question

Capacity

answer

The upper limit or ceiling on the load that an operating unit can handle Capacity needs include Equipment Space (classroom can hold 100 people) Employee skills

question

Strategic Capacity Planning Goal

answer

To achieve a match between the long-term supply capabilities of an organization and the predicted level of long-term demand Overcapacity - operating costs that are too high Undercapacity - strained resources and possible loss of customers

question

Capacity decisions are

answer

strategic (long term) impact the ability of the organization to meet future demands affect operating costs are a major determinant of initial cost often involve long-term commitment of resources can affect competitiveness affect the ease of management have become more important and complex due to globalization need to be planned for in advance due to their consumption of financial and other resources

question

Design capacity

answer

Maximum output rate or service capacity an operation, process, or facility is designed for accommodated was accommodated to have 100 students

question

Effective Capacity

answer

Design capacity minus allowances such as personal time, maintenance, and scrap but because there are chairs/desks actually can have 60 people

question

Actual Output

answer

Rate of output actually achieved--cannot exceed effective capacity. 27 people actually come to class

question

Efficiency Formula

answer

actual output/effect capacity

question

Utilization Formula

answer

actual output/design capacity

question

Deteriminants of effective capaciy

answer

Facilities Product and service factors Process factors Human factors Policy factors Operational factors Supply chain factors External factors

question

Strategy Formulation

answer

Strategies are typically based on assumptions and predictions about: Long-term demand patterns Technological change Competitor behavior -want to increase students but don't want to derease acceptance rates

question

Capacity Cushion

answer

Extra capacity used to offset demand uncertainty Capacity cushion = 100% - Utilization Capacity cushion strategy Organizations that have greater demand uncertainty typically have greater capacity cushion Organizations that have standard products and services generally have greater capacity cushion

question

Capacity Planning Steps

answer

Estimate future capacity requirements Evaluate existing capacity and facilities; identify gaps Identify alternatives for meeting requirements Conduct financial analyses Assess key qualitative issues Select the best alternative for the long term Implement alternative chosen Monitor results

question

Service Capacity Planing

answer

Service capacity planning can present a number of challenges related to: The need to be near customers Convenience The inability to store services Cannot store services for consumption later The degree of demand volatility Volume and timing of demand Time required to service individual customers

question

Demand Management Strategies

answer

Strategies used to offset capacity limitations and that are intended to achieve a closer match between supply and demand Pricing Promotions Discounts Other tactics to shift demand from peak periods into slow periods

question

In-House or Outsource?

answer

Once capacity requirements are determined, the organization must decide whether to produce a good or service itself or outsource Factors to consider: Available capacity Expertise Quality considerations The nature of demand Cost Risks

question

Developing Capacity Alternatives

answer

Things that can be done to enhance capacity management: Design flexibility into systems Take stage of life cycle into account Take a "big-picture" approach to capacity changes Prepare to deal with capacity "chunks" Attempt to smooth capacity requirements Identify the optimal operating level Choose a strategy if expansion is involved

question

Capacity Strategies: Leading

answer

Build capacity in anticipation of future demand increases (expect students to increase by 5000 so build building ahead of time - what happens if capacity doesn't increase)

question

Capacity Strategies: Following

answer

Build capacity when demand exceeds current capacity (building new dorm just in time)

question

Capacity Strategies: Tracking

answer

Similar to the following strategy, but adds capacity in relatively small increments to keep pace with increasing demand (Building a small piece at a time)

question

Bottleneck Operation

answer

An operation in a sequence of operations whose capacity is lower than that of the other operations

question

Economies of Scale

answer

If output rate is less than the optimal level, increasing the output rate results in decreasing average per unit costs Reasons for economies of scale: Fixed costs are spread over a larger number of units Construction costs increase at a decreasing rate as facility size increases Processing costs decrease due to standardization

question

Diseconomies of scale

answer

If the output rate is more than the optimal level, increasing the output rate results in increasing average per unit costs Reasons for diseconomies of scale Distribution costs increase due to traffic congestion and shipping from a centralized facility rather than multiple smaller facilities Complexity increases costs Inflexibility can be an issue Additional levels of bureaucracy

question

Constraint

answer

Something that limits the performance of a process or system in achieving its goals

question

Resolving Constraint Issues

answer

Identify the most pressing constraint Change the operation to achieve maximum benefit, given the constraint Make sure other portions of the process are supportive of the constraint Explore and evaluate ways to overcome the constraint Repeat the process until the constraint levels are at acceptable levels

question

Cost-Volume Analysis

answer

Focuses on the relationship between cost, revenue, and volume of output Fixed Costs (FC) tend to remain constant regardless of output volume Variable Costs (VC) vary directly with volume of output VC = Quantity(Q) x variable cost per unit (v) Total Cost TC = FC + VC Total Revenue (TR) TR = revenue per unit (R) x Q

question

Break-Even Point

answer

The volume of output at which total cost and total revenue are equal Profit (P) = TR - TC = R x Q - (FC +v x Q) = Q(R - v) - FC Qbep = FC/R-v

question

Cash Flow

answer

The difference between cash received from sales and other sources, and cash outflow for labor, material, overhead, and taxes

question

Present Value

answer

The sum, in current value, of all future cash flow of an investment proposal

Operations Management Chapter 5 Capacity Planning – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards