Professional Documents
Culture Documents
PRESENTED BY
VIJIT GAJBHIYE
• 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.
a) 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 one 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 utilisation.
Q. The design capacity for engine repair in a company is 80 trucks/day. The effective
capacity is 40 engines/day and the actual output is 36 engines/day. Calculate the
utilization and efficiency of the operation. If the efficiency for next month is
expected to be 82%, what is the expected output?
Ans.
Utilization = Actual Output / Design Capacity
= 36/80
= 45%
Efficiency = Actual Output / Effective Capacity
= 36/40
= 90%
Expected Output = Effective Capacity x Efficiency
= 40 x 0.82
= 32.8 Engines/day
© NEW AGE INTERNATIONAL PUBLISHERS
PART-II
AGGREGATE PLANNING
• The variables of the production system are labour, materials and capital.
• More labour effort is required to generate higher volume of output.
• Hence, the employment and use of overtime (OT) are the two relevant
variables.
• Materials help to regulate output.
• The alternatives available to the company are inventories, back ordering or
subcontracting of items.
Q. University Press publishes textbooks for the academic market. What is the
total cost of the initial plan?
The relevant cost and printing equipment-related capacity information are
given below.
Regular production cost = $20 per book
Regular production max. capacity = 10000 books per quarter
Overtime production cost = $30 per book
Overtime production max. capacity = 5000 books per quarter
Subcontracting cost = $35 per book
Beginning inventory = 0
Holding cost = $2 per book
Quarter Demand Total Work- Inventory Regular Over- Sub- Hire Fire
(Units) Prod. force Prod. time contract
Prod.
1 Ans. 5000 17500 0 12500 10000 5000 2500 0 0
2 10000 17500 0 20000 10000 5000 2500 0 0
3 30000 17500 0 7500 10000 5000 2500 0 0
4 25000 17500 0 0 10000 5000 2500 0 0