OPERATIONS MANAGEMENT AND TOTAL potentially leading to missed opportunities

QUALITY MANAGEMENT during demand surges.

TOPIC 3: CAPACITY PLANNING, PROCESS 3. Match Strategy – Incrementally adjusts
SELECTION AND FACILITY LAYOUT capacity in response to demand changes,
balancing the risks of over- and under-
CAPACITY PLANNING capacity.

Capacity Planning – involves determining the

Benefits of Capacity Planning
production capacity needed by an organization to
1. Improves demand management
meet changing demands for its products or
2. Cost reduction
services.
3. Increases flexibility
4. Risk mitigation
Types of Capacity Planning
5. Enhances operational efficiency
A. As to resources
1. Product Capacity Planning – Ensures UTILIZATION AND EFFICIENCY
sufficient product availability to meet
demand fluctuations. Capacity Terminologies
2. Workforce Capacity Planning – Aligns
1. Design Capacity – the maximum output a
staffing levels with workload
system is engineered to achieve under ideal
requirements.
conditions.
3. Tools Capacity Planning – Assesses
2. Effective Capacity – the maximum output
equipment availability and maintenance
achievable under normal operating
schedules to support production.
conditions, accounting for routine
B. As to time
disruptions like maintenance, scheduling
1. Strategic Capacity Planning/Long-
inefficiencies, and product mix variations.
term Planning (2–5 years) – Focuses on
3. Actual Output – the actual number of units
strategic decisions like facility expansion
produced in a given period, reflecting real-
or new product lines based on
time performance.
forecasted demand.
2. Tactical Capacity Planning/Medium-
Utilization and Efficiency
term Planning (1 year) – Balances
current demand with supply capabilities, • Utilization – is the percent of design
adjusting workforce and inventory levels capacity achieved.
accordingly. 𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡
3. Operational Capacity Planning/Short- 𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = (100%)
𝐷𝑒𝑠𝑖𝑔𝑛 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
term Planning (1 week to 3 months) –
Addresses immediate operational • Efficiency – is the percent of effective
needs, such as scheduling and resource capacity achieved.
allocation. 𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡
𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = (100%)
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
Capacity Planning Strategies
1. Lead Strategy – Proactively increases
capacity in anticipation of future demand,
CVP ANALYSIS
aiming to capture market opportunities but
risking overcapacity if demand doesn't Cost Volume Profit Analysis – is the study of
materialize. the effects of volume of output on revenues,
2. Lag Strategy – Adds capacity only after expenses, and net income.
demand has increased, minimizing risk but
Cost Classification under CVP Analysis: • Resources moved to the project site.
• Long timelines and complex
1. Fixed Costs – costs that continue even if no
coordination
units are produced.
2. Variable Costs – costs that vary with the
AUTOMATION
volume of units produced.
Automation – a machinery that has sensing and
Key Components of CVP Analysis
control devices that enable it to operate
1. Contribution Margin (CM) – The difference automatically.
between sales revenue and variable costs.
Types of Automation:
2. Break-even Point (BEP) – The sales level
at which total revenues equal total costs, 1. Fixed Automation
resulting in zero profit. • It uses high-cost, specialized
3. Margin of Safety – The difference between equipment
actual or projected sales and the break-even • Fixed sequence of operations
sales volume. It indicates the risk buffer 2. Programmable Automation
before incurring losses. • Involves the use of high-cost, general
purpose equipment controlled by a
PROCESS SELECTION AND computer program
FACILITY LAYOUT • Provides both the sequence of
operations and specific details about
Process selection – refers to deciding on the
each operation
way a product of goods or services will be
3. Flexible Automation
organized.
• It uses equipment more customized
Process Types: than that of programmable automation
• Requires less changeover time.
1. Job Shop
• Custom, low-volume production FACILITY LAYOUT
• High flexibility with general-purpose
equipment Facility Layout – determines the format of work
• Skilled workers handle varied tasks of any organization
2. Batch Types of Facility Layout:
• Moderate-volume, semi-standardized
production 1. Process Layout
• Products made in groups • This type of layout is suitable when the
• Intermittent workflow with partial volume of output is unknown and do not
automation require a great enough specialized
3. Repetitive production facilities to produce.
• High-volume, standardized production 2. Product Layout
• Dedicated equipment for specific tasks. • Equipment machines and other
• Low labor skill requirements due to facilities are arranged in the same
specialization sequence as the operating required for
4. Continuous manufacturing products.
3. Fixed Position Layout
• Non-stop, high-volume production
• Materials, labors and machines are
• Fully automated, 24/7 operation.
moved to a place, where all
• Minimal product variation
manufacturing activities are to be done
5. Project
• Unique, one-time
4. Combination of Layout PROCESS CONTROL
• Integrates elements of process,
product, and fixed-position layouts to Process Control – involves monitoring and
meet specific organizational needs. adjusting workflows to meet quality standards
• Useful for facilities requiring multiple and deadlines.
production methods. • It is essential for managers who seek to
improve the results of their companies by
DESIGN PROCESS LAYOUT optimizing resources and increasing
productivity.
Design Process Layout
PROCESS IMPROVEMENT
1. Gather information – It covers nature of the
jobs, number of workers needed, number of Process Improvement – is a systematic
shifts and machine types. approach to enhancing the efficiency and
2. Develop a block plan – it is developed that effectiveness of business processes. It involves
best satisfies performance criteria and area analyzing and improving existing processes
requirements. within an organization to meet new business
3. Design a detailed layout – after finding a goals or standards of quality, so organizations
satisfactory block plan, the layout designer can do more with less, faster.
translates it into a detailed representation
DESIGN OF WORK SYSTEM
PROCESS DESIGN
Design of Work System – focuses on
Process Design – It is the process of creating optimizing the efficiency, effectiveness, and
and improving systems that convert inputs into satisfaction of employees while aligning with
outputs. Process design involves understanding organizational goals.
how work is done within an organization and then
designing and implementing ways to improve it. 1. Job Design
• Defines the tasks, responsibilities, and
• "The sequence of operations that would be requirements of a job.
performed on a set of inputs to get a desired • Considers technical, economic, and
output." – Slack & Bandon-Jones (2019) behavioral feasibility to ensure the job is
Process Design Planning achievable, cost-effective, and satisfying
for employees
1. Determining the requirement. 2. Work Measurement
2. Creating the plan. • Establishes standards for task
3. Building team. completion times to improve efficiency
4. Implementing the plan. and productivity.
5. Monitoring the process. • Techniques like time studies or
6. Audit. predetermined motion-time systems
are used to analyze and optimize
Challenges Involved in Process Design
workflows
1. Uncertainty 3. Worker Compensation
2. Complexity • Ensures fair and motivating pay
3. Inexperience structures tied to performance or job
4. Lack of Tools complexity.
5. Time Constraints • Includes incentive systems that align
employee efforts with organizational
objectives.
 GROUP 3 MEMBERS:
SIX SIGMA Candido, Kiara Claire
Six Sigma – A process improvement Santiago, Lhenzy B.
methodology that reduces the number of defects Suzara, Renee Junea P.
to a vanishingly small amount Ubaldo, Ma. Dorothy S.
Umbao, Lovelyn S.
• Based on a common philosophy
supported by measurement and tools for
process and product improvement.
• Benefits: REFERENCES
o Increased Quality
o Reduced Waste Capacity Planning:
o Reduced Cost https://www.sagesoftware.co.in/erp-
o Increased Customer glossary/what-is-capacity-planning/
Satisfaction https://www.slideshare.net/slideshow/capacity-
planning-71948656/71948656#2
USING Increased
o THE DMAICin Customer
PROCESS
https://www.studocu.com/ph/document/tarlac-
DMAIC Process ((Define, Measure, Analyze, state-university/operations-
Improve, and Control) – a problem solving management/capacity-planning-pdf-omtqm-
method that is a roadmap which can be used for midterm-notes/17943193
any projects or quality improvements that needs
Process Selection and Facility Layout:
to be made.
https://www.slideshare.net/slideshow/chapter-
• Define: Identify the problem or area for 6process-selection-and-facility-
improvement. layoutpptx/256992746#12
• Measure: Collect data and measure the Process Design:
current process. https://www.edureka.co/blog/process-design-in-
• Analyze: Analyze the data to understand the operations-management/
causes of problems.
• Improve: Develop solutions to fix the issues Process Control:
and improve the process. https://www.siteware.co/blog/process-
• Control: Put controls in place to maintain management/process-control/
improvements. Process Improvement:
https://www.ibm.com/think/topics/process-
improvement