2. Capacity planning is the process of determining the production capacity needed by an organization to meet changing demand for its products.
3. Capacity is the rate of productive capability of a facility. Capacity is usually expressed as volume of output per time period. It is the process of determining the necessary to meet the production objectives. The objectives of capacity planning are:
4. To identify and solve capacity problem in a timely manner to meet consumer needs.
5. To maintain a balance between required capacity and available capacity.
6. The goal of capacity planning is to minimize this discrepancy.
7. Capacity is calculated: (number of machines or workers) × (number of shifts) × (utilization) × (efficiency).
8.
9. It helps an organization to identify and plan the actions necessary to meet customer’s present and future demand.
19. The first step on the capacity planning process is to categorize the work done by systems and to quantify users’ expectation for how the work gets down.
30. Finally, using forecasts of future business activity, future system requirements are determined. Implementing the required changes in system configuring will ensure that sufficient capacity will be available to maintain service level, even as circumstanced change in the future.
36. Managers often use forecast of product demand to estimate the short-term work load the facility must handle. By looking ahead up to 12 months, managers anticipate output requirements for different products or services. Then they compare requirements with existing capacity and detect when capacity adjustments are needed.
38. Long term capacity requirements are more difficult to determine because future demand and technologies are uncertain. Forecasting five or ten years into the future is a risky and difficult task. What products or services will the firm are producing then? Today’s product may not even exist in the future. Obviously, long-term capacity requirement are dependent on marketing plans, product development, and the life cycles of the products.
39. Changing in process technology must also be anticipated. Even if producers remain unchanged, the methods for generating them may change dramatically. Capacity planning must involve forecasts of technology as well as product.
43. For short-term periods of up to one year, fundamental capacity id fixed. Major facilities are seldom opened or closed on a regular monthly or yearly basis. Many short-term adjustments for increasing or decreasing capacity are possible, however. Which adjustment to make depended on whether the conversion process is primarily labour-or capital-intensive and whether the product is one that can be stored in inventory.
45. Expansion from World War II through the 1960s, the U.S. economy was one of abundance and growth. Since the 1970s the United States has encountered problems of scarce resources and a more competitive economy. Organization today cannot be locked into thinking only about expanding the resource base; they must also consider optimal approaches to contracting it.
46. Example:- A warehousing operation foresees the need for an additional 100,000 square feet of space by the end of the next five year. One option is to add an additional 50,000 square feet now and another 50,000 square feet two year from now. Another option is to add the entire 100,000 square feet now.
47. Estimated costs for building the entire addition now are $50/square foot. If expanded incrementally, the initial 50,000 square feet will cost $60/square foot.
48. The 50,000 square feet to be added later are estimated at $80/square foot. Which alternative is better? At a minimum, the lower construction costs plus excess capacity costs of total construction now must be compared with higher costs of deferred construction. The operation manager must consider the costs, benefits, and risks of each option.
49. WHAT IS DONE IF THERE IN AN INBALANCED BETWEEN DEMAND AND CAPACITY:
50. If there is an imbalance in the demand and the capacity in the short term then it can be tackled by temporary measures /adjustments such as increasing/ decreasing the labour force or creating and carrying inventory in the lean period to be used up in the peak-demand period.
51. If there is an imbalance in the long term demand and the capacity then an organization can respond by changing /modifying the capacity.
52. If capacity is short then it can create new facility or expand existing facility
53. If there is excess capacity then it can temporarily close/ sell/ consolidate facilities. Consolidation can be done by relocation (combining technologies) rearrangement of equipment.
54. WHAT ARE THE MODELS AND TECHNIQUES THAT ARE USEFUL FOR CAPACITY PLANNING?
55. Present value analysis: It is used to evaluate the time of capital investment and fund flows.
56. Aggregate planning models: it is useful for examining the way of using the examining the way of using the existing capacity in the short terms.
62. It is well known principle of economics. It indicates the relationship between cost and capacity in an operating system.
63. When output increases in an operating system, the system is likely to experience cost advantages on account several factors. Due the following reasons the average unit cost begins to fall with the rise in output level :
68. The economies of scale cease to occur beyond a level of production or output. This is called ‘Diseconomies of scale’. There can be several reasons for this:
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