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Capacity Planning and Scheduling

This document discusses capacity planning and scheduling. It covers: 1. Long-term capacity planning deals with investments over 2 years and requires top management approval as these decisions are difficult to reverse. 2. Measures of capacity include output, input, utilization, design capacity, and effective capacity. Utilization and efficiency are calculated using these measures. 3. A systematic approach to long-term capacity decisions involves estimating requirements, identifying gaps, developing alternatives, and selecting the best option. Tools like waiting line models, simulation, and decision trees can aid this process.

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GERBGARCIA
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144 views

Capacity Planning and Scheduling

This document discusses capacity planning and scheduling. It covers: 1. Long-term capacity planning deals with investments over 2 years and requires top management approval as these decisions are difficult to reverse. 2. Measures of capacity include output, input, utilization, design capacity, and effective capacity. Utilization and efficiency are calculated using these measures. 3. A systematic approach to long-term capacity decisions involves estimating requirements, identifying gaps, developing alternatives, and selecting the best option. Tools like waiting line models, simulation, and decision trees can aid this process.

Uploaded by

GERBGARCIA
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Module 5

Capacity Planning and Scheduling


Capacity planning is important due to the following reasons:
1. Impacts ability to meet future demands
2. It affects operating costs
3. It is a major determinant of initial costs
4. It involves long-term commitment
5. It affects competitiveness
6. Ease of management
LESSON 5.1: Planning Long-Term Capacity

Long-term capacity plans deal with investments in


new facilities and equipment at the organizational
level, and require top management participation
and approval because they are not easily reversed.
These plans cover at least two years into the future,
but construction lead times can sometimes be
longer and result in longer planning time horizons.
Measures of Capacity and Utilization

1. Output measures of capacity


2. Input measures of capacity
3. Utilization
4. Design capacity
5. Effective capacity
6. Actual output
Efficiency and Utilization
Utilization = Actual Output
Design Capacity

Efficiency = Actual Output


Effective Capacity
Example:

Given the following information, compute the


efficiency and the utilization of the vehicle
repair department.
Design capacity = 50 trucks per day
Effective capacity = 40 trucks per day
Actual output = 36 trucks per day
Solution:

Efficiency = Actual output = 36 trucks/day = 90%


Effective capacity 40 trucks/day

Utilization – Actual output = 36 trucks/day = 72%


Design capacity 50 trucks/day
Economies of Scale
1. Spreading fixed costs
2. Reducing construction costs
3. Cutting costs of purchased materials
4. Finding process advantages
LESSON 5.2: A Systematic Approach to
Long-Term Capacity Decisions

1. Estimate capacity requirements


A process’s capacity requirement is what its capacity should be for some future
time period to meet the demand of the firm’s customers (external or internal), given
the firm’s desired capacity cushion. Long-term capacity plans need to consider
more of the future (perhaps, a whole decade) than do short-term plans.
Unfortunately, the further ahead you look, the more chance you have of making an
inaccurate forecast.
Furthermore, another principle to consider in the capacity requirements is the
safety capacity (often called the capacity cushion) is an amount of capacity
reserved for unanticipated events, such as demand surges, materials shortages,
and equipment breakdowns. The formula for safety capacity is:
• Average safety capacity (%) = 100% − Average resource utilization %
Step 2: Identify Gaps
A capacity gap is any difference (positive or negative)
between projected capacity requirements (M) and current
capacity. Complications arise when multiple operations and
several resource inputs are involved. Expanding the
capacity of some operations may increase overall capacity.
Step 3: Develop Alternatives
The next step is to develop alternative plans to cope with projected gaps.
One alternative, called the base case, is to do nothing and simply lose
orders from any demand that exceeds current capacity or incur costs
because capacity is too large. Other alternatives if expected demand
exceeds current capacity are various timing and sizing options for adding
new capacity. Additional possibilities include expanding at a different
location and using short-term options, such as overtime, temporary
workers, and subcontracting. Alternatives for reducing capacity include
the closing of plants or warehouses, laying off employees, or reducing the
days or hours of operation.
Other alternatives include the following:
• Design flexibility into systems (modular expansion)
• Take a “big picture” approach to capacity changes (hotel rooms, car parks,
restaurant seats)
• Differentiate new and mature products (pay attention to the life cycle, demand
variability vs. discontinuation)
• Prepare to deal with capacity “chunks” (no machine comes in continuous
capacities)
• Attempt to smooth out capacity requirements (complementary products,
subcontracting)
• Identify the optimal operating level (facility size)
LESSON 5.3: Tools for Capacity
Planning
Waiting-Line Models
Simulation
Decision Trees
Format of a decision tree
Example:
A manager must decide on the size of a video arcade
to construct. The manager has narrowed the choices
to two: large or small. Information has been
collected on payoffs, and a decision tree has been
constructed. Analyze the decision tree and
determine which initial alternative (build small or
build large) should be chosen in order to maximize
expected monetary value.
Analyze the decision from right to
left:
1. Determine which alternative would be selected for each possible second
decision.
2. Determine the product of the chance probabilities and their respective payoffs
for the remaining branches:
Build small:
Low demand .4($40) = $16
High demand .6($55) = $33
Build large
low demand .4(50) = $20
high demand .6($70) = $42
3. Determine the expected value of each initial alternative.
Build small = $16+$33 = $49
Build large = $20+$42 = $62

Hence, the choice should be to build large facility because


it has a larger expected value than the small facility.
Aggregation

In general, companies perform aggregation along three


dimensions:
• Product Families
• Workforce
• Time
Demand Options

• Complementary Products - One demand option for a company to even out the load on
resources is to produce complementary products, or services that have similar resource
requirements but different demand cycles. The key is to find services and products that
can be produced with the existing resources and can level off the need for resources
over the year.
• Promotional Pricing - Promotional campaigns are designed to increase sales with
creative pricing. Lower prices can increase demand for the product or service from new
and existing customers, take sales from competitors, or encourage customers to move
up future buying. The first two outcomes increase overall demand, while the third shifts
demand to the current period.
• Prescheduled Appointments - Service providers often can schedule customers for
definite periods of order fulfillment. With this approach, demand is leveled to not exceed
supply capacity. An appointment system assigns specific times for service to customers.
• Reservations - Reservation systems, although
quite similar to appointment systems, are used
when the customer actually occupies or uses
facilities associated with the service.
• Revenue Management - Revenue management
(sometimes called yield management) is the
process of varying price at the right time for
different customer segments to maximize
revenues generated from existing supply capacity.
Backlogs
• Backorders and Stockouts - A last resort in
Supply Options

1. Anticipation inventory
2. Workforce adjustment
3. Workforce utilization
4. Part-time contractors
5. Subcontractors
6. Vacation schedules
Planning Strategies

1. Chase strategy
2. Level strategy
Gantt Charts
Priority Sequencing Rules - One way to determine what job or
customer to process next is with the help of a priority sequencing
rule. The following two priority sequencing rules are commonly used
in practice.
• First-Come, First-Served. The job or customer arriving at the
workstation first has the highest priority under a first-come, first-
served (FCFS) rule. This rule is the most “democratic” in that each
job is treated equally, with no one stepping ahead of others already
in line.
• Earliest Due Date. The job or customer with the earliest due date
(EDD) is the next one to be processed. The due date specifies
when work on a job or customer should be finished. Due dates are
commonly used by manufacturers and suppliers in the supply chain
• Performance Measures - The quality of a schedule can be judged in
various ways. Two commonly used performance measures are flow time
and past due.
– Flow Time. The amount of time a job spends in the service or manufacturing
system is called flow time. It is the sum of the waiting time for servers or machines;
the process time, including setups; the time spent moving between operations; and
delays resulting from machine breakdowns, unavailability of facilitating goods or
components, and the like. Flow time is sometimes referred to as throughput time or
time spent in the system, including service.
– Past Due. The measure past due can be expressed as the amount of time by
which a job missed its due date (also referred to as tardiness) or as the percentage
of total jobs processed over some period of time that missed their due dates.
Minimizing these past due measures supports the competitive priorities of cost
(penalties for missing due dates), quality (perceptions of poor service), and time
(on-time delivery).
Example
Processing times (including setup times) and due dates
for six jobs waiting to be processed at a work center are
given in the following table. Determine the sequence of
jobs, the average flow time, average tardiness, and
average number of jobs at the work center, for each of
these rules: Job Processing time Due date (days)
A. FCFS A 2 7
B. SPT B 8 16
C 4 4
C. EDD D 10 17
E 5 15
F 12 18
A. The FCFS sequence is simply A-B-C-D-E-F.
Job Proces Due
sing date
time (days)
Job Processing Flow Due Days tardy A 2 7
Sequence Time time date (0 if
B 8 16
negative)
C 4 4
A 2 2 7 0 D 10 17
B 8 10 16 0 E 5 15
C 4 14 4 10 F 12 18
D 10 24 17 7
E 5 29 15 14
F 12 41 18 23
41 120 54
The measures of effectiveness are:
Average flow time = 120/6 = 20 days
Average tardiness = 54/6 = 9 days
The makespan is 41 days. The average number of
jobs at the work center: 120/41 = 2.93
B. Using the SPT rule, the job sequence is A-C-E-B-D-F.

Job Processin Flow Due Days


Sequence g Time time date tardy
Job Process Due
(0 if
ing time date
negative)
(days)
A 2 2 7 0 A 2 7
C 4 6 4 2 B 8 16
C 4 4
E 5 11 15 0
D 10 17
B 8 19 16 3 E 5 15
F 12 18
D 10 29 17 12

F 12 41 18 23

41 108 40
The three measures of effectiveness are:
Average flow time: 108/6 = 18 days
Average tardiness: 40/6 = 6.67 days
Average number of jobs at the work center: 108/41 = 2.63
C. Using the EDD, the job sequence is C-A-E-B-D-F.

Job Processing Flow Due Days tardy


Sequence Time time date (0 if Job Process Due
ing time date
negative) (days)
C 4 4 4 0 A 2 7
A 2 6 7 0 B 8 16
E 5 11 15 0 C 4 4
D 10 17
B 8 19 16 3
E 5 15
D 10 29 17 12
F 12 18
F 12 41 18 23
41 110 38
The three measures of effectiveness are:
Average flow time: 110/6 = 18.33 days
Average tardiness: 38/6 = 6.33 days
Average number of jobs at the work center: 110/41 = 2.68

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