MG 211 Lecture Notes - Lecture 13: Operations Management, Net Present Value, Variable Cost
Document Summary
Capacity (the throughput, or number of units a facility can hold/receive/store/produce in a period of time). Three time horizons: long-range planning: add facilities and long lead time equipment, intermediate-range (aggregate) planning: subcontract, add equipment/shifts. add personnel, build/use inventory, short-range planning (scheduling): schedule jobs and personnel; allocate machinery. Design capacity (maximum theoretical output of a system; normally expressed as a rate). Effective capacity (capacity a firm expects to achieve given current operating constraints). Utilization (percent of design capacity usually achieved): = actual output / design capacity. Efficiency (percent of effective capacity actually achieved): = actual output / effective capacity. Capacity designs impact all 10 decisions of operations management and other functional areas. Capacity decisions must be integrated into mission and strategy. Demand exceeds capacity: curtail demand by raising prices, scheduling longer lead time, long-term solution = increase capacity. Capacity exceeds demand: stimulate market, product changes. Adjusting to seasonal demands: product products with complementary demand patterns.
