S7 Capacity in addition to Constraint Management Process Strategies Capacity Planning Over a Time Horizon

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S7 Capacity in addition to Constraint Management Process Strategies Capacity Planning Over a Time Horizon

LaCava, Jude, Host has reference to this Academic Journal, PHwiki organized this Journal © 2011 Pearson Education, Inc. publishing as Prentice HallS7Capacity in addition to Constraint ManagementPowerPoint presentation to accompany Heizer in addition to Render Operations Management, 10e Principles of Operations Management, 8ePowerPoint slides by Jeff Heyl© 2011 Pearson Education, Inc. publishing as Prentice HallProcess StrategiesThe objective of a process strategy is to build a production process that meets customer requirements in addition to product specifications within cost in addition to other managerial constraints© 2011 Pearson Education, Inc. publishing as Prentice HallCapacityThe throughput, or the number of units a facility can hold, receive, store, or produce in a period of timeDetermines fixed costsDetermines if dem in addition to will be satisfiedThree time horizons

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© 2011 Pearson Education, Inc. publishing as Prentice HallPlanning Over a Time HorizonFigure S7.1© 2011 Pearson Education, Inc. publishing as Prentice HallDesign in addition to Effective CapacityDesign capacity is the maximum theoretical output of a systemNormally expressed as a rateEffective capacity is the capacity a firm expects to achieve given current operating constraintsOften lower than design capacity© 2011 Pearson Education, Inc. publishing as Prentice HallUtilization in addition to EfficiencyUtilization is the percent of design capacity achievedEfficiency is the percent of effective capacity achievedUtilization = Actual output/Design capacityEfficiency = Actual output/Effective capacity

© 2011 Pearson Education, Inc. publishing as Prentice HallCapacity in addition to StrategyCapacity decisions impact all 10 decisions of operations management as well as other functional areas of the organizationCapacity decisions must be integrated into the organization’s mission in addition to strategy© 2011 Pearson Education, Inc. publishing as Prentice HallCapacity ConsiderationsForecast dem in addition to accuratelyUnderst in addition to the technology in addition to capacity incrementsFind the optimum operating level (volume)Build as long as change© 2011 Pearson Education, Inc. publishing as Prentice HallEconomies in addition to Diseconomies of ScaleFigure S7.2

© 2011 Pearson Education, Inc. publishing as Prentice HallManaging Dem in addition to Dem in addition to exceeds capacityCurtail dem in addition to by raising prices, scheduling longer lead timeLong term solution is to increase capacityCapacity exceeds dem in addition to Stimulate marketProduct changesAdjusting to seasonal dem in addition to sProduce products with complementary dem in addition to patterns© 2011 Pearson Education, Inc. publishing as Prentice HallComplementary Dem in addition to PatternsFigure S7.3© 2011 Pearson Education, Inc. publishing as Prentice HallComplementary Dem in addition to PatternsFigure S7.3

© 2011 Pearson Education, Inc. publishing as Prentice HallComplementary Dem in addition to PatternsFigure S7.3© 2011 Pearson Education, Inc. publishing as Prentice HallTactics as long as Matching Capacity to Dem in addition to Making staffing changesAdjusting equipmentPurchasing additional machinerySelling or leasing out existing equipmentImproving processes to increase throughputRedesigning products to facilitate more throughputAdding process flexibility to meet changing product preferencesClosing facilities© 2011 Pearson Education, Inc. publishing as Prentice HallDem in addition to in addition to Capacity Management in the Service SectorDem in addition to managementAppointment, reservations, FCFS ruleCapacity managementFull time, temporary, part-time staff

© 2011 Pearson Education, Inc. publishing as Prentice HallBottleneck Analysis in addition to Theory of ConstraintsEach work area can have its own unique capacityCapacity analysis determines the throughput capacity of workstations in a systemA bottleneck is a limiting factor or constraintA bottleneck has the lowest effective capacity in a system© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even AnalysisTechnique as long as evaluating process in addition to equipment alternativesObjective is to find the point in dollars in addition to units at which cost equals revenueRequires estimation of fixed costs, variable costs, in addition to revenue© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even AnalysisFixed costs are costs that continue even if no units are producedDepreciation, taxes, debt, mortgage paymentsVariable costs are costs that vary with the volume of units producedLabor, materials, portion of utilitiesContribution is the difference between selling price in addition to variable cost

© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even AnalysisCosts in addition to revenue are linear functionsGenerally not the case in the real worldWe actually know these costsVery difficult to verifyTime value of money is often ignoredAssumptions© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even AnalysisFigure S7.5© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even AnalysisTR = TCorPx = F + VxBreak-even point occurs when

© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even AnalysisProfit = TR – TC = Px – (F + Vx) = Px – F – Vx = (P – V)x – F© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even ExampleFixed costs = $10,000 Material = $.75/unitDirect labor = $1.50/unit Selling price = $4.00 per unit© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even ExampleFixed costs = $10,000 Material = $.75/unitDirect labor = $1.50/unit Selling price = $4.00 per unit

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© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even Example© 2011 Pearson Education, Inc. publishing as Prentice HallBreak-Even ExampleMultiproduct Casewhere V = variable cost per unit P = price per unit F = fixed costs W = percent each product is of total dollar sales i = each product© 2011 Pearson Education, Inc. publishing as Prentice HallReducing Risk with Incremental ChangesFigure S7.6

© 2011 Pearson Education, Inc. publishing as Prentice HallReducing Risk with Incremental Changes(a) Leading dem in addition to with incremental expansionFigure S7.6© 2011 Pearson Education, Inc. publishing as Prentice HallReducing Risk with Incremental Changes(b) Capacity lags dem in addition to with incremental expansionFigure S7.6© 2011 Pearson Education, Inc. publishing as Prentice HallReducing Risk with Incremental Changes(c) Attempts to have an average capacity with incremental expansionFigure S7.6

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