Process and Capacity Analysis Capacity Analysis What is Capacity Analysis? Why is it important? Capacity Basics Capacity Factors Compiled by: Alex J. Ruiz-Torres, Ph.D. From information developed by many.

What is Capacity Analysis? Process of relating resources (that have capacity) to customers (that have a demand/need) Capacity can be defined as the ability to hold/store, inspect, move or create/transform. Chef: 20 main dinner courses per hour Bartender: 1 drink per minute Assembly line: 1,000 TV per 8 hour day A ride at Universal can serve 9,200 guest per day

What is Capacity Analysis? We focus on two specific types of analysis: The process of understanding how much output can a system deliver. Focuses on the process capability The process of understanding the resources needed to meet customer requirements. Focuses on the customer

Why is important? Allows organizations to determine the right set of resources needed to meet customer requirements, which is essential for long term success. Not enough resources will result in lost sales, unsatisfied customers, long waits, expediting processes, overtime,… Too many resources are an unnecessary cost.

Capacity Basics Unused capacity is lost. An assembly line can assemble 1,000 TVs per day. If the assembly line only made 200 TVs today, it cannot make 1,800 the next day We focus on time based capacity. The time it takes a system to wash a car is 1 hour. This is the process time. The time available to wash cars is 8 hours on a day. This is the available time. What is the capacity of this system: 8 cars per day.

Capacity Basics Note that capacity planning is tightly linked with demand management. Demand management estimates the requirements from the customers. Forecasts and customer orders. Changes in demand (seasonal/short term and long term) will dictate the required resource plan. Resource plan: how many workers (and other resources) we need to meet the expected demand.

Capacity Factors Factors that reduce capacity Equipment breakdown / employees not present. Machine wear or not at best operating level. Setup time between products. Maintenance and cleaning. Factors the increase capacity Economies of scale. Learning.

Capacity Factors Operating level Systems have an optimal operating level. If there is not enough input or resources are slowed down, the full capacity will not be used. Running too fast will increase resource fatigue and cause errors, all decreasing long term capacity. Long term Capacity Best operating level resource speed +

Capacity Factors Setups Long term Capacity + Product variety (number of setups) Setups Time dedicated to changing from one product to another or from one type of task to another (therefore time not creating products or value to the customer) In production, changing tools or raw materials at workstations In services, the time a person spends switching tasks. For example, the employee is working on the budget, but then it has to handle a call from a customer about a lost order. The time the employee must dedicate to “remember” and find the needed information.

Capacity Factors Setup example Machine makes red kayaks. It takes one hour per kayak. 8 hours of available time. Current production plan is to make 8 red kayaks, using all the available time. Output = 8 kayaks Now they want to make them in two colors: red and blue Switching colors take 2 hours (setup time). Production plan. 3 blue kayaks (3 hours) switch color (2 hours) 3 red kayaks (3 hours) Output = 6 kayaks They gained product variety but lost output capacity

Capacity Factors Learning Curve The more a task/ process is performed by x, the better x gets at performing it. Will perform it faster. Higher quality/ yields. Capacity Time Number of units completed Reason: Skill increases. Improvements to the methods and tools. As x performs the process multiple times it finds out new and better ways to perform it, therefore capacity increases.

Capacity Factors Learning Curve example Customer Service Rep number of cases handled. When started: handle 8 cases/week After 2 months: handle 25 cases/week After 4 months: handle 33 cases/week After 6 months: handle 36 cases/ week After 8 months: handle 37 cases/week

Capacity Factors Economies of Scale Scale = Volume Relationship between capacity and resource specialization. Higher specialization results in higher volumes. Specialization use methods/ technologies/equipment that allow division of labor and automation. However, there are tradeoffs Loss of flexibility High capital investment craftsman Capacity Robotic assy line + Resource degree of specialization

Capacity Factors Economies of Scale Capacity (output) = 6 saints/week. https://www.etsy.com/listing/529511969/vintage-guatemala-folk-art-saint-wood Economies of Scale Jose + two daughters make wooden saints. Each makes one saint at a time. Each does all the steps of the process. Each can make 2 saints per week. Capacity (output) = 6 saints/week. There is lot of demand. The family wants to increase their production volume. They buy specialized equipment for cutting figures. Ana specializes in carving the body and the use of the new machine. Jose specializes in carving the face and the hands. Maria specializes in painting and finishing. With this specialized process and the new machine: Capacity (output) = 9 saints / week.