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Capacity Planning and Control
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Scalability
The ability of a production system to increase or decrease in size or volume in response to changes in the market demand. Essential for sustainable growth.
Match Capacity Strategy
An approach to match capacity increments with demand increments. Balances the risks and costs of lead and lag strategies but requires accurate demand forecasting.
Economies of Scale
The cost advantage obtained due to the expansion of production and reduction in costs per unit. Can lead to lower production costs but may require significant upfront investment.
Capacity Requirement Planning (CRP)
The process of determining the production capacity needed by an organization to meet changing demands for its products. Involves calculating the resources needed at particular times to fulfill the demand schedule.
Capacity Utilization Rate
The percentage of total capacity that is actually being used during production. High utilization rate indicates efficiency but can lead to increased wear and burnout.
Total Quality Management (TQM)
A management approach to long-term success through customer satisfaction that can improve the effective capacity of an organization through continuous process improvement.
Capacity Cushion
The amount of reserve capacity a company maintains to handle sudden demand surges. Provides flexibility but incurs costs.
Lag Capacity Strategy
A reactive approach to capacity planning where capacity is increased only after demand has been demonstrated. Minimizes risk of excess capacity but can lead to lost sales if demand is underestimated.
Six Sigma
A set of techniques and tools for process improvement, aiming for 3.4 defects per million opportunities. Can significantly increase capacity through process efficiency.
Bottleneck Analysis
The process of identifying the capacity constraint in a production system. Helps prioritize where capacity improvements are needed to maximize throughput.
Flexible Manufacturing System
A production method that is easily adaptable to changes in the quantity and type of product being manufactured. Reduces changeover time and can adapt to market changes effectively.
Safety Capacity
Extra capacity reserved to handle sudden increases in demand or temporary losses in production. Helps maintain service levels but involves holding cost.
Forecasting Demand
The process of predicting future demand for a product or service. Crucial for planning the right level of capacity.
Lead Capacity Strategy
A proactive approach to capacity planning where capacity is increased in anticipation of demand. Helps avoid lost sales but can lead to higher holding costs.
Theory of Constraints (TOC)
A methodology for identifying the most important limiting factor (constraint) that stands in the way of achieving a goal. Focuses on systematically improving that constraint until it is no longer the limiting factor.
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