Scribd
Upload
77 views8 pages

Capacity Planning Essentials

Capacity planning involves determining the appropriate production capacity needed to meet future demand. It affects costs, competitiveness, and long-term planning. Key decisions include determining how much and what type of capacity is required, when changes are needed, and maintaining balance. The steps are to estimate future needs, evaluate existing capacity, identify alternatives, analyze costs, select an alternative, implement it, and monitor results.

Uploaded by

Sehar Ishtiaq
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
77 views8 pages

Capacity Planning Essentials

Capacity planning involves determining the appropriate production capacity needed to meet future demand. It affects costs, competitiveness, and long-term planning. Key decisions include determining how much and what type of capacity is required, when changes are needed, and maintaining balance. The steps are to estimate future needs, evaluate existing capacity, identify alternatives, analyze costs, select an alternative, implement it, and monitor results.

Uploaded by

Sehar Ishtiaq
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 8

Capacity Planning

5-3 Capacity Planning

 Capacity is the upper limit or ceiling on the


load that an operating unit can handle.
 The basic questions in capacity handling are:
 What kind of capacity is needed?
 How much is needed?
 When is it needed?
Importance of Capacity Decisions
5-4 Capacity Planning

1. Impacts ability to meet future demands


2. Affects operating costs
3. Major determinant of initial costs
4. Involves long-term commitment
5. Affects competitiveness
6. Affects ease of management
7. Globalization adds complexity
8. Impacts long range planning
Capacity
5-5 Capacity Planning

 Design capacity
 maximum output rate or service capacity an
operation, process, or facility is designed for
 Effective capacity
 Design capacity minus allowances such as
personal time, maintenance, and scrap
 Actual output
 rate of output actually achieved--cannot
exceed effective capacity.
Efficiency and Utilization
5-6 Capacity Planning

Actual output
Efficiency =
Effective capacity

Actual output
Utilization =
Design capacity

Both measures expressed as percentages


Efficiency/Utilization Example
5-7 Capacity Planning

Design capacity = 50 trucks/day


Effective capacity = 40 trucks/day
Actual output = 36 units/day

Actual output = 36 units/day


Efficiency = = 90%
Effective capacity 40 units/ day

Utilization = Actual output = 36 units/day


= 72%
Design capacity 50 units/day
Determinants of Effective Capacity
5-8 Capacity Planning

 Facilities
 Product and service factors
 Process factors
 Human factors
 Operational factors
 Supply chain factors
 External factors
Key Decisions of Capacity Planning
5-9 Capacity Planning

1. Amount of capacity needed


2. Timing of changes
3. Need to maintain balance
4. Extent of flexibility of facilities
Steps for Capacity Planning
5-10 Capacity Planning

1. Estimate future capacity requirements


2. Evaluate existing capacity
3. Identify alternatives
4. Conduct financial analysis
5. Assess key qualitative issues
6. Select one alternative
7. Implement alternative chosen
8. Monitor results

You might also like