Planning Capacity
      Planning Capacity
         
             Capacity is the maximum rate of output of 
            a process or system
         
             Accounting, finance, marketing, 
            operations, purchasing, and human 
            resources all need capacity information to 
            make decisions
         
             Capacity planning is done in the long-term 
            and the short-term
         
             Questions involve the amount of capacity 
            cushion and expansion strategies
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       Planning Capacity
       Planning Capacity
                                          Capacity management
                     Capacity planning                           Constraint management 
                         (long-term)                                   (short-term)
                Economies and                                 Theory of constraints
                 diseconomies of scale                         Identification and 
                Capacity timing and sizing                     management of 
                 strategies                                     bottlenecks
                Systematic approach to                        Product mix decisions 
                 capacity decisions                             using bottlenecks
                                                               Managing constraints in a 
                                                                line process
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      Measures of Capacity Utilization
      Measures of Capacity Utilization
         
             Output measures of capacity
         
             Input measures of capacity
         
             Utilization
                                   Average output rate
               Utilization =                                         100%
                                    Maximum capacity
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      Capacity and Scale
      Capacity and Scale
         
             Economies of scale
              Spreading fixed costs
              Reducing construction costs
              Cutting costs of purchased materials
              Finding process advantages
         
            Diseconomies of scale
              Complexity
              Loss of focus
              Inefficiencies
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        Capacity and Scale
        Capacity and Scale
                             250-bed                                                  750-bed 
                )            hospital                    500-bed                      hospital 
             t  t
             s  n                                        hospital 
             o  e
                i
             c  t
                a
             t
             i  p
             n   
             u  r
                e
             e  p
             g   
                s
             a  r
             r  a
             e  l
             v  l
             A  o
                d
                (
                                         Economies                  Diseconomies 
                                           of scale                     of scale 
                                        Output rate (patients per week)
            Figure 6.1 – Economies and Diseconomies of Scale
           Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.                           6 – 6