MGCR 472 Lecture Notes - Lecture 7: Break Even, Real Options Valuation, Step Function
28 Sep 2016
School
Department
Course
Professor
9.26 MGCR 472
Capacity planning
Capacity
-Upper limit or ceiling on the load that an operating unit can
handle
-How much can produce ( output rates)
Planning
-Long term
oOverall capacity level
oStrategic capacity planning
oEx: facility size, major expansions
-Short term
oVariations in capacity requirements
oCreated by demand fluctuations
oEx: workforce-production plans
Decisions needed for:
-What kind of capacity is needed
-How much is needed
-When is needed
Importance of these decisions
-Determine ability to meet future demand
oRemain/ be competitive
-Excess capacity or ability to add capacity quickly can deter new
competitors
-Affects cost
find more resources at oneclass.com
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Document Summary
Upper limit or ceiling on the load that an operating unit can handle. How much can produce ( output rates) Long term: overall capacity level, strategic capacity planning, ex: facility size, major expansions. Short term: variations in capacity requirements, created by demand fluctuations, ex: workforce-production plans. Determine ability to meet future demand: remain/ be competitive. Excess capacity or ability to add capacity quickly can deter new competitors. Involve major investments and irreversible in the short run. Estimate long-term changes in demand and estimate future capacity needs. Identify sources of capacity to meet these needs. Design capacity: maximum obtainable output under ideal conditions. Effective capacity: maximum capacity given current product mix, scheduling difficulties and other doses of reality. Normal operation conditions: cannot run 24 hours, so cannot reach design capacity, less than design capacity. Actual output: rate of output actually achieved. Utilization = actual output / design capacity. If low, not fully use the resources to produce, not good.
