Chapter 7 Managing capacity and demand
Capacity management in Materials Processing Operations
Capacity = the maximum possible output in a given time
Three main types of capacity in MPO’s
1. Design capacity - the theoretical maximum capacity of an operation (using full capacity
at all times)
2. Effective capacity - potential capacity that can be achieved on a 'typical' day (planned
maintenance and product changeovers f.i. taken into account)
3. Achieved capacity - the actual output (there may be additional unplanned non-working
time, due to machinery breakdowns or staff shortages f.i.)
Overall equipment effectiveness (OEE) = also takes into account the quality of the output, next to
utilization and efficiency result effectiveness value OEE = availability x performance x quality
(availability = utilization; performance = ratio of actual run rate to ideal run rate; quality = ratio of
good production output to total pieces made)
Capacity management in Customer Processing Operations
Why is capacity in CPOs a challenge?
- Fixed location
- Services are consumed at the same time as they are produced
- Infrastructure of the CPO, building, fixtures, fitting and equipment are inflexible
- Demand is difficult to predict
- Offer variety of services for which the service time may vary, making it difficult to predict the
flow through the system
Reservations versus forecasting
- Reservations - designed to ensure a smooth flow of customers into the operation
- Forecasting - where it is not possible to reserve a service, such as a retail shop or a fast food
restaurant, the likely demand still needs to be predicted. A number of quantitative
techniques can be used:
o Simple moving average
o Weighted moving average
o Exponential smoothing
Capacity management in Materials Processing Operations
Capacity = the maximum possible output in a given time
Three main types of capacity in MPO’s
1. Design capacity - the theoretical maximum capacity of an operation (using full capacity
at all times)
2. Effective capacity - potential capacity that can be achieved on a 'typical' day (planned
maintenance and product changeovers f.i. taken into account)
3. Achieved capacity - the actual output (there may be additional unplanned non-working
time, due to machinery breakdowns or staff shortages f.i.)
Overall equipment effectiveness (OEE) = also takes into account the quality of the output, next to
utilization and efficiency result effectiveness value OEE = availability x performance x quality
(availability = utilization; performance = ratio of actual run rate to ideal run rate; quality = ratio of
good production output to total pieces made)
Capacity management in Customer Processing Operations
Why is capacity in CPOs a challenge?
- Fixed location
- Services are consumed at the same time as they are produced
- Infrastructure of the CPO, building, fixtures, fitting and equipment are inflexible
- Demand is difficult to predict
- Offer variety of services for which the service time may vary, making it difficult to predict the
flow through the system
Reservations versus forecasting
- Reservations - designed to ensure a smooth flow of customers into the operation
- Forecasting - where it is not possible to reserve a service, such as a retail shop or a fast food
restaurant, the likely demand still needs to be predicted. A number of quantitative
techniques can be used:
o Simple moving average
o Weighted moving average
o Exponential smoothing
