Capacity planning

• Capacity- capacity is defined as the maximum output of

a process or resource (e.g. worker, machine, work
center, factory, organization) measured in units per time
period.
• Capacity can be found by taking the total available time
divided by the time per unit.
• Let us assume: if an assembler of an electric motor can
do his/her task in 30 seconds (0.5 mins.), his/her
capacity is 60 mins.
• Per hrs.= ??
• 60/0.5 mins/ unit = 120 units/hrs.
Contd.
• Throughput – Throughput is defined as the actual total volume of
production through a facility (machine, work center, department,
plant, or network of plants). It is measured in units per time period.
• Cycle time- Cycle time is the time between completion of two
discrete units of production. For example, the cycle time of motors
assembled at a rate of 120 per hour would be 30 seconds.
• Throughput time- Throughput time refer to the length of time from
when material enters a production facility until it exits.
• Utilization – A measures of how intensively a resource is being used
to produce a good or service. Utilization compares actual time used
to available time. The actual time used may or may not include the
setup time for a process. Thus, a worker who is busy 45 mins. Every
hrs. has a utilization rate of 45/60 = 75%
Contd.
• Lead time- The time between the initiation of an order and the receipt of
goods. Individual components of lead time can include order preparation
time, queue time, processing time, move or transportation time and receiving
and inspection time. Queue time refers to the amount of time a job (or
person) waits at a given facility waiting to be processed (served).
• Setup time- The length of time required to change a specific machine,
resource, work center, or line from making the last good piece of one type of
product to the first good piece of another type of product. Cost associated
with the setup may include scarp costs, calibration costs, labor downtime
costs and lost sales.
• Inventory – Those stocks or items used to support production (raw materials
and work-in process items), supporting activities (maintenance, repair, and
operating suppliers), and customer service (finished good and spare parts).
Processes with setup time and setup cost will often have inventory associated
with them in order to spread the setup cost over as many items as
economically optimal.
Mr. XYZ’s sub shop makes custom submarine sandwiches to order. It is analyzing the
processes at its shop. The general flow of the process is shown below. A different person is
working on each of the steps in the process. Mr. XYZ wants to figure out the following for a
typical 8-hours workday.
A. what is the current maximum output of the process assuming that no one works
overtime?
B. if we add another person, where would we add him or her and what is the
benefit?
C. is there a benefit if we can shift 1 minute from Bun and Meat to order taking?
Assume we do not make the change in part (B) above.
D. is there a benefit if we shift 1 minute of work from Condiments to Bagging?
Assume we do not make the changes in parts (B) and (C) above.
• Take orders= (60 mins per hrs./1 mins. Per order) * 8 hrs. = 480 subs
per day
• Bun and Meat = ( 60 mins per hrs/ 3 mins per order) * 8 hrs. = 160 sub
per day
Example : Bread Making
• Two steps are required
1. Prepare the dough and bake the loaves (bread making)
2. Packaging the loaves
• Bread is made in batches of 100 loaves
• Completes a batch every hour, which is the cycle time
• Slower process so is the bottleneck
• Packaging needs only 0.75 hour to place the 100 loaves in bags
• Has 75 percent utilization

11-6
Example : Bread Making
• Suppose we have two bread making lines
• Cycle time on each is still one hour to make 100 loaves
• Bread making runs two shifts
• Produces 200 x 8 x 2 = 3,200
• Packaging runs three shifts
• Produces 133.3 x 8 x 3 = 3,200
• Capacities are roughly equal

11-7
A manufacturing process consists of three operations. Operation 1 is processed on the machine by
processing one unit at a time. The processing time of a unit is 4 minutes. There are three identical
machines available for this purpose and a part can be processed on any of the available machine.
Operation 2 consists of a heat treatment operation which is done using a furnace. In this furnace, 100
units can be loaded at a time. The time required to process these parts is 2 hours and 30 minutes,
regardless of the number of parts loaded in a batch. Also after every batch is completed there is a
setup time of 10 minutes for the next batch. Operation 3 consists of finishing operation. There is only
one machine available for this purpose, but the machine has twin workstations. While the operator is
setting up (unloading, cleaning, and reloading) a part on one workstation, the processing can happen
to the earlier loaded part on the other work station. The actual machining time for a part is only 2
minutes. Unloading a finished part takes 30 seconds and reloading a part for machining (including
intermediate cleaning) takes another 30 seconds. Assume that after finishing the part on one
workstation, the machine immediately processes the part on other workstation if is loaded. A part has
to be processed on all operations in the sequence of Operation 1, Operation 2, and Operation 3.
Which is the bottleneck operation? What is the maximum production rate that can be using this setup?
Assuming that at any given time, there are 300 parts in the shop floor, what is the throughput time?
• Operation 1: cycle time = 4 min ÷ 3 = 80 sec,
• Operation 2 – (batch processing + set up time) ÷ cycle time = (2 hr 30 min +
10 min) ÷ 100 = 1.6 min = 96 sec,
• Operation 3: cycle time = 2 min = 120 sec.
Therefore, bottleneck is Ops. 3. Therefore, production rate (capacity) = 30
units per hour.
• Next is throughput time if WIP is 300 units.
• Apply Little's law of WIP = Ideal Output (or Input) Rate * Throughput time,
we get for a WIP of 300 and output rate of 30 units/hour, the throughput
time is 10 hour or 600 minutes.
• Finally, ideal batch size for batch processing is to tune it with bottleneck
operation. Each cycle of batch processor is 2 hr 40 min that is 160 min.
• To tune it with bottleneck you need an output of 2 min per unit, so ideal
batch size is 80 units even if capacity is 100 units.
Consider a three operation flowshop. Operation 1 requires 3.5 minutes to produce one part. There are two
identical machines for that operation and any machine can process one part at a time in 3.5 minutes. Each
machine is manned by 1 person. Operation 2 is a batch processor. The batch processor does not require any set
up. The capacity of a batch is maximum 90 parts at a time. One batch takes 3 hours to complete irrespective of
the size of the batch. The batch processor requires two people to operate and monitor it. Operation 3 is an
inspection bench manned by 4 inspectors. All inspectors are equally skilled. A part can be inspected by 1 person
at a time and take 4 minutes to complete the inspection. The direct labour cost is Rs. 25000 per worker per
month. Assume 26 working days in a month and 2 shifts per day. Each shift has an actual 9 hour working time.
Answer the following:
• Identify the bottleneck operation.
• Calculate the average monthly capacity of the system.
• If the average work in process inventory is 300 parts, calculate the average throughput time.
• Calculate the direct labour cost per unit.
• If some process changes are carried out at the batch processor which will limit the maximum capacity of the
batch processor to 80 parts, but will take only 2 hours to process a batch, will it increase the average output
of the system. If yes, what will be the new average monthly capacity?
Operation 1: cycle time = 3.5 min/part/m/c ÷ 2 = 1.75 min, that is 105 sec.
Operation 2 - batch processing / cycle time = (3Hrs=180 min) ÷ 90 parts = 2 min/part = 120
sec./part,
Operation 3: cycle time = 4 min ÷ 4 = 1 min = 60 sec.
• Therefore bottleneck is Op. 2. Therefore, production rate (capacity) = 30 units per hour.
• The monthly production rate will be calculated by 30 units per hour * 9 hours per shift * 2
shifts per day * 26 days per month. Next is throughput time if WIP is 300 units.
• Apply Little's law of WIP = Ideal Output (or Input) Rate * Throughput time, we get for a WIP
of 300 and output rate of 30 units/hour, the throughput time is 10 hours or 600 minutes.
• Little’s law is Inventory = Throughput × Flow time OR (I = RT; I= avg. a number of items
in a system (units); R = long run avg. throughput rate of the system (units/time); T = avg.
Time a unit in the system (time)
• The per unit labor cost can be calculated by using (the labor rate per month per person * a number of persons
per shift * 2 shifts)/ monthly output. Finally, if some changes in Op 2 are carried out, then Op 2 cycle time will become
(2 hours)/ 80 = 1.5 min = 90 sec. So now, the bottleneck will be shifted from Op 2 to Op 1. The new output of the system
is calculated using Op 1 cycle time of 105 sec.
Consider a bakery that produces only one type of bread white bread. The
bakery operates two parallel baking lines, each equipped with a mixer, a
proofer, and an oven. In addition, the bakery operates a single packaging line,
which is shared by the two bread-making lines. A process flow diagram for the
bakery is shown below, along with the cycle times of each step of the bread-
making and packaging process. Proof Bake CT=3/4 hour/ 100 loaves CT=3/4
hour 100 loaves CT=1 hour 100 loaves Raw / Pack Materials CT=3/4 hour 100
loaves Mix Proof Bake CT=3/4 hound CT=3/4 hour CT=1 hour) 100 loaves 100
loaves 100 loaves.
Answer the following questions:
A. What is the capacity of the packaging task?
B. What is the capacity of each baking task?
c. What is the bottleneck task in each bread-making line?
D. What is the cycle time of each bread-making line?
E. What is the cycle time of both bread-making lines together?
F. What is the bottleneck task for the entire process?
G. What is the cycle time for the entire process?
H. What is the daily capacity of the bakery? (Assume an 8 hour
workday)
I. What is the throughput time (or manufacturing lead time) of the
entire process if
I. The bakery alternately begins batches between the two
mixers every 3/4 hour.
II. The bakery begins batches every 1 1/2 hours on both lines.
An automobile company assembles cars in a plant and purchases batteries from
a vendor in China. The average cost of each battery is $45. The automobile
company takes ownership of the batteries when they arrive at the plant. It takes
exactly 12 hours to make a car in the plant and the plant assembles 200 cars per
8-hour shift (currently the plant operates one shift per day). Each car uses one
battery. The company holds on average 8,000 batteries in raw material
inventory at the plant as a buffer.

1. Find the total number of batteries in the plant on average (in work-in-
process in the plant and in raw material inventory).
2. How much are the batteries worth?
3. How many days of supply are held in raw material inventory on average?
There are three questions in this problem: First, what is the total number of batteries in the plant for both work in
process and raw materials inventory. Second, how much are the batteries worth? And lastly, how many days of
supply are held in the raw material inventories on average?

1. So we know that there are two inventories namely work-in-process and raw material.

For the work-in-process, Little’s law can be straightly applied to look for the amount of work-in-process inventory:

Little’s law is Inventory = Throughput × Flow time OR (I = RT; I= avg. number of items in a system (units); R =
long run avg. throughput rate of system (units/time); T = avg. Time a unit in the system (time)

Where:

Throughput is the production rate of the plant, which is 200 cars per 8-hour shift or 25 cars per hour.

Since we use one battery per car, our throughput rate for the batteries is 25 per hour.

Flow time is 12 hours, so the work-in-process is Work-in-process inventory = 25 batteries per hour × 12 hours
= 300 batteries.

Given the data, the problem is that there are 8,000 batteries in the raw materials inventory;
Flow time is 12 hours, so the work-in-process is:

Work-in-process inventory = 25 batteries per hour × 12 hours = 300 batteries

Given from the problem that there are 8,000 batteries in raw materials inventory;

so the total number of batteries in the pipeline on average is computed by:

Total inventory = 8,000 + 300 = 8,300 batteries

2. The worth of this batteries is computed by 8,300 × $45 = $373,500.

3. Remember, that the days of supply in raw material inventory is always the same to the “Flow time” for a battery
in raw material inventory.

At this point, we need to assume that the batteries are used in the similar order when they reach the plant. So we
need to reorder our Little’s law formula to: Flow time = Inventory/Throughput

Therefore, flow time = 8,000 batteries / (200 batteries/day) = 40 days

This represents a 40-day supply of inventory.
Name Product Number Link
H. R. Anna Company UV0335-PDF-ENG https://hbsp.harvard.edu/tu/97a62401
Dooly County Doughnuts UV7397-PDF-ENG https://hbsp.harvard.edu/tu/4e2bac1c
A-CAT Corp.: Forecasting W13377-PDF-ENG https://hbsp.harvard.edu/tu/03e79224
Middletown General Hospital W91C33-PDF-ENG https://hbsp.harvard.edu/tu/ee5efe3e
Emergency Department Observation
Unit Analysis Exercise
 H. R. Anna Company

"Process Performance Measures."

Calculations required include capacity,
bottlenecks, utilization, the effects of setup
reduction, and batch size.
Stamping
• Setup time = 120 mins.
• Run time for A = 1 min.
• Run time for B = 0.5 min
• Batch size for A = 360 units
• Batch size for B = 720 units
• Total time for A = setup time + run time
120 mins. + 360 units * 1 mins./unit = 480 mins.
• Total time for B = 120 mins + 720 units* 0.5 mins. = 480 mins
• Total time for a batch of 360 = 480 + 480 = 960 mins.
• Total time available = 40 hrs. * 60 mins/hr. = 2400 mins.
2400 mins/week / 960 mins per batch /batch = 2.5 batches/week (maximum)
2.5 batches/week * 360 windows boxes/batch = 900 window boxes/week
Painting
• Setup time = 20 mins.
• Run time for A = 0.5 min.
• Run time for B = 1/6 min
• Batch size for A = 360 units
• Batch size for B = 720 units
• Total time for A = setup time + run time
20 mins. + 360 units * 0.5 mins./unit = 200 mins.
• Total time for B = 0 mins + 720 units* 1/6 mins. = 120 mins
• Total time for a batch of 360 = 200 + 120 = 320 mins.
• Total time available = 40 hrs. * 60 mins/hr. = 2400 mins.
2400 mins/week / 320 mins per batch /batch = 7.5 batches/week (maximum)
7.5 batches/week * 360 windows boxes/batch = 2700 window boxes/week
Assembly
• 27 mins/unit
• Total time available = 2400 mins/week *12 worker = 28,800 mins.
• 28,800 mins/27 mins/unit = 1067 window boxes/week

• Because demand (D) is only 800 boxes/week

• Utilization of stamping = 800/900 = 89%

• Utilization of painting = 800/2700 = 29.7%
• Utilization of assembly = 800/1067 = 74.97%
 Dooly County
• Q1. Calculate the capacities of each step of the doughnut-making process.
What is the bottleneck of the process? What is the overall capacity of the
process?
• Q2. How would your answers in question 1 change if the batch size was
doubled to 16Ib? You may assume that the cycle times and the setup times for
each step do not change due to the change in batch size.
• Q3. If Johnson decides to keep the batch size at 8Ib. And instead focus on
reducing the setup time for the extrusion process, by how much must he
reduce the setup time in order to meet his demand?
• Q4. If Johnson decides to invest in the set of 6 cutters, what setup time would
be needed for Johnson to meet demand with 6 cutters using the standard 8-
Ib. batch?
• Q5. What do you recommend Johnson do?
 Calculation part- data given
Stations # 1 2 3 4 5 6
description Batching Mixing Extruding Frying Glazing Customizing
Cycle time 2 2.5 18 90 45 3.5
Units Mins/batch Mins/batch Extrusion/ Seconds * Seconds* Seconds/two
cutter/mins doughnuts
Notes Constant Constant The number of No capacity No capacity
regardless of regardless of cutter is constraint constraints
batch size batch size. variable. Each
There are 2 batch requires
mixers a setup at the
extruder

Capacity = time available / production time per unit

Data given
each doughnut requires 2 oz. of dough
The std. batch consists of 8 lb of dough
There are 8 contiguous working hours/per day
The extrusion machine has to be set up before each batch is extruded. The setup takes 1.5 min/per batch
 Ans. 1
Q1. Calculate the capacities of each step of the doughnut-making process. What is the bottleneck of the process? What is the
overall capacity of the process?
• The first step is to determine the capacity of each of the stations.
Capacity @batching =
(480 mins/day/2 mins/batch) * (8 pounds/batch) *(16 ounces/pounds) *
(1 doughnut/2 ounces) = 15,360 dounghnuts/day

• Cycle time @extrusion = (1.5 mins/batch) +

[ (8 pounds/batch) * (16 ounces/pounds) *(1 doughnut/2 ounces)]
18 doughnuts/min./extruders * 3 extruders
Cycle time extrusion = 2.7 mins/batch

Capacity @ extrusion = (480 mins/day/2.7 mins/batch) * (8 pounds/batch) *(16

ounces/pounds) * (1 doughnut/2 ounces) = 11,440 dounghnuts/day
 Capacity calculation
Stations # 1 2 3 4 5 6
description Batching Mixing Extruding Frying Glazing Customizing
Cycle time 2 2.5 18 90 45 3.5
Units Mins/batch Mins/batch Extrusion/ Seconds * Seconds* Seconds/two
cutter/mins doughnuts
Notes Constant Constant The number of No capacity No capacity
regardless of regardless of cutter is constraint constraints
batch size batch size. variable. Each
There are 2 batch requires
mixers a setup at the
extruder
Capacity 15,360 24,576 11,440 Sufficient Sufficient 16,457
 Ans.2,
Q2. How would your answers in question 1 change if the batch size was doubled to 16Ib? You may assume that
the cycle times and the setup times for each step do not change due to the change in batch size.

• The first step is to determine the capacity of each of the stations.

Capacity @batching =
(480 mins/day/2 mins/batch) * (16 pounds/batch) *(16 ounces/pounds) *
(1 doughnut/2 ounces) = 30,720 dounghnuts/day

• Cycle time @extrusion = (1.5 mins/batch) +

[ (16 pounds/batch) * (16 ounces/pounds) *(1 doughnut/2 ounces)]
18 doughnuts/min./extruders * 3 extruders
Cycle time extrusion = 3.9 mins/batch
Capacity @ extrusion = (480 mins/day/3.9 mins/batch) * (16 pounds/batch) *(16
ounces/pounds) * (1 doughnut/2 ounces) = 15,874 dounghnuts/day
 Capacity calculation
Stations # 1 2 3 4 5 6
description Batching Mixing Extruding Frying Glazing Customizing
Cycle time 2 2.5 18 90 45 3.5
Units Mins/batch Mins/batch Extrusion/ Seconds * Seconds* Seconds/two
cutter/mins doughnuts
Notes Constant Constant The number of No capacity No capacity
regardless of regardless of cutter is constraint constraints
batch size batch size. variable. Each
There are 2 batch requires
mixers a setup at the
extruder
Capacity 30,720 49,152 15,874 Sufficient Sufficient 16,457
 Ans. 3, If Johnson decides to keep the batch size at 8Ib. And instead focus on reducing the setup time for
the extrusion process, by how much must he reduce the setup time in order to meet his demand?

• In order to solve this problem, we will use the formula for capacity listed in our case,
but this time we will set the capacity equal to the demand and solve for the cycle time
“C”, which will then allow us to solve for the setup time “S”. We are give that the
demand is 1100 dozen doughnuts per day, which is the equivalent of 13,200
doughnuts/day.

• Capacity @ extrusion = (480 mins/day/ “C” mins/batch) * (8 pounds/batch) * (16

ounces/pounds) * (1 doughnut/2 ounces)
13,200 (1100 *12) = (480 * 8 * 16 * 1) /(2 “C” mins/batch) = “C” = 2.3 mins.

Cycle time @ extrusion = “S” mins/batch + [ (8 pounds/ batch) * ( 16 ounces/pounds) *

(1 doughnut/ 2ounces) ] / (18 doughnuts/min/extruder * 3 extruder)
2.3 = “S” min/batch + 1.185
 Ans. 4, Q4. If Johnson decides to invest in the set of 6 cutters, what setup time would be needed for Johnson
to meet demand with 6 cutters using the standard 8-Ib. batch?

• The process for solving this question is exactly the same as the previous one,
except that this time there are 6 cutter instead of 3.
• Capacity @ extrusion = (480 mins/day/ “C” mins/batch) * (8 pounds/batch) *
(16 ounces/pounds) * (1 doughnut/2 ounces)
13,200 (1100 *12) = (480 * 8 * 16 * 1) /(2 “C” mins/batch) = “C” = 2.3 mins.

Cycle time @ extrusion = “S” mins/batch + [ (8 pounds/ batch) * ( 16

ounces/pounds) * (1 doughnut/ 2ounces) ] / (18 doughnuts/min/extruder * 6
extruder)
2.3 = “S” min/batch + 0.57
“S” = 1.73 mins.
Middletown General Hospital emergency
department observation unit analysis
exercise
1. In 2011, what was the average census of observation
patients in the hospital?
2. What was the average census of admitted patients in the
hospital?
3. Using the 2011 patient flows, how large should the ED
observation unit be to achieve a target utilization of 80%?