Opmt611 - Module 4

Front 1

What is capacity planning at the strategic level?

Back 1

the capacity an organization should have in order to satisfy its customers

Front 2

what is capacity planning at a tactical level

Back 2

occurs during operation

Front 3

what is capacity planning at the operational level

Back 3

addresses day to day issues

Front 4

what is capacity

Back 4

the upper limit or ceiling on the load that an operating unit can handle, also includes equipment, space and employees with a variety of skills

Front 5

what are some basic issues that should be addressed concerning capacity

Back 5

- type of capacity
- how it affects operating costs
- how much is needed
- when
- where it is needed

Front 6

a company's/organization's capacity should be equal to

Back 6

its demand

Front 7

what is a potential consequence of having too much capacity

Back 7

- excessive spending to maintain extra unneeded capacity

Front 8

what is a potential consequence of having too little capacity

Back 8

may require employees to work OT, thereby increasing costs

Front 9

what is design capacity

Back 9

the maximum output rate or service capacity an operation, process or facility is designed for

Front 10

what is effective capacity

Back 10

the design capacity minus allowances, such as personal time and maintenance time, effective capacity is smaller than design capacity

Front 11

what is actual output

Back 11

the rate of output actually achieved, cannot exceed effective capacity

Front 12

formula for efficiency

Back 12

actual output / effective capacity

Front 13

formula for utilization

Back 13

actual output / design capacity

Front 14

what are some determinants of effective capacity

Back 14

- facilities
- product & service factors
- process factors
- human factors
- policy factors
- operational factors
- supply chain factors
- external factors

Front 15

determinants of effective capacity are defined by

Back 15

- the process
- by the organization according to policies that affect capacity

Front 16

what are some factors involved with strategy formulation

Back 16

- capacity strategy
- demand patterns
- how much demand is going to go up
- facilities (building and operating costs)
- tech changes (rate and direction of technology changes)

Front 17

what is the purpose of capacity strategy

Back 17

satisfying long term demand

Front 18

what is capacity cushion

Back 18

extra capacity in excess of expected demand intended to offset uncertainty (100% of capacity minus how much facilities will actually be utilized)

Front 19

key decisions of capacity planning?

Back 19

- how much capacity needed
- when changes are needed
- what needs to be balanced
- what should be extent of facility's flexibility

Front 20

steps in capacity planning?

Back 20

- estimate future capacity requirements
- evaluate existing capacity
- ID alternatives
- conduct financial analysis
- assess key qualitative issues
- select on alternative
- implement alternative chosen
- monitor results

Front 21

in steps for capacity planning, explain "estimating future capacity requirements"

Back 21

- knowing what demand is, determining what future capacity requirements are

Front 22

in steps for capacity planning, explain "evaluating existing capacity"

Back 22

assess how much capacity currently exists

Front 23

in steps for capacity planning, explain "IDing alternatives"

Back 23

ID alternatives in terms of location and how much capacity needs to be added

Front 24

in steps for capacity planning, explain "conducting financial analysis"

Back 24

assessing financial requirements of implementing each alternative

Front 25

in steps for capacity planning, explain "addressing key qualitative issues"

Back 25

- is there requirement for capacity to be located close to customers?

Front 26

what does forecasting capacity requirements involve?

Back 26

- looking at long-term vs short-term capacity needs
- how long-term capacity relates to overall level of capacity
- how short-term capacity relates to variations from seasonal, random and irregular fluctuations in demand

Front 27

know how to calculate processing requirements

Back 27

sum of (annual demand)(standard processing time per unit) for all products

Front 28

What factors are important to planning service capacity

Back 28

- location to customers
- if there is an inability to store services (match capacity with timing of demand)
- degree of volatility of demand (especially during peak)

Front 29

what factors are important when considering outsourcing

Back 29

- available capacity
- expertise
- quality considerations
- value of demand
- cost
- risk

Front 30

when developing capacity alternatives what is important to consider

Back 30

- flexibility
- stage of product life cycle
- what the "big picture" is
- ID optimal operating level

Front 31

what is a bottleneck operation

Back 31

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

Front 32

what is the optimal operating level of a facility

Back 32

occurs when the average cost of producing a unit is at its minimum

Front 33

know optimal operating level graph!!!!

Back 33

16/23 module 4....

Front 34

what factors could cause the cost per unit to go up when rate of output continues to increase

Back 34

- worker fatigue
- equipment breakdown
- loss of flexibility
- other issues (errors)

Front 35

what is economies of scale

Back 35

a decrease in avg unit cost that occurs with an increase in production rate (occurs as long as the production rate is less than the optimal operating level)

Front 36

what is a diseconomies of scale

Back 36

output rate increase as average unit cost decreases, when output rate is increased more than optimal level, avg unit cost increases

Front 37

what are the 4 types of analyses that are used for evaluating capacity planning alternatives

Back 37

- cost-volume analysis
- financial analysis
- decision theory
- waiting line analysis

Front 38

what is cost-volume analysis

Back 38

analyzing total cost and comparing it to total revenue

Front 39

what is financial analysis

Back 39

analyzing cash flow of different facilities with different capacities, IDing PV of investment and return on investment

Front 40

what is decision theory analysis

Back 40

analyzing possible future conditions, developing alternatives, determining payoff for each alternative under each possible future condition

Front 41

what is waiting line analysis

Back 41

analyzing elements of waiting line to see if capacity needs to be increased

Front 42

when does a company break even

Back 42

when total cost = total revenue

Front 43

during break even, total cost will be equal to the sum of _____________

Back 43

FC of running facility + VC of producing each unit

Front 44

How does an increase in the number of units affect variable costs?

Back 44

Increases it (know graphs!!!!)

Front 45

what is total revenue

Back 45

# of units a company sells times the price per unit

Front 46

how is the break even point calculated

Back 46

= FC / (Unit Price - VC)

Front 47

Know break even example in module.... with the chefs....

Back 47

22/23 module 4

Front 48

what are the cost volume analysis assumptions?

Back 48

- only one product involved
- everything produced can be sold
- VC/unit is same regardless of volume
- FC do not change with volume
- revenue/unit is constant regardless of volume
- revenue/unit exceeds VC of unit

Front 49

what is utilization

Back 49

the percent of design capacity actually achieved