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1、,Strategic Capacity Management,Operations Management,For Competitive Advantage,CHASE AQUILANO JACOBS,ninth edition,Chapter 9,Chapter 9Strategic Capacity Planning,Strategic Capacity Planning Defined Capacity Utilization & Best Operating Level Economies & Diseconomies of Scale The Experience Curve Cap
2、acity Focus, Flexibility & Planning Determining Capacity Requirements Decision Trees Capacity Utilization & Service Quality,Strategic Capacity PlanningDefined,Capacity can be defined as the ability to hold, receive, store, or accommodate. Strategic capacity planning is an approach for determining th
3、e overall capacity level of capital intensive resources, including facilities, equipment, and overall labor force size.,Capacity Utilization,Capacity used rate of output actually achieved Best operating level capacity for which the process was designed,Capacity utilization rate = Capacity used Best
4、operating level,Best Operating Level,Underutilization,Average unit cost of output,Volume,Overutilization,Example of Capacity Utilization,During one week of production, a plant produced 83 units of a product. Its historic highest or best utilization recorded was 120 units per week. What is this plant
5、s capacity utilization rate? Answer: Capacity utilization rate = Capacity used . Best operating level = 83/120 =0.69 or 69%,Economies & Diseconomies of Scale,100-unit plant,200-unit plant,300-unit plant,400-unit plant,Volume,Average unit cost of output,Economies of Scale and the Experience Curve wor
6、king,Diseconomies of Scale start working,The Experience Curve,Total accumulated production of units,Cost or price per unit,As plants produce more products, they gain experience in the best production methods and reduce their costs per unit.,Capacity Focus,The concept of the focused factory holds tha
7、t production facilities work best when they focus on a fairly limited set of production objectives. Plants Within Plants (PWP) (from Skinner) Extend focus concept to operating level,Capacity Flexibility,Flexible plants Flexible processes Flexible workers,Capacity Planning: Balance,Maintaining System
8、 Balance,Units per month,6,000,7,000,4,500,Capacity Planning,Frequency of Capacity Additions External Sources of Capacity,Determining Capacity Requirements,Forecast sales within each individual product line. Calculate equipment and labor requirements to meet the forecasts. Project equipment and labo
9、r availability over the planning horizon.,Example of Capacity Requirements,A manufacturer produces two lines of mustard, FancyFine and Generic line. Each is sold in small and family-size plastic bottles. The following table shows forecast demand for the next four years.,Example of Capacity Requireme
10、nts: The Product from a Capacity Viewpoint,Question: Are we really producing two different types of mustards from the standpoint of capacity requirements? Answer: No, its the same product just packaged differently.,Example of Capacity Requirements: Equipment and Labor Requirements,Three 100,000 unit
11、s-per-year machines are available for small-bottle production. Two operators required per machine. Two 120,000 units-per-year machines are available for family-sized-bottle production. Three operators required per machine.,Question: What are the Year 1 values for capacity, machine, and labor?,150,00
12、0/300,000=50%,At 1 machine for 100,000, it takes 1.5 machines for 150,000,At 2 operators for 100,000, it takes 3 operators for 150,000,The McGraw-Hill Companies, Inc., 2000,17,Question: What are the values for columns 2, 3 and 4 in the table below?,56.67% 1.70 3.40,58.33% 1.17 3.50,66.67% 2.00 4.00,
13、70.83% 1.42 4.25,80.00% 2.40 4.80,83.33% 1.67 5.00,18,The McGraw-Hill Companies, Inc., 2000,Example of a Decision Tree Problem,A glass factory specializing in crystal is experiencing a substantial backlog, and the firms management is considering three courses of action: A) Arrange for subcontracting
14、, B) Construct new facilities. C) Do nothing (no change) The correct choice depends largely upon demand, which may be low, medium, or high. By consensus, management estimates the respective demand probabilities as .10, .50, and .40.,Example of a Decision Tree Problem: The Payoff Table,The management
15、 also estimates the profits when choosing from the three alternatives (A, B, and C) under the differing probable levels of demand. These costs, in thousands of dollars are presented in the table below:,Example of a Decision Tree Problem: Step 1. We start by drawing the three decisions,Example of Dec
16、ision Tree Problem: Step 2. Add our possible states of nature, probabilities, and payoffs,Example of Decision Tree Problem: Step 3. Determine the expected value of each decision,Example of Decision Tree Problem: Step 4. Make decision,$62k,$80.5k,$46k,Alternative B generates the greatest expected profit, so our choice is B or to construct a new facility.,Planning Service Capacity,Time Location Volatility of
