md. Imrul Kaes - Capacit Planning 2012-5-30

7/28/2019 md. Imrul Kaes - Capacit Planning 2012-5-30

1/24

CAPACITYPLANNING


2/24

Planning: direction and coordination of

firms resources towards attaining the

prefixed goals.

Capacity is the rate of productive capability

of a firm. The objective of capacity planning

is to match the level of operations to the

level of demand.


3/24

Production managers are more concerned about

the capacity planning for the following reasons:

Sufficient capacity is required to meet the

customer demands in time.

Capacity affects the cost efficiency of operations.

Capacity affects the scheduling system.

Capacity creation requires an investment.


4/24

Measurement of capacity

It is easy and simple to measure the capacity of thesection producing homogeneous tangible productswhich can be counted. The capacity of such section ormachine can be expressed in number of units of output

per period. For example, the capacity of a textile mill isexpressed as meters of cloth per day.

It is difficult to express capacities when the companyproduces multiple products and some of the productsrequiring common facilities and others specializedfacilities. Here capacity is expressed as man hours,machine hours etc.


5/24

A gap between the current capacity and desired

capacity will push the firm out of balance

situation. Overcapacity causes high operating

cost, while under capacity causes shortage ofresources and possible loss of customers.

For making a good capacity planning forecastingand demand management is very important.


6/24

Design Capacity

Effective capacity

Actual output


7/24

Design capacity: it is the maximum rate of outputachieved under ideal conditions.

Effective capacity: it is usually less than design capacity

owning to realities of changing product mix, the needfor period maintenance of equipments, lunch breaks,coffee breaks etc.

Actual output can not exceed effective capacity and isalways less because of machine breakdowns,absenteeism, shortage of materials and qualityproblems.


8/24

Design capacity

Effective capacity

Actual output

Lunch break, coffee break, schedule

maintenance

Machine break down, absenteeism,

shortage of materials


9/24

capacitydesign

outputactualnutilizatio

capacityeffective

outputactualefficiency


10/24

Example1:

Design capacity of a factory is 50 tons per day,

effective capacity 40 tons per day and actual

output 36 tons per day. Find out efficiency andutilization of the factory.


11/24

%7272.050

36

%909.040

36

ordaypertons

daypertons

capacitydesign

outputactualnutilizatio

ordaypertons

daypertons

capacityeffective

outputactualefficiency


12/24

Example 2:

A sewing line has three side seam operators per shift. 2 shifts per day, six

days worked per week and eight hours worked per shift. Records indicatethat machine utilization is 75% and operator efficiency is 85%. What isthe design capacity and effective work capacity per week?

Solution:

weekperhours

weekperhours

efficiencyOutputActualCapacityEffective

weekperhoursweekperhours

nutilizatiocapacityDesignOutputActual

weekperhoursweekperdaysdaypershif tsshiftperhoursCapacityDesign

11.254

85.0216

21675.0288

2886283


13/24

weekperpieces

weekperpieces

efficiencyOutputActualCapacityEffective

weekperpiecesweekperpiecesnutilizatiocapacityDesignOutputActual

weekperpieces

weekperdaysdaypershif tsshif tperhourspiecesCapacityDesign

71680

90.064512

6451280.080640

80640

7384120

Example 3:

A factory has an efficiency of 90% and the utilization is 80%.Four process lines are used. The lines operate seven days aweek and three eight hour shifts per day. Each line wasdesigned to process 120 standard pieces per hour. What is theDesign capacity and effective capacity?

Solution:


14/24

Example 2:

A dying factory wants to expand the plant

capacity by adding 1 ton capacity dyeingmachines. It requires 5 hrs to dye 1 ton of fabric

including loading and unloading time. The

machines are used only 85 percent of the timedue to water problem or power restriction. The

required output for the plant is 16 ton per shift (8

hrs). The plant remains open on an average 60%

time due to political unrest and other problems .

Calculate- a) Number of machines required.

b) Estimate the percentage of time that is wasted.


15/24

%50%100160

80

80)80160(

80516

160

820)

206.19

2.0

92.3)

2.05

1

92.3

8.6

66.26,1

66.26,8.6

8.685.08

66.266.0

shiftperton16capacitysystemRequired

wastedtimeofPercentage

hourswastedTime

hourshourston

conditionidealofcaseinshif tperusedbeshouldhoursTotalhours

hoursshif tperusedactuallyhoursTotalb

machinesmachines

hourperton

hourpertonrequiredmachinesofNumbera

hourpertonhour

toncapacitymachineIndiv idual

hourperton

hourpertoncapacitysystemrequiredthenhrshoursavailablewhen

toncapacitysystemrequiredthenhrshoursavailablewhen

hrshrshoursAvailable

shif tperton


16/24

Example 3:

The owner of a garment factory wants to add a newsewing line which will require leasing new equipments

and sewing machines for a daily payment of $6000.Variable costs would be $2 per garment and garmentswould retail for $7 each. Calculate:

a) How many garments must be sold in order to be atbreak even?b) What would be the profit if 1000 garments are madeand sold in a day?c) How many garments must be sold to realize a profit

of $4000?d) If 2000 can be sold and a profit target is $5000, whatprice should be charged per garment?


17/24

daypergarmentsvR

FC

Qa BEP 120027

6000

)

10006000)27(1000

)()

P

FCvRQP

vR

FCP

Qb


18/24

5.7$2

2000

60005000

)(

)

20002$7$

6000$4000$

,

4000$)

R

vQFCPR

Q

FCPvR

FCPvRQ

vR

FCPQd

piecesvR

FCP

QknowWe

PGivenc


19/24

Example 4:

A manager has the option of purchasing one, two or three

machines. Fixed costs and potential volumes are as follows:

Variable cost is $ 10 per unit and revenue is $40 per unitDetermine:

a) The break even point for each rangeb) If projected annual demand is between 580 and 600 units,

how many machines should the manager purchase?

Number of

machines

Total Annual Fixed

Costs

Corresponding

range of output

1 $ 9600 0 to 300

2 $ 15000 301 to 600

3 $ 20000 601 to 900


20/24

unitsQmachinesthreeFor

unitsQmachinetwoFor

BEPnoistheresorangeinnotunitsQmachineoneFor

vR

FCQ

BEP

BEP

BEP

BEP

67.666

10$40$

000,20$,

50010$40$

15000$,

),(32010$40$

9600$,

For two machines, the break even point is 500. This

means that even the demand is at the low end of the

range, it would be above the break even point and thusyield a profit.

Hence the manager should choose 2 machines.


21/24

Make Buy

Annual Fixed Cost $ 150000 None

Variable Cost per unit $ 60 $ 80

Annual Volume (units) 12000 12000

Make or Buy Decision:

Example 5:

A firms manager must decide whether to make or buy a

certain item used in the production system. Cost and volumeestimates of make and buy decision are given below;

Given these number, should the manager buy or make thisitem?


22/24

Solution:

Total Cost = Fixed cost + Volume variable costMake: Total Cost = 15000 + 12000 60

= $ 870,000

Buy : Total Cost = 0 + 12000 80= $ 960,000

Since the total cost of making the item is less than the

annual cost of buying it, the manager should choose tomake the item.


23/24

An item which is required by the company can be

manufactured on any of the three following machinesand also it can be purchased at a price of $5.4 per

component:

Suggest the best option if the requirement is 2000 units

then what would be the decision about buying or

making?

Machine Fixed Cost Variable cost

M1 9000 0.75

M2 8500 0.50

M3 9200 0.05


24/24

9300200005.09200cos,

950020005.08500cos,

10500200075.09000cos,

800,1020004.5,

:

3

2

1

tTotalmachineMFor

tTotalmachineMFor

tTotalmachineMFor

CostTotalbuyingFor

Solution

md. Imrul Kaes - Capacit Planning 2012-5-30

Documents

Transcript of md. Imrul Kaes - Capacit Planning 2012-5-30