CAPACITY AND SCHEDULING MANAGEMENT

• Adding capacity allows firms to position plants and service outlets in key areas around the world.

• In some cases location may be influenced by industry trends.

• For example, in the mid-1990s, before its merger with HP, Compaq invested around $90 million in order to double its capacity at its Singapore manufacturing plant.

• In addition, the firm injected a further $11M into its manufacturing plant in Scotland to enhance the manufacturing capabilities there. These additions to capacity formed part of Compaq’s pronounced plan to become the world’s leading PC manufacturer.

• Japanese firms have clearly understood the strategic importance of capacity in their transplants operations. For example, the expansion by Nissan when it enlarged its Tennessee plant by 1.7 million square feet in order to allow a further 200 000 vehicles to be manufactured there in the mid-1990s was typical of many such aggressive expansions. This, and the other massive investments in North American capacity by Japanese firms, employed the technology advantage of lean production to exploit a window of opportunity – indolence in American management.

More recently, Intel showed the importance of capacity:

Capacity expansion can often be targeted within specific countries, as illustrated in the example of Pepsi-Cola

Capacity

Capacity

• Waters(2001) suggests that there is a difference between ‘designed capacity’ and ‘effective capacity’.

• Designed capacity is the maximum output of a process under ideal conditions.

• Effective capacity is the maximum output that can be realistically expected under normal conditions.

Capacity

• He explains that, usually, effective capacity is less than designed capacity, due to set-up times, breakdowns, stoppages, maintenance, and so on.

• While this is true in many cases, especially in materials processing operations, there are instances in which effective capacity may be greater than designed capacity.

• For example, there are more passengers who routinely travel than the LRT or MRT system was designed for.

• Under normal conditions, it might be thought that a hotel could sell its rooms only once in a 24-hour period but some routinely sell their rooms more than once per day. Overbooking can be an issue. Another problem would be in the area of housekeeping (towels, bedsheets, etc.)

Capacity

• Waters (2001) suggests that ‘actual output will normally be lower than effective capacity.’ this will certainly be the case if capacity is not managed well.

• Managing capacity is a challenging task, because matching output with effective capacity is very difficult. However, by distinguishing between designed capacity and effective capacity, we can establish the difference between ‘utilization’ and‘efficiency’.

Capacity

• Utilization is the ratio of actual output to designed capacity, whilst efficiency is the ratio of output to effective capacity. In some operations, management focuses very much on utilization. For example, key performance measures in many capacity-constrained services, such as hotels, airlines and theatres, are utilization measures, namely room occupancy, passenger load and seat occupancy.

The management of capacity

focuses on two aspects of the

operation

Ensuring the transformation inputs are utilized efficiently depends on the flow of inputs through the system. This requires the adoption of an appropriate strategy for inventory management. Such strategies include inventory management, material requirement planning / manufacturing resource planning and JIT production.

• One of the key constraints that needs to be managed in capacity is bottleneck problems.

• Schmenner and Swink’s ‘law of bottlenecks’ states that productivity is improved if the rate of flow is consistent throughout the whole process.

• Applying this to engineering and manufacturing in job shops has led to the emergence of a number of rules.

• Throughput is governed by the capacity of the bottleneck;

• Balance material flow rather keep all resources fully occupied;

• Inventory will accumulate at the bottleneck;• Any decrease in the output of a bottleneck will be

a decrease in the output of the whole system;• Any increase in the output of a non-bottleneck

will not increase the output of the system as a whole.

Optimized Production Technology

• One solution to bottlenecks is the OPT. • 10 Principles:

• Transfer Batch– batch that gets transferred down the value chain and

passes to another set of workers or to the ultimate customer. Transfer batches are often bigger, that is several process batches make up a transfer batch.

• Process Batch– A process batch is a batch of work that is done by a

person, team or system. Process batches tend to be optimized for efficient use of resources, communication, costs or effort expended such as efficiency of time on task and time in motion.

Four V’s of Capacity

Strategies for Managing Capacity

Fixed Capacity and Chase Demand

Strategies for Managing Capacity

Lead, Lag, Average

Strategies for Managing Capacity

Level Capacity Strategy

Strategies for Managing Capacity

Chase Capacity Strategy

• Anchor’s Away, one of the favorite rides of Enchanted Kingdom goers has a capacity of 50 passengers. This is one of the rides at EK that has the longest queue. The ride usually takes about 2 minutes. Come up with a strategy where:(a) all interested riders are accommodated(b) riders are satisfied with the time they are given(c) people won’t be queuing for a long time

Scheduling Methods

• Giving priority to the best customers

• Prioritizing emergency cases

• Giving in to pressure from the most demanding customer

• Others:– First come, first served– Earliest due date– Shortest or longest total

processing time– Least changeover cost– Shortest first/last

operation first– Critical ratio