Capacity Ability of a facility to deliver outputs for a specific span of time Capacity measurement Units/shift or any other span

n of time

Tonnes of steel/day, Number of motor cars/day

Types of Capacity
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Types of capacity 1. Fixed capacity

Plant and equipment, fixed assets

2. Adjustable capacity

Workforce
Number of planned shifts Outsourcing
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3. Design/installed capacity
The planned rate of output as per the equipment

installed
4. System capacity

The output from the system which is less than

Design/installed capacity The product mix
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 Quality specifications
The current labor capital mix 5. Potential capacity - maximum capacity which can be made available by top management 6. Immediate capacity/ Effective capacity - which can be made available within current budget period
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Factors influencing plant capacity

1. Market demand

2. Capital investment
3. Degree of automation

4. Level of integration (vertical)

5. Technology selected 6. Dynamic nature of all factors
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7. Uncertain demand and future technology

8. Obsolescence of product and technology

9. Future capacity additions

Capacity decisions
What is the size of the plant? How much capacity to install? When capacity is needed? When to phase in capacity and when to phase out capacity? At what cost? Budget?

Where? Location How?

Process design, Layout, Equipment selection

Importance of Capacity Planning Capacity planning is important because capacity decisions are strategic in nature Influences technology selection

Capacity requires investment

Equipment Building Man power, Raw materials

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Capacity influences commercial viability,

profitability and competitiveness

Meets demand of customers

Effects the efficiency of operations

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Process of Capacity Planning Assessing existing capacity (capacity measurement) Forecasting future capacity needs

Identifying alternative ways to modify capacity

to meet the forecasted demand

Evaluating financial, economical and

technological aspects of capacity alternatives
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Selecting a capacity alternative most suited to

achieve the strategic aims of the firm

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Classification of Capacity Planning

Long term & short term (time horizon )

Long term Capacity Planning, to meet long term

forecast

Expanding product line

Expanding product portfolio Diminishing demand
How ?
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Expansion Subcontracting Acquisitions Setting up new facilities Reduction Selling off Developing other products

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Short term Capacity Planning to meet short term

demand forecast by

Overtime
Number of shifts Sub contracting Part time employees Flexible work-hours
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MRP Applicability Objectives MRP I & MRP II Systems

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inventory transactions

Customers orders

Forecasts

Engineering changes

Master production schedule [which product to produce, in what quantity & when] Bill of materials file [product structure and routing]

Inventory status file [finished items, WIP, planned orders

MRP I SYSTEM

PLANNED SCHEDULES AND VARIOUS OTHER REPORTS

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What is ERP? ERP is a software package developed to utilize resources optimally in a company ERP as a single (total) solution addresses the information needs of the whole organization

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Functioning of ERP A dealer places an order. when the order is given to ERP, the ERP checks the stocks, allocates the inventory and checks

the dealer account. If the credit limit

doesn't permit, dispatch is put on hold

ERP integrates production, logistics,

marketing and HR functions of a company
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ERP Packages Packages can be customized or standard SAP BAAN ORACLE ETC.

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Why ERP? Entry of MNCs has made Indian companies customer sensitive Cost Delivery Quality

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Application of ERP Universal applicability. suitable for any kind of company Financials Financial accounting Treasury management Asset management Logistics Materials management distribution management
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Human resources
Personnel management

Training and development

Skills inventory

Work flow
Flexible assignment of tasks and

responsibilities to various locations, jobs,

groups or individuals
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Benefits of ERP (Tangible benefits)

60% reduction in lead-time 30% improvement in inventory turns 99% OTD performance 80% improvement in TPT

70% reduction in WIP

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(Intangible benefits) Improved customer service

Improved vendor performance

Better productivity (resource utilization ) Accuracy of information Improved decision making capability

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