Capacity Planning and Bottlenecks

Jul 14, 2024

Capacity Planning and Bottlenecks

Key Concepts

  • Capacity Planning: Process of determining the production capacity needed by an organization to meet changing demands for its products.
  • Bottleneck: The activity in the production process that takes the longest time, limiting the overall capacity.

Steps in Capacity Planning

  1. Forecast Demand: Look at medium or long-term horizons to predict future demand.
  2. Calculate Capacity Requirements: Based on forecasted demand.
  3. Measure Current Capacity: Assess the present level of production capacity.
  4. Compare and Identify Gaps: Identify differences between current capacity and required capacity.
  5. Address Gaps: Decide on changes or improvements needed.

Example: Subway Franchise

  • Processes Involved: Cutting meat, cutting vegetables, baking bread, assembling sandwiches.
  • Assessment of Capacity:
    • Meat Cutting: 200 ounces/hour (50 sandwiches/hour based on 4 ounces per sandwich).
    • Vegetable Cutting: 25 sandwiches/hour.
    • Bread Baking: 6 loaves/hour (1 loaf = 1 sandwich).
    • Assembly: 5 minutes per sandwich (12 sandwiches/hour).
  • Identified Bottleneck: Bread Baking at 6 sandwiches/hour.

Addressing Bottlenecks

  • Focus improvements on the bottleneck to effectively increase capacity.

Hypothetical Improvements

  1. Bread Making Improvement: Increase by 30%
    • New capacity = 6 * 1.3 = 7.8 sandwiches/hour.
  2. Assembly Improvement: Increase by 20%
    • New capacity = 12 * 1.2 = 14.4 sandwiches/hour.
  3. Meat Cutting Improvement: Increase by 15%
    • New capacity = 50 * 1.15 = 57.5 sandwiches/hour.

Conclusion

  • Only improvements in the bottleneck (bread making) will increase overall production capacity.
  • Enhancements in processes that aren't the bottleneck won't affect the total capacity.

Focus Areas for Capacity Planning

  • Always identify and target the bottleneck for improvements.
  • Evaluate the impact of potential changes on overall capacity.