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Understanding Strategic Capacity Planning module 1 for midterm

The document explains the concepts of capacity and capacity planning, emphasizing the importance of matching long-term supply capabilities with predicted demand. It distinguishes between design capacity and effective capacity, providing formulas for calculating efficiency and utilization. Additionally, it outlines various factors that determine effective capacity, including facilities, processes, human factors, policies, operational aspects, supply chain influences, and external factors.

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11 views

Understanding Strategic Capacity Planning module 1 for midterm

The document explains the concepts of capacity and capacity planning, emphasizing the importance of matching long-term supply capabilities with predicted demand. It distinguishes between design capacity and effective capacity, providing formulas for calculating efficiency and utilization. Additionally, it outlines various factors that determine effective capacity, including facilities, processes, human factors, policies, operational aspects, supply chain influences, and external factors.

Uploaded by

froilan copiling
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Understanding

Strategic Capacity
Planning
L01:Describe ways of
defining and
measuring capacity
L02:Determinants of
Effective Capacity
What is CAPACITY?

 It refers to the upper limit or


ceiling on an operating unit’s load.
The maximum amount that
something can contain or can
produce.
What is CAPACITY PLANNING?
 It is to achieve a match between the long-
term supply capabilities of an organization
and the predicted level of long-term
demand. Moreover, it may cause
OVERCAPACITY and UNDER-CAPACITY of
products or services.
Two functions of capacity
 Design capacity- It is the maximum
rate of output achieved under ideal
or perfect conditions.
 Effective capacity- design capacity
minus allowances such as personal
time and maintenance.
Formula for know the proper
capacity of product
 Efficiency=(Actual Output/Effective
Capacity) x 100% This is the ratio of
actual output to effective capacity.
 Utilization=(Actual Output/Design
Capacity) x 100% This is the ratio of
actual output to design capacity.
Example of computation
 In a bakery, for example, we have
established that the design capacity is
30 pies per day and effective capacity
is 20 pies per day. Currently, the
bakery is producing 27 pies per day.
Solution to the problem
 Utilization Effective = (actual output/effective
capacity) x 100% = (27/20) x 100% =
135%
 Utilization Design = (actual output/design
capacity) x 100% = (27/30) x 100% = 90%
Factors that determine effective
capacity
 A. Facilities- design, location,
layout, environment
 B. Product/Service- design,
product or service mix
Factors that determine effective
capacity
 C. Process- quantity and quality
capabilities
 D. Human Factors- job content and
design, training and experience,
motivation, compensation, learning rates,
absenteeism and labor turnover
Factors that determine effective
capacity
 E. Policy –Management policy can affect
capacity by allowing or not allowing capacity
options.
 F. Operational- scheduling, materials
management, quality assurance, maintenance
policies, equipment breakdowns
Factors that determine effective
capacity
 G. Supply Chain – through capacity
planning chances affects the substantial
capacity of product/services
 H. External Factors product standards,
safety regulations, unions, pollution
control standards
Exercise 1: What are some capacity measures for each
of the following?

a. University Ex. number and sizes of


classrooms

b. Hospital Ex. number doctors


c. Restaurant Ex. number of waiters and
kitchen staff

d. Hotel Ex. Number of rooms


Follow-up question!

 Why
is the capacity decision
important?
 What is the difference between
utilization and efficiency?

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