Capacity planning and control

 

It is also possible to set the  capacity somewhat below the forecast peak  demand level in order to reduce the  degree of under-utilization.

 

However, in the periods where demand  is expected to exceed planned capacity,  customer service may deteriorate. 

 

Customers may have to queue for long  periods or may be ‘processed’ faster  and less sensitively.

 

Benefits to the organization of stability and productivity may outweigh the disadvantages of upsetting some customers.

 

CHASE DEMAND PLAN

 

The opposite of a level capacity plan is one which attempts to match capacity closely to the varying levels of forecast demand.

 

This is much more difficult to achieve than a level capacity plan,

 

• as different numbers of staff,
• different working hours
• different amounts of equipment may be necessary in each period.

 

For this reason, pure chase demand plans are unlikely to appeal to operations which manufacture standard, non-perishable products.

 

Also, where manufacturing operations are  particularly capital-intensive, 

 

the chase demand policy would require a level of physical capacity, all of which would be used only occasionally.

 

So such a plan is less likely to be appropriate for the aluminium producer

 

than for the woollen garment manufacturer (see Figure 11.9).

 

A pure chase demand plan is more usually adopted by operations which cannot store their output

 

• customer-processing operations

 

• manufacturers of perishable products.

 

It avoids the wasteful provision of excess staff that occurs with a level capacity plan

 

Yet should satisfy customer demand throughout the planned period.

 

Where output can be stored, the chase demand policy might be adopted in order to minimize or eliminate finished goods inventory.

 

Sometimes it is difficult to achieve  very large variations in capacity from  period to period.

 

If the changes in forecast demand are  as large as those in the hotel example  (see Figure 11.10), significantly different  levels of staffing will be required throughout  the year:

 

• employing part-time and temporary staff,

 

• requiring permanent employees to work longer hours