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Capacity Management Learning Curves

The document discusses capacity management and learning curves. It defines capacity as the maximum output a system can produce over a period of time. Capacity management must consider both inputs and outputs, and the concepts of economies and diseconomies of scale. Learning curves show that the time and costs to produce units decreases with cumulative production in a predictable way. The document provides examples of using learning curves to estimate production times and costs for future units based on prior data and learning percentages.

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aakash urangapuli
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55 views32 pages

Capacity Management Learning Curves

The document discusses capacity management and learning curves. It defines capacity as the maximum output a system can produce over a period of time. Capacity management must consider both inputs and outputs, and the concepts of economies and diseconomies of scale. Learning curves show that the time and costs to produce units decreases with cumulative production in a predictable way. The document provides examples of using learning curves to estimate production times and costs for future units based on prior data and learning percentages.

Uploaded by

aakash urangapuli
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CAPACITY MANAGEMENT

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CAPACITY IN OPERATIONS MANAGEMENT

 Capacity – the ability to hold, Capacity utilization rate – a measure of how


receive, store, or accommodate
close the firm is to its best possible operating
 In business, viewed as the
level
amount of output that a system
is capable of achieving over a
specific period of time

 Capacity management needs to


consider both inputs and Economies of scale – the idea that as a planet
outputs gets larger and volume increases, the average
cost per unit tends to drop

Diseconomies of scale – at some point, the


plant becomes too large and average cost per
unit begins to increase
3
MAJOR OPERATIONS PLANNING ACTIVITIES

4
DECISION MAKING UNDER RISK

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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EXAMPLE - DECISION TREES

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LEARNING CURVES

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LEARNING CURVES
 Learning curve: a line displaying the relationship between unit production time
and the cumulative number of units produced
 Wide range of applications; Can be used to estimate time and cost
 One of the trade-offs in JIT

The amount of time required to complete a given task or unit of a product will be less
each time the task is undertaken.
The unit time will decrease at a decreasing rate.
The reduction in time will follow a predictable pattern.

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LEARNING CURVES - APPLICATIONS

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PLOTTING LEARNING CURVES

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DATA FOR 80% LEARNING CURVE

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LOGARITHMIC ANALYSIS

Yx  Kx n
x  Unit number
Yx  Number of direct labor hours required to produce the x th unit
K  Number of direct labor hours required to produce the first unit
log b
n
log 2
b  Learning percentage

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A SIMPLE EXAMPLE

First unit takes 100,000 hours


80 percent learning curve
Find hours for eighth unit

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A SIMPLE EXAMPLE

First unit takes 100,000 hours


80 percent learning curve
Find hours for eighth unit

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IMPROVEMENT CURVES -
UNIT VALUES

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IMPROVEMENT CURVES -
CUMULATIVE VALUES

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IMPROVEMENT
CURVES

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LEARNING CURVES IN CONTRACTING

 Contract for 11 boats, has completed 4 of them.

 Production manager has been reassigning people to torpedo


assembly.

 The first boat required 225 workers, each working a 40-hour week,
while 45 fewer workers were required for the second boat.

 Manager has told them that “this is just the beginning” and he will
complete the last boat with only 100 workers!

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LEARNING CURVES IN CONTRACTING

180 / 225 = 0.80

Look up unit 11 for an 80 percent improvement ratio in Exhibit


(approximately equal to the average of .4765 (corresponding to 10) and
.4493 (corresponding to 12)

0.4629

0.4269 x 225 = 104

Thus, the estimate has been missed by 4 people!

27
LEARNING CURVES IN COSTING

 SUB Company has produced the first unit of a new line of mini-subs at a cost of
$500,000.
 $200,000 for materials and $300,000 for labor

 It has agreed to accept a 10 percent profit and is willing to contract on the basis of a
70 percent learning curve.

 What will be the contract price for three mini-subs?

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LEARNING CURVES IN COSTING

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LEARNING CURVES - ESTIMATION

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LEARNING CURVES

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