Capacity planning and control

CAPACITY PLANNING AND 
CONTROL

 

CHAPTER 11

INTRODUCTION

 

Providing the capability to satisfy current and future demand is a fundamental responsibility of operations management.

 

Get the balance between capacity and demand right = the operation can satisfy its customers cost effectively.

 

Get it wrong = it will fail to satisfy demand and have excessive costs.

 

 

Capacity planning and control = aggregate planning and control.

 

This is because demand and capacity calculations are usually performed on an aggregated basis

 

it does not discriminate between the different products and services.

 

The essence of the task is to reconcile the supply of capacity with the level of demand (see Figure 11.1).

 

KEY QUESTIONS 

 

What is capacity planning and control?

 

 What are the ways of coping with demand fluctuation?

 

 How is capacity measured?

 

 How can operations plan their capacity level?

 

 How can operations control their capacity level?

WHAT IS CAPACITY?

 

The most common use of the word capacity is in the static, physical sense of the fixed volume of a container or the space in a building.

 

For example, a pharmaceutical manufacturer may invest in new 1000-litre capacity reactor vessels,

 

a property company purchases a 500-vehicle capacity city-centre car park,

 

a ‘multiplex’ cinema is built with ten screens and a total capacity of 2500 seats.

 

These capacity measures describe the scale of these operations

 

But they do not reflect the processing capacities of these investments.

 

To do this we must incorporate a time dimension.

 

The pharmaceutical company will be concerned with the level of output that can be achieved using the 1000-litre reactor vessel.

 

If a batch of standard products can be produced every hour, the planned processing capacity could be as high as 24,000 litrs per day.

 

Similarly, the car park may be fully occupied by office workers during the working day, ‘processing’ only 500 cars per day.

 

Or it may be used for shoppers staying on average only 1 hour and theatre-goers occupying spaces for 3 hours in the evening.

 

The processing capacity would then be up to 5000 cars per day.

 

Thus the capacity of an operation = the maximum level of value-added activity over a period of time that the process can achieve under normal operating conditions.

CAPACITY CONSTRAINTS

 

Many organizations operate at below their maximum processing capacity,

 

• either because there is insufficient demand completely to ‘fill’ their capacity
• or as a deliberate policy, so that the operation can respond quickly to every new order.

 

Often organizations find themselves with some parts of their operation operating below their capacity while other parts are at their capacity ‘ceiling’.

 

Sometimes some parts of the operation are operating at their capacity ‘ceiling’ = the capacity constraint for the whole operation (with some parts of their operation operating below their capacity)

 

For example, a retail superstore might  offer a gift-wrapping service which at  normal times can cope with all requests  for its services without delaying customers  unduly. 

 

At Christmas, however, the demand for  gift wrapping might increase proportionally  far more than the overall increase in  custom for the store as a whole. 

 

Unless extra resources are provided to  increase the capacity of this micro operation,  it could constrain the capacity of the  whole store.

 

PLANNING AND CONTROLLING CAPACITY

 

Capacity planning and control is the  task of setting the effective capacity  of the operation so that it can respond to the demands placed upon it.

 

This usually means deciding how the operation should react to fluctuations in demand.

 

We have faced this issue before in  Chapter 6 where we examined long-term  changes in demand and the alternative  capacity strategies for dealing with the  changes. 

 

These strategies were concerned with introducing (or deleting) major increments of physical capacity.

 

We called this task long-term capacity strategy.

 

In this chapter we are treating the  shorter time scale 

 

where capacity decisions are being made largely within the constraints of the physical capacity limits set by the operation’s long-term capacity strategy.

 

MEDIUM- AND SHORT-TERM CAPACITY

 

Having established long-term capacity, operations managers must decide how to adjust the capacity of the operation in the medium term.

 

This usually involves an assessment of the demand forecasts over a period of 2–18 months ahead, during which time planned output can be varied, for example by changing the number of hours the equipment is used.

 

In practice, however, few forecasts are  accurate and most operations also need  to respond to changes in demand which occur over a shorter time scale.

 

Hotels and restaurants have unexpected and  apparently random changes in demand from  night to night

 

But also know that certain days are on average busier than others.

 

So operations managers also have to  make short-term capacity adjustments,