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Capacity And Constraint Management (IAF716) Chapter 7

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Sandra Watson
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Chapter 7 – Capacity and Constraint Management-what is the theoretical maximum output of a system in a given period under ideal​ conditions?

Seneca College

Operations Management (IAF716)

What is Capacity?
➔ Too little capacity = lose customers | Too much capacity = expensive Capacity needs ⇒ to be “just right”
➔ Capacity – is the number of units a facility can hold, recieve, store, or produce (aka the throughput) in a period of time.
◆ Determines Fixed Costs
◆ Determines if demand will be satisfied
◆ Capacity planning can be viewed in Three Time Horizons:
(1) Long-Range Planning: > 1 year
(2) Intermediate Range Planning — aka aggregate planning: 3 to 18 months
(3) Short-Range Planning — aka scheduling: up to 3 months
How to Determine Design Capacity, Effective Capacity, and Utilization?
➔ Design Capacity – the theoretical maximum output of a system in given period under ideal conditions
◆ Expressed as a rate, normally
➔ Effective Capacity – the capacity a firm can expect to achieve given current operating constraints, like product mix, methods
of scheduling, maintenance, and standard of quality.
◆ Often lower than design capacity
➔ Utilization – actual output as a percent of design capacity
◆ UTILIZATION = ACTUAL OUTPUT / DESIGN CAPACITY
➔ Efficiency – actual output as a percent of effective capacity
◆ EFFICIENCY = ACTUAL OUTPUT / EFFECTIVE CAPACITY
➔ EXPECTED/ACTUAL OUTPUT = (EFFECTIVE CAPACITY)(EFFICIENCY)
◆ Sometimes rated to as rated capacity

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Capacity And Constraint Management (IAF716) Chapter 7

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