Outline
                                Outline
             Capacity
                 Capacity
                   Design and Effective Capacity
                      Design and Effective Capacity
                   Capacity and Strategy
                      Capacity and Strategy
                   Capacity Considerations
                      Capacity Considerations
                   Managing Demand
                      Managing Demand
                   Demand and Capacity 
                      Demand and Capacity 
                      Management in the Service 
                      Management in the Service 
                      Sector
                      Sector
  © 2008 Prentice Hall, Inc.                                             S7 – 2
                 Outline – Continued
                 Outline – Continued
              Capacity Planning
                   Capacity Planning
              Break-Even Analysis
                   Break-Even Analysis
                    Single-Product Case
                        Single-Product Case
                    Multiproduct Case
                        Multiproduct Case
              Applying Decision Trees to 
                   Applying Decision Trees to 
                   Capacity Decisions
                   Capacity Decisions
  © 2008 Prentice Hall, Inc.                                             S7 – 3
                 Outline – Continued
                 Outline – Continued
          Applying Investment Analysis to 
               Applying Investment Analysis to 
               Strategy-Driven Investments
               Strategy-Driven Investments
                Investment, Variable Cost, and 
                    Investment, Variable Cost, and 
                    Cash Flow
                    Cash Flow
                Net Present Value
                    Net Present Value
  © 2008 Prentice Hall, Inc.                                             S7 – 4
                 Learning Objectives
                 Learning Objectives
        When you complete this supplement, 
         When you complete this supplement, 
        you should be able to:
         you should be able to:
           1. Define capacity
           1. Define capacity
           2. Determine design capacity, effective 
           2. Determine design capacity, effective 
               capacity, and utilization
               capacity, and utilization
           3. Compute break-even analysis
           3. Compute break-even analysis
           4. Apply decision trees to capacity 
           4. Apply decision trees to capacity 
               decisions
               decisions
           5. Compute net present value
           5. Compute net present value
  © 2008 Prentice Hall, Inc.                                             S7 – 5
                              Capacity
                               Capacity
        The throughput, or the number of 
            The throughput, or the number of 
            units a facility can hold, receive, 
            units a facility can hold, receive, 
            store, or produce in a period of time
            store, or produce in a period of time
        Determines 
            Determines 
            fixed costs
            fixed costs
        Determines if 
            Determines if 
            demand will 
            demand will 
            be satisfied
            be satisfied
        Three time horizons
            Three time horizons
  © 2008 Prentice Hall, Inc.                                             S7 – 6