Capacity Planning Manufacturing : Inventory can be used to cushion fluctuations in demand More focused on machinery as a constraint than people Services.

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Presentation transcript:

Capacity Planning Manufacturing : Inventory can be used to cushion fluctuations in demand More focused on machinery as a constraint than people Services : No Inventory People are primary constraint

Planning Horizons Business Plan Production Plan Master Production Schedule Matl. Reqs. Plan (MRP) Individual Machine/ Workcenter LONG SHORT

Capacity must be matched carefully with Marketing strategy! America on(OFF)line - How NOT to plan!

AOL: Number of members on- line at once

Me? I thought YOU were going to tell operations!! Marketing Operations

How to Deal with Uneven Demand? Vary inventory Change Production Rate Change workforce size REACTIVE alternatives!!

Proactive/Aggressive Alternatives Complementary products Promotional campaigns Creative pricing

Two Capacity Expansion Strategies..... EXPANSIONIST Demand Forecast Capacity Time

Expansionist Strategy CONCEPT: Large, Infrequent jumps in capacity Stays ahead of demand ADVANTAGES: Lost Sales unlikely Economies of scale (construction and learning) Preempt Competition

Two Capacity Expansion Strategies..... WAIT-and-SEE Capacity Time

Two Capacity Expansion Strategies..... WAIT-and-SEE Demand Forecast Capacity Time

Two Capacity Expansion Strategies..... WAIT-and-SEE Demand Forecast Capacity Time

Wait and See Strategy CONCEPT: Small, Frequent jumps in capacity Lags behind demand, relying on short-term operations ADVANTAGES: Minimize risk Greater flexibility

Capacity Cushion Maximum Capacity (100%) Average Utilization Cushion

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