BU385 Lecture Notes - Lecture 5: Nylon, Variable Cost, Spin Master

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9 Oct 2014
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Chapter 5: Strategic Capacity Planning
Capacity – the upper limit on the workload that an operating unit can handle
- capacity is also measured as maximum production rate
Strategic Capacity Planning – systematic determination of facility and major equipment
requirements to meet long-term demand for goods and services
Design Capacity – the maximum output that can possibly be attained under ideal solutions
Effective Capacity – the maximum possible output that can be sustained given operating
hours, product mix, scheduling difficulties and expected delays, and machine maintenance
Efficiency = Actual Output _
Effective Capacity
Utilization = Actual Output _ or = Used Time _
Design Capacity Available Time
Design Capacity = 5 trucks per day (designed for 8 hours a day with 2 mechanics)
Effective Capacity = 4 trucks per day (1-hour lunch break and 1 hour expected delay)
Actual Output = 3 trucks per day (1.5 hours of additional unexpected delays and break downs
per day)
Efficiency = 3 trucks per day = 75%
4 trucks per day
Utilization = 3 trucks per day = 60%
5 trucks per day
Calculating Capacity Requirements
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5,800 __ _ = 2.90 machines (round up to 3)
2,000 hours/machine
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