Learning Objectives:

• Understand the significance of capacity planning in meeting customer demand and achieving operational efficiency.
• Identify and understand various types of capacity planning, including long-term, intermediate-term, and short-term planning.
• Recognize the factors that impact capacity planning, such as demand variability, lead times, resource availability, and technology.

Design of the production system involves planning for the inputs, conversion process and outputs of production operation. The effective management of capacity is the most important responsibility of production management. The objective of capacity management (i.e. planning and control of capacity)is to match the level of operations to the level of demand.
Capacity planning is to be carried out keeping in mind future growth and expansion plans, market trends, sales forecasting, etc. It is a simple task to plan the capacity in case of stable demand. But in practice the demand will be seldom stable. The fluctuation of demand creates problems regarding the procurement of resources to meet the customer demand. Capacity decisions are strategic in nature. Capacity is the rate of productive capability of a facility. Capacity is usually expressed as volume of output per period of time. Production managers are more concerned about the capacity for the following reasons:

• Sufficient capacity is required to meet the customers demand in time.

• Capacity affects the cost efficiency of operations.

• Capacity affects the scheduling system.

• Capacity creation requires an investment.

Capacity planning is the first step when an organization decides to produce more or new products.
Capacity planning is concerned with defining the long-term and the short-term capacity needs of an organization and determining how those needs will be satisfied. Capacity planning decisions are taken based upon the consumer demand and this is merged with the human, material and financial resources of the organization.
Capacity requirements can be evaluated from two perspectives—long-term capacity strategies and short-term capacity strategies:

1. Long-term capacity strategies: Long-term capacity requirements are more difficult to determine because the future demand and technology are uncertain. Forecasting for five or ten years into the future is more risky and difficult. Even sometimes company’s today’s products may not be existing in the future. Long-range capacity requirements are dependent on marketing plans, product development and life-cycle of the product. Long-term capacity planning is concerned with accommodating major changes that affect overall level of the output in long-term. Marketing environmental assessment and implementing the long-term capacity plans in a systematic manner are the major responsibilities of management. Following parameters will affect long-range capacity decisions.
   

   • Multiple products: Company’s produce more than one product using the same facilities in order to increase the profit. The manufacturing of multiple products will reduce the risk of failure. Having more than on product helps the capacity planners to do a better job. Because products are in different stages of their life cycles, it is easy to schedule them to get maximum capacity utilization.

   • Phasing in capacity: In high technology industries, and in industries where technology developments are very fast, the rate of obsolescence is high. The products should be brought into the market quickly. The time to construct the facilities will be long and there is no much time, as the products should be introduced into the market quickly. Here the solution is phase in capacity on modular basis. Some commitment is made for building funds and men towards facilities over a period of 3-5 years. This is an effective way of capitalizing on technological breakthrough.

   • Phasing out capacity: The outdated manufacturing facilities cause excessive plant closures and down time. The impact of closures is not limited to only fixed costs of plant and machinery. Thus, the phasing out here is done with humanistic way without affecting the community. The phasing out options makes alternative arrangements for men like shifting them to other jobs or to other locations, compensating the employees, etc.

2. Short-term capacity strategies: Managers often use forecasts of product demand to estimate the short-term workload the facility must handle. Managers looking ahead up to 12 months, anticipate output requirements for different products, and services. Managers then compare requirements with existing capacity and then take decisions as to when the capacity adjustments are needed. The short-term capacity strategies are:

   1. Inventories: Stock finished goods during slack periods to meet the demand during peak period.

   2. Backlog: During peak periods, the willing customers are requested to wait and their orders are fulfilled after a peak demand period.

   3. Employment level (hiring or firing): Hire additional employees during peak demand period and lay off employees as demand decreases.

   4. Employee training: Develop multi skilled employees through training so that they can be rotated among different jobs. The multi skilling helps as an alternative to hiring employees.

   5. Subcontracting: During peak periods, hire the capacity of other firms temporarily to make the component parts or products.

   6. Process design: Change job contents by redesigning the job.

Solved Example: 9182-01

Capacity planning should be solely based on the principle of maximizing the ___ delivered to the customer.

A. Facility

B. Value

C. Comfort

D. All of the above

Correct Answer: B

Solved Example: 9182-02

Capacity planning guides our choices on ___ for the long-term.

A. Capacity

B. Locations

C. Layout

D. All of the above

Correct Answer: D

Learning Objectives:

• Understand the relationship between the number of machines and people required to meet production or service demand.
• Learn how to calculate machine and labor requirements based on production rates, processing times, workloads, and cycle times.

Equipment Requirements:

People Requirements:

Learning Objectives:

• Identify common trade-offs in capacity planning (e.g., cost vs. capacity, flexibility vs. efficiency).
• Discuss strategies for making informed decisions when faced with these trade-offs.

Common Trade-offs: Cost vs. capacity, flexibility vs. efficiency.

Strategies: Balancing conflicting factors to achieve optimal outcomes.

Cost vs. Capacity Trade-off: Balancing the expenses associated with increasing capacity against the benefits gained from meeting demand.

• Fixed Costs: Expenses that do not vary with production levels (e.g., facility costs).
• Variable Costs: Expenses directly tied to production volume (e.g., labor, materials).
• Marginal Costs: The additional cost incurred by producing one more unit.

• Capital Investment: Upfront costs for new equipment, facilities, or technology.
• Operational Costs: Ongoing expenses related to increased production.

Learning Objectives:

1. Overview of material handling equipment
2. Overview of material handling principles.

---

Haynes defines “Material handling covers the basic operations in connection with the movement of bulk, packaged and individual products in a semi-solid or solid state by means of gravity manually or power-actuated equipment and within the limits of individual producing, fabricating, processing or service establishment”.

Following are the principles of material handling:

1. Planning principle: All handling activities should be planned.
2. Systems principle: Plan a system integrating as many handling activities as Possible and coordinating the full scope of operations (receiving, storage, production, inspection, packing, warehousing, supply and transportation).
3. Space utilization principle: Make optimum use of cubic space.
4. Unit load principle: Increase quantity, size, weight of load handled.
5. Gravity principle: Utilize gravity to move a material wherever practicable.
6. Material flow principle: Plan an operation sequence and equipment arrangement to optimize material flow.
7. Simplification principle: Reduce combine or eliminate unnecessary movement and/or equipment.
8. Safety principle: Provide for safe handling methods and equipment.
9. Mechanization principle: Use mechanical or automated material handling Equipment.
10. Standardization principle: Standardize method, types, size of material handling equipment.
11. Flexibility principle: Use methods and equipment that can perform a variety of task and applications.
12. Equipment selection principle: Consider all aspect of material, move and Method to be utilized.
13. Dead weight principle: Reduce the ratio of dead weight to pay load in mobile equipment.
14. Motion principle: Equipment designed to transport material should be kept in motion.
15. Idle time principle: Reduce idle time/unproductive time of both MH equipment and man power.
16. Maintenance principle: Plan for preventive maintenance or scheduled repair of all handling equipment.
17. Obsolescence principle: Replace obsolete handling methods/equipment when more efficient method/equipment will improve operation.
18. Capacity principle: Use handling equipment to help achieve its full capacity.
19. Control principle: Use material handling equipment to improve production control, inventory control and other handling.
20. Performance principle: Determine efficiency of handling performance in terms of cost per unit handled which is the primary criterion.




Gazouya-japan, CC BY-SA 4.0, via Wikimedia Commons





High Contrast, CC BY 3.0 DE, via Wikimedia Commons


---

Solved Example: 9019-01

Materials handling system includes:

A. Automated Guided Vehicles (AGV)

B. Automated Storage/Retrieval System (AS/RS)

C. Robots

D. All of the above

Correct Answer: D

Solved Example: 9019-02

What material handling equipment is used if high volume of material is to be moved from one fixed location to another?

A. Trucks

B. Fork lift

C. Conveyors

D. Cranes

Correct Answer: C

Solved Example: 9019-03

In steel plant the most important system for materials handling is:

A. Conveyors

B. Cranes and hoists

C. Trucks

D. Locos

Correct Answer: D

Solved Example: 9019-04

Which of the following are the principles of material handling?

A. Keep all the handling to the minimum

B. Select only efficient handling equipment

C. Move the heaviest weight to the least distance

D. All of the above

Correct Answer: D

Solved Example: 9019-05

The chart which gives an estimate about the amount of materials handling between various work stations is known as:

A. Flow chart

B. Process chart

C. Travel chart

D. Operation chart

Correct Answer: C

Solved Example: 9019-06

For handling materials during manufacture of cement, a _________ is widely used.

A. Belt conveyor

B. Bucket conveyor

C. Fork lift truck

D. Overhead crane

Correct Answer: B

Solved Example: 9019-07

For material transportation, conveyors are used when the prevailing conditions include:

A. Loads are uniform

B. Routes do not vary

C. Materials move relatively continuously

D. All of these

Correct Answer: D