Term
| Things to consider in capacity planning |
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Definition
| how much cushion to handle uncertain demand, expand capacity before or after demand is known |
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Term
| Two ways capacity can be measured |
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Definition
| Capacity can be measure in terms of input or output |
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Term
| When are output measures used? |
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Definition
| • Output measures of capacity are best applied to processes within the firm or on standardized products or services (ie car manufacturing) |
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Term
| When are input measures used? |
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Definition
| Input measures are used for low volume high flexibility processes |
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Term
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Definition
| the degree to which a resource is being used |
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Term
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Definition
| the idea that the average unit cost can be reduced by increasing output |
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Term
| Four principal reasons behind economies of scale |
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Definition
o Fixed costs are spread over more units
o Construction costs are reduced
o Cost of purchased materials is reduced
o Process advantages are found |
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Term
| What happens when the utilization rate increases? |
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Definition
| the average unit cost drops |
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Term
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Definition
| occurs when the average cost per unit increases as the facility’s size increases |
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Term
| What results from excessive size? |
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Definition
| Excessive size brings lack of focus, complexity, and lack of efficiency |
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Term
| Three dimensions of capacity planning |
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Definition
o Sizing capacity cushion
o Timing and sizing expansion
o Linking process capacity and other operating decisions |
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Term
| What happens when average utilization approaches 100%? |
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Definition
| It is usually time to increase capacity |
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Term
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Definition
the amount of reserve capacity a process has to handle sudden increases in demand or temporary losses of production capacity
= 100%- average utilization rate |
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Term
| What industries have low capacity cushions? |
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Definition
| high capital intensive industries |
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Term
| Signs to increase capacity |
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Definition
| frequent reliance on subcontractors and overtime is a sign that capacity needs to be increased |
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Term
| When is capacity planning less critical? |
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Definition
| capacity planning is less critical in labor intensive markets |
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Term
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Definition
| large, infrequent increases in capacity (stays ahead of demand and prevents stock outs) |
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Term
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Definition
| smaller more frequent increases in capacity (lags behind demand and relies on overtime. Prevents overexpansion) |
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Term
| follow the leader expansion strategy |
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Definition
| waiting for others to expand and doing it at the same time |
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