capacity and constraints managment

Capacity and
Constraint
Management 7

© 2014 Pearson Education, Inc. S7 - 1

, Learning Objectives
When you complete this supplement
you should be able to :
1. Define capacity
2. Determine design capacity, effective capacity, and
utilization
3. Perform bottleneck analysis
4. Compute break-even
5. Determine the expected monetary value of a
capacity decision
6. Compute net present value

© 2014 Pearson Education, Inc. S7 - 2

, Capacity (Understanding
Capacity)
► It is a throughput, or the number of
units a facility can hold, receive, store,
or produce in a given time.
► Capacity decisions often determines
fixed costs.
► It also determines if
demand will be satisfied or whether
facilities will be idling.
► Capacity planning can be viewed in
three time horizons.
© 2014 Pearson Education, Inc. S7 - 3

, Planning Over a Time Horizon
Figure S7.1
Time Horizon
Options for Adjusting Capacity

Long-range Add facilities
planning
Intermediate-
Add long lead time equipment *
range Subcontract Add personnel
planning Add equipment Build or use inventory
(aggregate Add shifts
planning)
Schedule jobs
Short-range
planning
(scheduling)
* Schedule personnel
Allocate machinery

Modify capacity Use capacity
* Difficult to adjust capacity as limited options exist
© 2014 Pearson Education, Inc. S7 - 4