Capacity planning and control

 

either on a predicted basis (for example, bank checkouts are always busy at lunchtimes)

 

or at short notice (for example, a sunny warm day at a theme park).

 

AGGREGATE DEMAND AND CAPACITY

 

Capacity planning and control sets capacity levels over the medium and short terms in aggregated terms.

 

‘aggregated’ means – different products and services are bundled together in order to get a broad view of demand and capacity.

 

For example, a hotel might think of demand and capacity in terms of ‘room nights per month’.

 

This ignores the number of guests in each room and their individual requirements, but it is a good first approximation.

A woollen knitwear factory might measure  demand and capacity in the number of units (garments) per month (ignoring size, colour or style variations).

 

Aluminium producers could use tons per month (ignoring types of alloy, gauge and batch size variation).

 

The ultimate aggregation measure is money.

 

For example, retail stores use revenue per month, ignoring variation in spend, number of items bought, the gross margin of each item and the number of items per customer transaction.

 

THE OBJECTIVES OF CAPACITY PLANNING  AND CONTROL

 

Costs and Revenues will be affected by the balance between capacity and demand (or output level if that is different).

 

Capacity levels > demand => under-utilization of capacity and therefore high units cost.

 

 Capacity levels = or > than demand => all demand is satisfied and no revenue lost.

 

 

Working capital will be affected if an operation decides to build up finished goods inventory prior to demand.

 

Demand is satisfied, but need to fund the inventory until it can be sold.

 

 

Quality of goods or services might be affected by a capacity plan which involved large fluctuations in capacity levels, by hiring temporary staff for example.

 

The new staff and the disruption to  the operation’s routine working could increase  the probability of errors being made.

 

Speed of response to customer demand could be enhanced

 

• either by the build-up of inventories (allowing customers to be satisfied directly from the inventory rather than having to wait for items to be manufactured)

 

• or by the deliberate provision of surplus capacity to avoid queuing.

 

Flexibility, especially volume flexibility, will be enhanced by surplus capacity.

 

If demand and capacity are in balance,  the operation will not be able to  respond to any unexpected increase in  demand.

 

Dependability of supply will also be affected by how close demand levels are to capacity.

 

The closer demand gets to the operation’s  capacity ceiling =>

 

the less able it is to cope with any unexpected disruptions

 

and the less dependable its deliveries of goods and services could be.

 

 

THE STEPS OF CAPACITY PLANNING  AND CONTROL

 

The sequence of capacity planning and control decisions which need to be taken by operations managers is illustrated in Figure 11.2.

 

Typically, operations managers are faced with a forecast of demand which is unlikely to be either certain or constant.

 

They will also have some idea of their ability to meet this demand.

 

The steps of capacity planning and control

 

1. to measure the aggregate demand and capacity levels for the planning period.