Capacity Management CH 11

A common method used to increase capacity with a lag strategy is

A and B

learning curve theory

A body of theory based on applied statistics which suggests that productivity levels can improve at a predictable rate as people and even systems "learn" to do tasks more efficiently.

Lead Capacity Strategy

A capacity strategy in which capacity is added in anticipation of demand.

Lag Capacity Strategy

A capacity strategy in which capacity is added only after demand has materialized.

Match Capacity Strategy

A capacity strategy that strikes a balance between the lead and lag capacity strategies by avoiding periods of high under or overutilization.

Which of the following is not one of the four principles of bottleneck management?

Bottlenecks should be moved to the end of the system process

Which of the following represents a common way to manage capacity in the service sector?

Changes in staffing levels

Methods of Evaluating Capacity Alternatives

Expected value, decision trees, learning curves

decision tree

Is a visual tool that decision makes use to evaluate capacity decisions.

Capacity Strategies

Lead, lag, match

The process time of a system is equivalent to the

Process time of the bottleneck

Consider a production line with five stations. Station 1 can produce a unit in 9 minutes. Station 2 can produce a unit in 10 minutes. Station 3 has two identical machines, each of which can process a unit in 12 minutes (each unit only needs to be processed on one of the two machines. Station 4 can produce a unit in 5 minutes. Station 5 can produce a unit in 8 minutes. Which station is the bottleneck station?

Station 2

Define capacity

The capability of a worker, a machine, a work center, a plant or an organization to produce output in a time period.

Expected value

The same throughput with lowest cost or the same cost with the best revenues.

Changes in capacity may lead, lag, or straddle the demand. (T/F)

True

The theory of constraints is a body of knowledge that deals with anything that limits an organization's ability to achieve its goals. (T/F)

True

If demand exceeds capacity at a new facility, an organization can use which of the following to move demand to an existing facility?

aggressive marketing

A fabrication company wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $21 per unit. If the estimated output is 5000 units, which machine should be purchased? a. machine A b. machine B c. either machine A or machine B d. no purchase because neither machine yields a profit at that volume e. purchase both machines since they are both profitable

d. no purchase because neither machine yields a profit at that volume

Adding a complementary product to what is currently being produced is a demand management strategy used when

the existing product has seasonal or cyclical demand