Case study Fitness club part A

Economies and Discomposes of Scale Capacity Timing and Sizing Sizing capacity cushions Capacity cushions are the amount of reserve capacity a process uses to handle sudden changes Capacity cushion = 100% – Average Utilization rate (%) Expansionist strategies Wait-and-see strategies Combination of strategies 6-7 Forecast of capacity required Planned unused capacity increment Time between increments Time (a) Expansionist strategy Figure 6. 2 – Two Capacity Strategies 6-8 Planned use of snort-term pitons (b) Wait-and-see strategy 6-9 Linking Capacity Capacity decisions should be linked to processes and supply chains throughout the organization Important issues are competitive priorities, quality, and process design 6-10 Systematic Approach 1 . Estimate future capacity requirements 2. Identify gaps by comparing requirements with available capacity 3. Develop alternative plans for reducing the gaps 4.

Evaluate each alternative, both qualitatively and quantitatively, and make a final choice 6-11 Step 1 is to determine the capacity required o meet future demand using an appropriate planning horizon Output measures based on rates of production Input measures may be used when Product variety and process divergence is high The product or service mix is changing Productivity rates are expected to change Gallants learning erects are expected 6-12 For one service or product processed at one operation with a one year time period, the capacity requirement, M, is Processing hours required for year’s demand requirement = Hours available from a single capacity unit (such as an employee or machine) per year, after deducting desired cushion – (C/OHIO)] where

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D = demand forecast for the year (number of customers serviced or units of product) p = processing time (in hours per customer served or unit produced) N = total number of hours per year during which the process operates C = desired capacity cushion (expressed as a percent) 6-13 Setup times may be required if multiple products are produced requirement = Processing and setup hours required for year’s demand, summed over all services or products Hours available from a single capacity unit per year, after deducting desired cushion [EDP + (D/SF]product 1 + [EDP + (D/SF]product 1 + INC – (C/OHIO)] Q = number of units in each lot = setup time (in hours) per lot 6-14 + [EDP + (D/Q)s]product n Estimating capacity Requirements EXAMPLE 6. 1 A copy center in an office building prepares bound reports for two clients. The center makes multiple copies (the lot size) of each report. The processing time to run, collate, and bind each copy depends on, among other factors, the number of pages. The center operates 250 days per year, with one 8-hour shift.

Management believes that a capacity cushion of 15 percent (beyond the allowance built into time standards) is best. It currently has three copy machines. Based on the following table of information, determine how many machines are needed at the copy center. Item Client X Client Y 2,000 6,000 Standard processing time (hour/copy) 0. 5 0. 7 Average lot size (copies per report) 20 0.

25 0. 40 Annual demand forecast (copies) Standard setup time (hours) 6-15 Estimating Capacity Requirements