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Operations Mgmt

Prof. fandel: Chapter 10 Capacity Management

Capacity The capability of a manufacturing or service resource such as a facility, process, workstation, or piece of equipment to acquire its purpose over a specified time period.
Capacity is determined by: By the resources available to organization (facilities, equipment, and labor) how they are organized, and their efficiency as determined by specific work methods.
Two ways to view Capacity: 1) As the maximum rate of output per unit of time. 2) As units of resource availability
Economies of Scale Are achieved when the average unit cost of a good or service decreases as the capacity and/or volume of throughput increases.
Diseconomies of Scale Occur when the average unit cost of the good or service begins to increase as the capacity and/or volume of throughput increases.
Focused Factory A way to achieve economies of scale without extensive investments in facilities and capacity by focusing on a narrow range of goods or services, target market segments, and/or dedicated processes to maximize efficiency and effectiveness.
Safety Capacity (Capacity Cushion) An amount of capacity reserved for unanticipated events, such as demand surges, materials shortages, and equipment breakdowns.
Average Safety Capacity (%) = 100% - Average resource utilization %
Capacity required (Ci) = Setup (Si) + [Processing Time (Pi) x Order Size (Qi)]
Revenue Management Systems (RMS) Consists of dynamic methods to forecast demand, allocate perishable assets across market segments, decide when to overbook and by how much, and determine what price to charge different customer classes. ex) Managing overbooking in airlines, hotels, etc.
Theory of Constraints (ToC) A set of principles that focuses on increasing total process throughput by maximizing the utilization of all bottleneck work activities and workstations.
Throughput Amount of money generated per time period through actual sales.
Constraint Anything that limits an organization from moving toward or achieving a goal.
Physical Constraint Associated with the capacity of a resource. ex) Machine, employee
Bottleneck Work Activity One that effectively limits capacity of an entire process.
Non-bottleneck Work Activity One in which idle capacity exists.
Non-physical Constraint Environmental or organizational ex) Low product demand or an inefficient management policy or procedure.)
Created by: KAzetapi
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