Capacity and Aggregate Planning

1. Chapter 9 Capacity and Aggregate Planning

2. 2000 by Prentice-Hall, Inc 2 Defining Capacity Now: the rate of output from an OM system per unit of time OR the rate at which the firm withdraws work from the system

3. 2000 by Prentice-Hall, Inc 3 Supply Chain Capacity Tactical perspective output driven units of output, hours worked strategic perspective capability what you can and cannot do match capabilities with marketing needs

4. 2000 by Prentice-Hall, Inc 4 Types of Capacity:Maximum Capacity (aka Design) Defined: The highest rate of output that a process can achieve Calculation involves the following assumptions: equally skilled workers no time loss due to changeovers or product differences no loss of capacity due to PM or planned downtime no OT work or heroic employee efforts Are these assumptions realistic?

5. 2000 by Prentice-Hall, Inc 5 Types of Capacity: Effective Capacity Defined: the output rate that managers expect for a given process Why would you operate below maximum?

6. 2000 by Prentice-Hall, Inc 6 Types of Capacity: Demonstrated Capacity Defined: the actual level of output for a process over a period of time, i.e., the average of output over time Why might this number be different than maximum or effective capacity?

7. 2000 by Prentice-Hall, Inc 7 Types of Capacity: Demonstrated Capacity Demonstrated capacity what we actually observe can be affected by numerous factors problems with input problems internally nature of the product new vs standard

8. 2000 by Prentice-Hall, Inc 8 Capacity within the Supply Chain Must deal with the issue of bottlenecks and system constraints. Capacity defined by: information systems infrastructure physical capacity logistics capacity supplier capacity relationship management

9. 2000 by Prentice-Hall, Inc 9 Bottlenecks Must look for bottleneck constraining resource how identified too much or too little inventory overtime why important limits output determines lead time determines ability of system to make money Keys to success keep the bottlenecks busy inventories/signals invest in bottlenecks

10. 2000 by Prentice-Hall, Inc 10 Capacity - calculating Level of output of a plant or system is dependent on how it is organized capacity in sequence linear operations capacity in parallel multiple alternative operations any machine can be used

11. 2000 by Prentice-Hall, Inc 11 Capacity - Sequential Capacity of a system or process is based on the operation with the lowest amount of capacity Keys convert into the same units of measurement ensure that we are talking about the same dimensions effective vs design vs demonstrated capacity taken over the same time

12. 2000 by Prentice-Hall, Inc 12 We have a process that makes cans Operation 1 - punches out tops and bottoms 2 lids for every can produces 250 lids per minute Operation 2 - body 1 body for every can produces 175 bodies per minute Operation 3 - mating makes the can produces 7500 cans per hour Capacity - Sequential

13. 2000 by Prentice-Hall, Inc 13 Capacity - Parallel Capacity of the system or operation is based on the sum of the capacities of the various machines that make up the operation. Operation 3 has 4 machines machine 1 - 90 pieces per minute machine 2 - 110 pieces per minute machine 3 -120 pieces per minute machine 4 - 80 pieces per minute Total capacity for operation 3 = 400 pieces/min

14. 2000 by Prentice-Hall, Inc 14 Capacity Management Tools: Calculating Capacity 1. Describe the general flow of activities within the process 2. Establish the time period 3. Establish a common unit 4. Identify the Maximum capacity for the overall process 5. Identify the Effective capacity for the overall process 6. Determine the Demonstrated capacity 7. Compare the Demonstrated, Effective and Maximum Capacities and take appropriate actions

15. 2000 by Prentice-Hall, Inc 15 Capacity Planning Capacity lead strategy expand capacity in anticipation of growth Capacity lag strategy increase capacity after increase in growth Average capacity strategy expand capacity to coincide with average demandCapacity lead strategy expand capacity in anticipation of growth Capacity lag strategy increase capacity after increase in growth Average capacity strategy expand capacity to coincide with average demand

16. 2000 by Prentice-Hall, Inc 16 Capacity Expansion

17. Capacity Expansion Strategies

18. 2000 by Prentice-Hall, Inc 18 Aggregate Production Planning (APP)

19. 2000 by Prentice-Hall, Inc 19 Inputs and Outputs to APP

20. Adjusting Capacity to Meet Demand

21. 2000 by Prentice-Hall, Inc 21 Strategy Details

22. 2000 by Prentice-Hall, Inc 22 Strategy Details

23. 2000 by Prentice-Hall, Inc 23 Level Production

24. 2000 by Prentice-Hall, Inc 24 Chase Demand

25. APP Using Pure Strategies

26. APP Using Pure Strategies

27. Level Production Strategy

28. 2000 by Prentice-Hall, Inc 28 Chase Demand Strategy

29. APP Using Mixed Strategies

30. 2000 by Prentice-Hall, Inc 30 Demand Management

31. 2000 by Prentice-Hall, Inc 31 Demand Distortion along the Supply Chain

32. 2000 by Prentice-Hall, Inc 32 Hierarchical Planning Process

33. 2000 by Prentice-Hall, Inc 33 Aggregate Planning for Services

34. 2000 by Prentice-Hall, Inc 34 Best Operating Levels

35. 2000 by Prentice-Hall, Inc 35 Inputs and Outputs to APP

36. 2000 by Prentice-Hall, Inc 36 Level Production

37. 2000 by Prentice-Hall, Inc 37 APP by Linear Programming

38. 2000 by Prentice-Hall, Inc 38 APP by the Transportation Method

39. 2000 by Prentice-Hall, Inc 39 The Transportation Tableau

40. 2000 by Prentice-Hall, Inc 40 Burruss’ Production Plan

41. 2000 by Prentice-Hall, Inc 41 Other Quantitative Techniques Linear decision rule (LDR) payroll, staffing, over/undertime, inventory costs Search decision rule (SDR) find minimum cost combination of labor levels & production rates Management coefficients model uses regression analysis to improve consistency of planningLinear decision rule (LDR) payroll, staffing, over/undertime, inventory costs Search decision rule (SDR) find minimum cost combination of labor levels & production rates Management coefficients model uses regression analysis to improve consistency of planning

42. 2000 by Prentice-Hall, Inc 42 Hierarchical Planning Process

43. 2000 by Prentice-Hall, Inc 43 Available-to-Promise

44. 2000 by Prentice-Hall, Inc 44 Available-to-Promise

45. 2000 by Prentice-Hall, Inc 45 Available-to-Promise

46. 2000 by Prentice-Hall, Inc 46 Yield Management

47. 2000 by Prentice-Hall, Inc 47 Yield Management

48. 2000 by Prentice-Hall, Inc 48 Yield Management

49. 2000 by Prentice-Hall, Inc 49 Yield Management

50. Best Operating Levels