this is the maximum possible output in a given time.
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Examples/ different types of capacity
Hospitals use the number of available beds, Airlines use the number of available seats
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What will happen if there is too much capacity?
Extra machinery and staff will cost too much money
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What will happen if there is too little capacity?
This may lead to the business losing orders
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What are the 3 types of capacity?
Achieved, Design and effective
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Definition of design capacity
This assumes that the operation is used at full capacity at all times.
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Definition of effective capacity
The potential capacity that can be achieved on a ‘typical’ day, taking into account planned maintenance and product changeovers for example
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Definition of achieved capacity
The actual output of an operation may be less than the effective capacity as there may be additional unplanned non-working time, due to machinery breakdowns or staff shortages for example.
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Definition of utilisation
how much of the design capacity is actually achieved in any operation
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Definition of efficiency
the proportion of the effective capacity that is actually achieved in any operation
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Calculation for design capacity
Hours x Days
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Calculation for Effective capacity
Design capacity – Planned downtime
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Calculation for achieved capacity
Effective capacity - Avoidable downtime
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Calculation for Machine Utilization
Achieved capacity / design capactiy
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Calculation for efficiency
Achieved capacity / Effective capacity
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What are the 3 main strategies for managing capacity and demand
Chase demand, level capacity and demand management
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Level capacity- explanation
Managment of capacity to fit demand - inputs are kept constant even when there is lower demand to create inventory to meet times when demand increases again
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Level capacity - CPO examples
Professional services – maximise the use of scarce resources (experts) Restaurants – have fixed capacity and use this as an advantage to create ‘waiting lists’ to increase anticipation.
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Level capacity - MPO examples
Automotive assembly operations – cars are assembled at a fixed rate irrespective of model type or options added.Oil refining. Output is set by the machinery used in the manufacturing process.
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Chase demand strategy - explanation
inputs are adjusted so that outputs match demand
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Chase demand- CPO examples
Retail outlets – which need to deal with high levels of demand as the demand chanegs at weekends and theme parks -they close during winter and open during summer as demand changes
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Chase demand - MPO examples
Manufacturing plants which open up or close down lines according to demand e.g. McDonalds can assemble their burgers on a second line when demand increases
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Other cards in this set
Card 2
Front
Examples/ different types of capacity
Back
Hospitals use the number of available beds, Airlines use the number of available seats
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