11.1
Chapter 11
Capacity planning and control
Photodisc. Photolink
11.1
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.2
Capacity planning and control
Operations
strategy
Design
Capacity planning
and control
Improvement
Planning and
control
The market requires…
the availability of
products and services
The operation supplies…
the capacity to deliver
products and services
11.2
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.3
Key operations questions
In Chapter 11 – Capacity planning and control – Slack et al.
identify the following key questions:
• What is capacity planning and control?
• How are demand and capacity measured?
• What are the alternative ways of coping with demand
fluctuation?
• How can operations plan and control their capacity level?
• How can queuing theory be used to plan capacity?
11.3
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.4
What is capacity?
• Capacity in the static, physical sense means the scale
of an operation.
• However, this may not reflect the operation’s
processing capability.
• Hence, we must incorporate a time dimension
appropriate to the use of assets.
–
–
–
–
11.4
For example, 24,000 litres per day;
10,000 calls per day;
57 patients per session;
Etc.
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.5
The objectives of capacity planning and control
To provide an ‘appropriate’ amount of capacity at any
point in time.
The ‘appropriateness’ of capacity planning in any part
of the operation can be judged by its effect on…
Costs
Revenue
Working capital
Service level.
11.5
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.6
The Objectives of capacity planning and control (Continued)
Measure aggregate
capacity and demand.
Aggregated output
Identify the alternative
capacity plans.
Choose the most
appropriate capacity plan.
Forecast demand
Estimate of current capacity
Time
11.6
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.7
The nature of aggregate capacity
Aggregate capacity of a hotel:
– rooms per night;
– ignores the numbers of guests in each room.
Aggregate capacity of an aluminium producer:
– tonnes per month;
– ignores types of alloy, gauge and batch variations.
11.7
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.8
Causes of seasonality
Climatic
Festive
Behavioural
Construction materials
Beverages (beer, cola)
Foods (ice-cream)
Clothing (swimwear, shoes)
Gardening items (seeds)
Fireworks
11.8
Political
Financial
Social
Travel services
Holidays
Tax processing
Doctors (influenza epidemic)
Sports services
Education services.
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.9
11.9
Demand fluctuations in four operations
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.10
Good forecasts are essential for effective capacity planning
• But, so is an understanding of demand uncertainty because it
allows you to judge the risks to service level.
Only 5% chance of demand
being higher than this
Demand
Demand
Distribution of demand
Time
Only 5% chance of demand
being lower than this
Time
• When demand uncertainty is high, the risks to service
level of under provision of capacity are high.
11.10
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.11
Operating equipment effectiveness (OEE)
Loading time
Total operating
time
Net operating Speed
losses
time
Availability
losses
Not worked
(unplanned)
Set-up and
change-overs
Breakdown
failure
Equipment
‘idling’
Slow running
equipment
Quality
losses
Quality
losses
Availability rate = a
= Total operating time
Loading time
Performance rate = p
= Net operating time
Total operating time
Quality rate = q
= Valuable operating time
Net operating time
Valuable
operating
time
11.11
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.12
How capacity and demand are measured
Efficiency =
Design
capacity
Planned loss
of 59 hours
Effective
capacity
168 hours
per week
109 hours
per week
Utilization=
11.12
Actual output
Effective capacity
Avoidable loss –
58 hours per
week
Actual output –
51 hours per
week
Actual output
Design capacity
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.13
Ways of reconciling capacity and demand
Demand
Capacity
Level capacity
11.13
Demand
Capacity
Chase demand
Demand
Capacity
Demand
management
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.14
Ways of reconciling capacity and demand (Continued)
How do you cope with
fluctuations in demand?
Absorb
demand
Adjust output
to match
demand
Level capacity
Chase demand
11.14
Change
demand
Demand
management
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.15
Absorb demand
Absorb
demand
Have
excess
capacity
Keep output
level
Make to
stock
Part finished
Finished goods, or
Customer inventory
11.15
Make
customer
wait
Queues
Backlogs.
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.16
Adjust output to match demand
Adjust output to
match demand
11.16
Hire
Fire
Temporary labour
Lay-off
Overtime
Short time
Subcontract
3rd party work
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.17
Change demand
Change
demand
Change pattern of demand.
Develop alternative products and/or services.
11.17
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.18
11.18
Moving a peak in demand can make capacity
planning easier
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.19
Capacity planning and control as a dynamic
sequence of decisions
Period t – 1
Period t
Period t + 1
Current
capacity Updated
estimates forecasts
Outcome Shortages Decision
queues
Actual
inventory How much
demand
capacity
and actual
next
capacity
period?
Costs
Revenues
Working capital
Customer satisfaction,
etc.
11.19
Current
capacity Updated
estimates forecasts
Capacity
level
Outcome Shortages Decision
queues How much
Actual
inventory
demand
capacity
and actual
next
capacity?
period?
Costs
Revenues
Working capital
Customer satisfaction,
etc.
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.20
Demand for a manufacturing operation’s output
Forecast in aggregated units
of output per month
8000
7000
6000
5000
4000
3000
2000
1000
0
J
F
M
A
M
J
J
A
S
O
N
D
Months
11.20
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
For capacity planning purposes demand is best considered on a cumulative basis.
This allows alternative capacity and output plans to be evaluated for feasibility
Forecast cumulative aggregated
output (thousands)
11.21
60
But will not satisfy demand at
all points throughout the year
50
40
Producing at average demand
allows inventory to be accumulated
30
20
Producing at
average demand
10
0
0
40
80
120
160
200
240
Cumulative operating days
11.21
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
Cumulative representations
Capacity and demand
11.22
Cumulative demand
Cumulative capacity
Building
stock
Unable to
meet orders
Time
11.22
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.23
Simple queuing system
Low variability –
narrow distribution
of process times
Time
High variability –
wide distribution of
process times
Time
11.23
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
11.24
Simple queuing system (Continued)
Distribution of
arrival times
Distribution of
processing times
Rejecting
Server 1
Balking Reneging
Server 2
Source of
customers
Served
customers
Queue or
‘waiting line’
Server m
Boundary
of system
11.24
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010