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Chapter 6: Managing Capacity
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Terms in this set (27)
how much capacity do we need
what form should the capacity take
when do we need it
strategic decisions that managers face about capacity (3)
forms
service and manufacturing organizations
capacity can take many different_____, and capacity planning is an important activity in both _______ ___ _____________ _____________
capacity
The capability of a worker, a machine, a work center, a plant, or an organization to produce output in a time period
How capacity is measured?
Which factors affect capacity?
The impact of the supply chain on the organization's effective capacity.
Capacity decisions that managers face (3)
The number of people you have
The amount of space you have
Scheduled hours worked
The amount of equipment you have
Cash
which factors affect capacity (5)
theoretical capacity
rated capacity
measures of capacity (2)
theoretical capacity
The maximum output capability, allowing for no adjustments for preventive maintenance, unplanned downtime, or the like
rated capacity
The long-term, expected output capability of a resource or system
predictions
future
rated capacity is used to do ___________ on the ______
number of lines used
Number of shifts operating (work hour groups)
Number of temporary workers used
Number of public storage facilities used
Product variations
factors that may affect capacity (5)
lead capacity strategy
A capacity strategy in which capacity is added in anticipation of demand.
lag capacity strategy
A capacity strategy in which capacity is added only after demand has materialized
match capacity strategy
A capacity strategy that strikes a balance between the lead and lag capacity strategies by avoiding periods of high under or over utilization.
cost
demand considerations
decision tree
break-even analysis
Methods of Evaluating Capacity Alternatives (4)
variable costs
fixed costs
types of costs (2)
TC = FC + VC*X
total costs formula
break-even point
The volume level for a business at which total revenues cover total costs.
BEP = FC / (R - VC)
break-even point formula
The strategic importance of an activity to a firm.
The desired degree of managerial control.
The need for flexibility.
with capacity, what else are we concerned with (3)
common carrier
anybody who can ship
contracts carrier
a shipper we have a contract with
leasing own refrigerated trucks
becoming your own shipper
little's law
A law that holds for any system that has reached a steady state and enables the understanding of the relationship between average inventory, average arrival rate (throughput rate), and average time a unit spends in a system (throughput time)
i = rt
little's law formula
order assessment
another term for order processing area
t = i/r
average throughput time formula (little's law)
theory of constraints
An approach to visualizing and managing capacity which recognizes that nearly all products and services are created through a series of linked processes, and in every case, there is at least one process step that limits throughput for the entire chain
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