supply chain- BA Level 2400 words
Applewatts
Ch7_Managing_Capacity_L6.pptAlex Hill and Terry Hill
Learning objectives
- Understand NATURE of capacity and the mix of RESOURCES involved
- Appreciate the PURPOSE of managing capacity and the IMPACT of having too little or too much capacity
- Explain how to DEFINE and MEASURE capacity in different organisations
- Understand the FACTORS involved in determining the level of capacity required
- Explain the key STEPS in capacity planning
- Recognise the key FACTORS in managing capacity
Lecture outline
- INTRODUCTION
- An OVERVIEW of managing capacity
- FACTORS affecting capacity management
- PLANNING and MANAGING capacity
- Critical REFLECTIONS
- SUMMARY
© Alex Hill and Terry Hill
CAPACITY
Introduction
What is capacity?
RESOURCES needed to:
Serve customers
Process information or
Make products
MIX of people, systems and equipment
Introduction
Purpose of managing capacity
CAPACITY of resources
MATCH
DEMAND for services and products
TO
| > | KEY IDEA |
| A key BUSINESS STRATEGY decision is whether capacity should LEAD or FOLLOW demand |
| > | KEY IDEA |
| TOO LITTLE capacity leads to DELAYS and possible LOST SALES TOO MUCH incurs unnecessary COSTS |
An overview of managing capacity
Defining and measuring capacity
TYPE
Reflects
SERVICE or PRODUCT
to be delivered
Reflects volume of DEMAND
AMOUNT
An overview of managing capacity
Defining and measuring capacity
TIME is the common denominator
Some businesses would express as number of SERVICES or PRODUCTS
e.g. number of people served in a restaurant
An overview of managing capacity
Defining and measuring capacity
An overview of managing capacity
Defining and measuring capacity
| > | KEY IDEA |
| Operations expresses and measures its activities in TIME The rest of the business uses MONEY |
An overview of managing capacity
Defining and measuring capacity
STATEMENT and MEASUREMENT of overall capacity will differ
Overall size = ♯BEDS
Emergency unit = ♯STAFF
Consultant clinic = ♯APPOINTMENTS
HOSPITAL EXAMPLE
An overview of managing capacity
Defining and measuring capacity
An overview of managing capacity
Defining and measuring capacity
PLANNED capacity
ACTUAL capacity
| > | KEY IDEA |
| UTILISATION compares ACTUAL hours worked with PLANNED hours worked |
| > | KEY IDEA |
| EFFICIENCY compares ACTUAL output with EXPECTED output for the hours worked |
Factor affecting capacity management
Impact of delivery systems and processes on capacity
Use of CUSTOMERS
PERISHABLE nature of service capacity
BACK office vs FRONT office
Use of ADEQUATE CAPACITY at each stage of the delivery system
| > | KEY IDEA |
| Service capacity is PERISHABLE and cannot be put into inventory for use or sale in the future |
Factor affecting capacity management
Determining the level of capacity
ANTICIPATING END of growth
AVOIDING OVER capacity
LEAD or FOLLOW demand
What to do with OVERCAPACITY
Divest or diversify?
| > | KEY IDEA |
| Deciding on the LEVEL of capacity involves: ANTICIPATING END of growth AVOIDING too much Deciding to LEAD or FOLLOW demand Deciding what to do with OVER-CAPACITY Divest or diversify? |
Factor affecting capacity management
Demand fluctuations
PREDICTABLE
UNPREDICTABLE
Cyclical
Annual or seasonal
Weekly or daily
Random
Unexpected
Factor affecting capacity management
Capacity fluctuations
PREDICTABLE
UNPREDICTABLE
Planned increase
Planned decrease
Absenteeism
Machine breakdown
| > | KEY IDEA |
| Organisations need to SEPARATE the PREDICTABLE variations from the UNPREDICTABLE variations in demand and capacity |
Planning and managing capacity
Issues to consider
UNCERTAINTY
Demand is UNCERTAIN
ANTICIPATING THE FUTURE
Forecasts are INACCURATE
TIMESCALES
From LONG-TERM plans to DAY-TO-DAY schedules
ALTERNATIVES
Different WAYS to provide capacity
EXECUTION
FULFILLING the plan
Planning and managing capacity
Resource planning
AMOUNT
How much is required?
TIMING
When is the capacity required?
LOCATION
Where should the capacity be located?
Planning and managing capacity
Resource planning
CONTROL
What ACTIVITIES should take place in the operationLayout
WHEN they should take place
What RESOURCES should be allocated to them
PLANNING
Understand what is actually HAPPENING in the operation
Decide if there is any DEVIATION from what should be happening
Change RESOURCES to affect the operation
Planning and managing capacity
Resource planning
Planning and managing capacity
Resource planning
Forecasts
Investment
Long Term
Planning
Short Term
Planning / Control
1-year demand forecasts
Capacity requirements
Capacity plan
Medium Term
Planning
Space
Layout
Staff
Equipment
Stock
Process
Time
Outsourcing
RESOURCES
Capacity
Management
CUSTOMERS
Pricing
Advertising
Off-peak offers
Reservations
Complementary services
Alternative attractions
Queuing
Demand
Management
| > | KEY IDEA |
| RESOURCE planning looks SEVERAL YEARS ahead to provide future capacity requirements |
| > | KEY IDEA |
| MEDIUM-TERM planning looks up to TWO YEARS ahead to resolve how to provide capacity to meet forecast demand |
Planning and managing capacity
Resource planning
TYPES OF CAPACITY PLAN
LEVEL capacity
CHASE demand
MIX plan
Planning and managing capacity
Resource planning
Planning and managing capacity
Resource planning
Planning and managing capacity
Resource planning
Planning and managing capacity
Resource planning
Planning and managing capacity
Managing demand
Changing the PATTERN of demand
Alternate PRICING
ADVERTISING
Offering COUNTER seasonal services or products
SCHEDULING
RESERVATIONS or APPOINTMENTS
Fixed SCHEDULES
ADVERTISING
EDUCATING customers
Managing UNCERTAINTY
FORECASTS vs known orders
Planning and managing capacity
Managing capacity
Short-term capacity ADJUSTMENTS
OVERTIME
TEMPORARY staff
FLEXIBLE capacity
FLEXIBLE staff
PART-TIME or TEMPORARY staff
SHIFT patterns
STAGGERED working hours
Changing capacity FORM and NATURE
ANNUALISED hours
SUBSTITUTING capacity by technology/customers
SUBCONTRACTING
| > | KEY IDEA |
| Taking actions to change DEMAND patterns and change the shape of CAPACITY are key tasks when managing these resources |
Planning and managing capacity
Type of capacity and demand
- Chairs
- Tables
- Waiting staff
- Equipment
- Food
- Chefs
- Air space
- Air traffic controllers
- Equipment
- Assembly workers
- Number of planes
- Number of customers
- Number of orders
- Number of widgets
| Question | Air traffic | Restaurant | Kitchen | Factory |
| Capacity | ||||
| Demand |
Planning and managing capacity
Managing capacity and demand
- Part-time / Temp staff
- Staggered working
- Overtime / Shifts
- Flexible staff
- Overtime
- Shift patterns
- High automation
- Shift patterns
- Alternate pricing
- Reservations
- Fixed schedules
- Alternate pricing
- Reservations
- Fixed schedules
| Question | Air traffic | Restaurant | Kitchen | Factory |
| Managing capacity | ||||
| Managing demand |
- Managing capacity is COMPLEX and CHALLENGING
- DECISIONS on capacity and location impact future
- Market POSITIONS
- Market OPPORTUNITIES
- Increasing or decreasing capacity is a MAJOR DECISION
- TOO LITTLE capacity leads to
- DELAYS and possible LOST SALES
- TOO MUCH capacity incurs
- Unnecessary COSTS
Critical reflections
Summary
- Capacity and demand MEASUREMENT varies by
- Delivery system and process type
- Capacity and demand FLUCTUATIONS
- Predicable and unpredictable
- Resource PLANNING and CONTROL
- Long-term, medium-term, short-term
- Methods vary by delivery system and process type
- Managing DEMAND
- Change pattern, schedule, manage uncertainty
- Managing CAPACITY
- Short-term adjustments, flexibility, form and nature
© Alex Hill and Terry Hill
