CHAPTER 5:  STRATEGIC CAPACITY MANAGEMENT (AND MAINTENANCE)

CAPACITY: Maximum sustainable level of output.

MAINTENANCE:  Keeping facilities and equipment in good operating condition.

What is capacity?

DESIGN capacity is set by system design.

EFFECTIVE capacity is constrained by available resources, product mix, plans, quality levels, worker attitudes, etc.  Might call it SUSTAINABLE capacity.  Capacity is best looked at as an Average  and must be qualified with a time period (capacity per day, week, month, year, etc.).

ACTUAL OUTPUT what actually is produced.

KEY ISSUES:

          . WHAT KIND IS NEEDED?

. HOW MUCH IS NEEDED?

. WHEN IT IS NEEDED?

. WILL A CUSHION BE DESIRABLE? Capacity cushion is certain amount of capacity set aside--for such things as planned maintenance, "things" that could happen, etc.  It is in essence a buffer.

. HOW EFFICIENTLY IS IT USED / WILL IT BE USED? Usually measure it in terms of utilization.

. WHAT IMPACT WILL IT HAVE ON OVERALL STRATEGY AND HOW DOES IT FIT INTO OVERALL STRATEGY?  Operations Strategy and Corporate Strategy. 

CONSIDER IMPACT OF:

     Economies of Scale  (bigger means lower cost up to a point)

     Experience Curve  (larger plant->larger volume->more experience->
     shorter time->Lower cost

     Capacity Focus (focused facilities—focused plant is an efficient plant! PWP)

     Capacity Flexibility

              Flexible Plants (can be easily changed for alternative use)

              Flexible Processes (Economies of Scope--can make things more

              economically in combination than separately) (can make multiple

              products efficiently using FMS, Cellular layout, etc.) 

              Flexible Workers (shift workers around depending on need—pay for skill
              incentives)

PLANNING CAPACITY:

1. Estimate future requirements.

2. Compare with what is available and identify the gap.

3. Develop alternatives for filling the gap.

4. Evaluate alternatives and make a choice.

5. Implement alternative(s).

MAINTENANCE IS ESSENTIAL AND MUST BE PLANNED FOR.

Generally involves balancing maintenance activity costs with system failure costs. 

PLANNING SERVICE CAPACITY:

Similar to planning for other capacity planning, but services are different.

Time—got to do it now because services cannot generally be stored—may try to shift demand for services to address problems with capacity.

Location—service capacity must generally be located close to the customer.  There are exceptions and E-commerce is helping to change that.

Volatility of Demand—Why?

     Services cannot be stored

     Customer interacts directly with system and causes variability in
               processing time

     Consumer behavior—consumers may react to things like weather,
               current events, etc. resulting in fluctuations in demand for service
              (in particular, fluctuations that may not be predictable).