breakdowns can reduce the time
equipment is available for production.
o Impact: Decreases the actual output, causing underutilization of capacity.
2. Quality Problems
o Explanation: Defects and errors in production can lead to rework or scrapping of
products.
o Impact: Increases the time and resources needed to produce acceptable units, reducing
overall capacity utilization.
3. Insufficient Demand
o Explanation: Market demand might not be high enough to use the full capacity.
o Impact: Limits the volume of production, leaving part of the capacity idle.
Key Points
• Maintenance and breakdowns reduce equipment availability.
• Quality issues necessitate rework, slowing down production.
• Low market demand leads to underutilized capacity.
3. How do long-term and short-term capacity considerations differ?
Differences Between Long-term and Short-term Capacity Considerations
1. Time Horizon
o Long-term: Focuses on future capacity needs over several years.
o Short-term: Deals with immediate capacity needs, typically within a year or less.
2. Scope of Changes
o Long-term: Involves significant investments such as building new facilities, purchasing
major equipment, or entering new markets.
o Short-term: Involves minor adjustments like scheduling changes, temporary labor, or
minor equipment maintenance.
3. Flexibility
o Long-term: Less flexible due to the scale of changes and investments required.
o Short-term: More flexible, allowing for quick adjustments to meet immediate demands.
Key Points
• Long-term capacity planning is for several years and involves major investments.
• Short-term capacity planning is for immediate needs and involves minor adjustments.
• Long-term planning is less flexible compared to the more adaptable short-term planning
4- Give an example of a good and a service that exhibit the following seasonal demand patterns. a.
Annual b. Monthly c. Weekly d. Daily
Seasonal Demand Patterns Examples
Summary
• Annual: Christmas decorations (good) and tax preparation services (service) have peak demands
once a year.
• Monthly: Magazines (good) and residential cleaning services (service) see demand spikes
monthly.
• Weekly: Grocery items (good) and fitness classes (service) experience weekly demand patterns.
• Daily: Coffee (good) and restaurant dining (service) have daily demand fluctuations based on
time of day
5- Give some examples of building flexibility into system design.
1. Incorporating provisions for future expansion during initial construction:
o Installing necessary infrastructure components like water lines and power hookups.
o Allowing for easy modifications to accommodate future growth.
2. Securing options for additional land:
o Starting with a smaller-scale operation and having the flexibility to expand.
o Progressing from a smaller facility to a larger one by obtaining adjacent land options.
3. Considering adaptable layouts, equipment choices, and production planning:
o Designing layouts that can easily adjust to changing requirements.
o Selecting equipment that can be modified or upgraded as needed.
o Planning production processes that can scale up or down based on demand.
6- Why is it important to adopt a big-picture approach to capacity planning?
1. Considering interrelationships within the system:
o Understanding how different parts of the system are interconnected.
o Recognizing the impact of capacity changes on various aspects of the operation.
2. Addressing potential supply chain implications:
o Collaborating with supply chain partners to ensure alignment with capacity plans.
o Allowing time for suppliers, distributors, and transporters to adjust to capacity changes.
3. Avoiding system imbalances:
o Preventing bottleneck operations that can limit overall system capacity.
o Ensuring that all components of the system can effectively support the desired capacity
levels.
7- What is meant by “capacity in chunks,” and why is that a factor in capacity planning?
1. Matching desired capacity with feasible capacity:
o Acquiring capacity increases in large chunks can lead to challenges in aligning
capacity with demand.
o The need to balance capacity additions to meet specific operational requirements.
2. Managing uneven capacity requirements:
o Dealing with fluctuations in demand that may not align with the capacity increments
available.
o Addressing situations where capacity additions may result in underutilization or
overutilization of resources.
3. Optimizing resource utilization:
o Striving to achieve an optimal balance between capacity increments and actual
demand.
o Considering the implications of acquiring capacity in chunks on operational efficiency
and cost-effectiveness
9. How can a systems approach to capacity planning be useful?
1. Considering interconnected components:
o Understanding how different elements within the system interact.
o Recognizing the impact of capacity decisions on various parts of the operation.
2. Addressing supply chain implications:
o Collaborating with supply chain partners to ensure alignment with capacity plans.
o Allowing time for suppliers, distributors, and transporters to adjust to capacity changes.
3. Avoiding imbalances in the system:
o Preventing bottleneck operations that can restrict overall system capacity.
o Ensuring that all system components can effectively support the desired capacity levels.
10. How do capacity decisions influence productivity?
1. Impacting the ability to meet demand:
o Capacity decisions determine the organization's capability to fulfill product or service
requirements.
o Adequate capacity enables the organization to capitalize on opportunities and enhance
productivity.
2. Affecting operational costs:
o Aligning capacity with demand minimizes operating expenses.
o Balancing costs associated with under or overcapacity situations is crucial for cost-
effectiveness.
3. Serving as a major cost determinant:
o Higher capacity typically corresponds to increased initial costs.
o The relationship between capacity and cost is essential in decision-making processes.
4. Influencing competitiveness:
o Excess capacity or the ability to quickly adjust capacity can act as a competitive
advantage.
o Capacity decisions impact delivery speed, which can enhance competitiveness in the
market.
5. Simplifying management:
o Matching capacity with demand streamlines operational management.
o Proper capacity alignment reduces complexities in resource utilization and planning.
11. Why is it important to match process capabilities with product requirements?
1. Ensuring product quality:
o Aligning process capabilities with product requirements guarantees the production of
high-quality goods or services.
o Meeting product specifications and standards is essential for customer satisfaction and
market competitiveness.
2. Enhancing efficiency:
o Matching process capabilities with product requirements optimizes operational
efficiency.
o Avoiding mismatches between process capabilities and product needs minimizes waste
and improves productivity.
3. Supporting consistency:
o Consistent alignment between process capabilities and product requirements ensures
uniformity in output.
o Maintaining consistency in production processes leads to reliable and predictable
results.
4. Facilitating innovation:
o Understanding and meeting product requirements with appropriate process capabilities
fosters innovation.
o The ability to adapt processes to meet evolving product demands drives continuous
improvement and competitiveness.
12. Briefly discuss how uncertainty affects capacity decisions.
1. Influencing decision-making:
o Uncertainty surrounding future demand and market conditions can complicate capacity
planning.
o Ambiguity in forecasting demand and technological changes adds complexity to capacity
decisions.
2. Impacting resource allocation:
o Uncertainty may lead to challenges in allocating resources effectively.
o Balancing the need for capacity adjustments with uncertain future conditions requires
strategic planning.
3. Necessitating flexibility:
o Uncertainty underscores the importance of flexibility in capacity decisions.
o Being able to adapt quickly to changing circumstances is crucial in managing uncertain
environments.
