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MGT2070 - Ch. 5&6.docx

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MGT 2070
Barry Stannard

MGT2070: Operations Management October 3, 2012 Chapter 5: Strategic Capacity Planning  Capacity planning o Upper limit/ceiling that an operating unit can handle o Can be used to control markets o Design capacity: maximum obtainable output under ideal conditions (aka peak capacity) o Effective capacity: maximum possible output given operating hours, product mix, scheduling difficulties, expected delays, machine maintenance, and standards of quality  usually less than design capacity  Utilization: % measure of design capacity actually achieved Utilization = Actual output (used time) Design capacity (available time)  Efficiency: % measure of the effectiency capacity actually achieved Efficiency = Actual Output (standard time) Effective capacity (Average actual time)  Time standard: used in determining machine requirements and labour requirements. A predetermined time allowed for the performance of a specific job. o Consists of machine set-up time & actual running time o If time standard is exactly right, efficiency is 1 (100%) o If time standard < standard time, efficiency >1 o If time standard > standard time, efficicncy <1  *Demand trend, duration, and amplitude of cycles are important long-term considerations*  Capacity cushion o Sometimes we chose to carry an excess capacity over the average demand o Could be due to policy  Retail: Carrying extra stock reduces stock-outs.  Utilities: large capacity cushion to avoid brown-outs and generators going offline  *Overtime is the cheapest way to increase your capacity. Constant over eventually leads to exhaustion.* **”Breakeven/cost-volume analysis in POM-QM #costs = 2 (fixed, variable) **assignment: st nd slide #21 1 part = fixed cost, 2 part = variable cost, add together = total cost Slide #37 **use practice quizzes on Connect for quizzes MGT2070: Operations Management October 3, 2012 **3 forecasting questions on exam Breakeven points (& multiproduct)
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