Week 2 Handout

Introduction to Operations Management - I
B Mahadevan
Week 2
Capacity Issues in Operations
Section 2, Sub-section 2.1
All Rights Reserved, Indian Institute of Management Bangalore

B Mahadevan
Module 1 Highlights
Week 2
Three broad flow patterns in the overall configuration of manufacturing

& service organizations
Streamlined flow
Intermittent flow
Jumbled flow
Complexity of Operations Management varies on account of these
differences
It is important to choose appropriate measures for operations so that
we can increase the propensity to succeed in the market

B Mahadevan
Options for Improving Operations

Week 2
Improving the operations requires addressing some of the core aspects of

operations.
Capacity in the system
Productivity Initiatives
Supply Chain choices that we need to make
Quality Assurance in Operations

B Mahadevan
Week 2
The Notion of Capacity in organizations

B Mahadevan
Some examples of capacity in organizations

Week 2
Associated Cements Corporation (ACC) has an installed capacity of 17.65

million tons.
Bharat Petroleum Corporation Limited (BPCL) has a refining capacity of
260,000 barrels of crude every day.
Recently Tata Consultancy Services (TCS), India's leading software firm
announced that it will double its capacity at its largest delivery center,
Hyderabad, with an addition of 28,000 employees over a period of three
to four years.

B Mahadevan
Importance of Capacity
Week 2
Capacity and its relationship to competitiveness of business firms.

In the Executive health check-up unit in a multi-specialty hospital
many people wait in the system for their turn and some may choose to
post-pone or abandon the idea.
Firms find it difficult to deliver products and services on the promised
date simply because of a huge backlog in customer orders.
In a manufacturing shop floor components pile up in front of some
machines while some other machines downstream starve for want of
components for processing.

B Mahadevan
Importance of Capacity (cont.)

Week 2
When capacity choices have not been made appropriately it can result
in:
Market share loss
Loss of goodwill
Customer dissatisfaction etc.

B Mahadevan
Definition of Capacity
Week 2
Capacity directly relates to the quantum of these resources that an operating

system has:
In the case of a garment manufacturer the number of cutting and sewing
machines, the number of people employed in the shop for production,
quality assurance etc. will all determine the capacity of the system.
In a restaurant the number of dining spaces, the capacity of various
machines used for cooking, the number of servers and chefs, availability of
utensils, plates, cups etc. will all determine the capacity in the system.
It also denotes the maximum output of products and services one can
achieve using these resources.

B Mahadevan
Measuring Capacity
Week 2
Capacity is measured in two ways in any organization:

On the basis of output: An automobile manufacturer such as Toyota will
measure capacity on the basis of daily production of vehicles, say
20,000 vehicles per day.
In terms of input resources: A software service provider or a
management consulting firm can measure capacity in terms of the
number of professionals that they have.

B Mahadevan
Week 2
Process Design & Capacity Analysis

B Mahadevan
Capacity Planning Issues

Week 2
What is of interest to us are the following:

How do these multiple resources in an operating system eventually
determine the capacity of the system?
How do they affect the outcomes and customer oriented measures such
as output, and delivery promises?
How to make an assessment of the capacity in my organization?
What kind of data are required in order to estimate the capacity in an
organization?

Capacity Planning Issues B Mahadevan

Week 2
A Healthcare example
Issues affecting capacity in a typical hospital:

Doctors, para-medical staff who are involved in the treatment of the patients.
The hospital uses certain equipments, diagnostic gadgets such as scanners.
The hospital may also have a certain number of waiting spaces, operating
theaters etc.
Given a certain number of each of these resources,
How it will affect the outcome in terms patient waiting, residence time in the
hospital?
These are determined by the design of the process deployed to deliver health
care.

B Mahadevan
Process Analysis
Week 2
Process Analysis is a method by which:

We can incorporate details pertaining to resources and other process
related data.
Use some logic to analyze these aspects pertaining to the capacity in the
system.

Process Analysis B Mahadevan

Week 2
Building Blocks
1. Activities: These are the building blocks that make up a process let us
look at one manufacturing and one service example to understand this.
2. Technological & Logical Constraints: Dictates the order in which the
steps are carried out. This is important because only then we will know
the flow of activities.

Activities & Process Constraints: B Mahadevan

Week 2
The Case of Shirt Manufacturing
Cut
Collar Cuff Sleeve Front Back Shoulder
Attach Co Attach S Sew Hem
Inspect Iron Fold & Pack

Activities & Process Constraints: B Mahadevan

Week 2
The Case of Insurance Services
Review Under Policy

Rating
Request Writing Writing


Week 2
Building Blocks
3. Process time for each activity: This is going to give us an idea of the
extent to which resources are consumed in each activity.
4. Resources available: May include the skills of labor, types of
machines, special storages, fixtures, other tools, computers etc.

Process Times & Resource Availability: B Mahadevan

Week 2
The Case of Shirt Manufacturing

No. Operation Process time/shirt (min)
1 Cutting 1.25
2 Make collar 1.48
3 Make cuffs 0.50 For example, we may have 3 cutting
4 Make Sleeves 2.30 machines, 12 sewing machines, 7 labor in
5 Make front 1.41 each stage of stitching the shirt, 6
inspector and so on
6 Make back 2.45
7 Join Shoulders 0.33
8 Attach collar 1.45
9 Attach Sleeves 1.38
10 Sew side seam 1.45
11 Hem Bottom 1.42
12 Inspect 2.35
13 Iron 0.48
14 Fold, Package 1.45

Process Times & Resource Availability: B Mahadevan

Week 2
The Case of Insurance Services

Number of people
for under writing
(4) (2) (6) (5)

Review Under Policy
Rating
Request Writing Writing
35 mins 26 mins 70 mins 45 mins

Process Analysis Fundamentals B Mahadevan

Week 2
Summary
The basic information required for process and capacity analysis:

Activities that make up a process
Technological & Logical Constraints
Process Times
Resources available at each stage of processing


Week 2
Toy Manufacturing Example

A toy manufacturer receives crafted toys from local carpenters and performs
the final operations before stocking it for sale. The process consists of five
steps.
Step 1: Arrange a set of four toys in a pallet (8 minutes).
Step 2: The pallet moves to the next station where the toys are pre-treated (12
Minutes).
Step 3: Send it to the spray-painting chamber, where it is painted as per the
specifications (there is one spray-painting machine) (20 minutes).
Step 4: It is left in an open area for drying (10 minutes).
Step 5: The toys are inspected and packed (5 minutes).
Source: Mahadevan , B. (2015), Operations Management: Theory & Practice, Pearson Education, 3rd Edition, pp 186 189.

Week 2
Toy Manufacturing Example (Process Flow Diagram)
Inspect &
Prepare Pre-treat Paint Dry
Pack
5 mins
55 minutes
Source: Mahadevan, B. (2015), Operations Management: Theory & Practice, Pearson Education, 3rd Edition, pp 186.


Week 2
Throughput or Lead Time
The measure 55 minutes is the throughput time or manufacturing lead

time for the process.
There is no way we will be able to roll out a batch of toys before 55
minutes from the time we started.
This is the response time for a rush order assuming we have nothing in
stock.
organizations need to know this number so that they can make
meaningful promise to the customer as to how soon an emergency
requirement could be met.


Week 2
Toy Manufacturing Example (A graphical representation)

Prepare
0-8 20-28 40-48
8 mins
Pre-treat
8-20 28-40 48-60
12 mins
Paint
20 - 40 40 - 60 60 - 80
20 mins
Dry
40-50 60-70 80-90
10 mins
Inspect & Pack

5 mins 50-55 70-75 90-95
Every pallet of toys come out exactly in an interval of 20 minutes, which is the cycle time for the process.

Week 2
Cycle Time & Bottleneck
The measure 20 minutes is known as cycle time.

If we manufacture these toys continuously, we will notice that a batch of
toys will come out of the system every 20 minutes.
The stage of processing which determines the cycle time controls the
output from the system.
In our example, the painting station dictates the output from the system.
This is known as the bottleneck in the system.


Week 2
Toy Manufacturing Example (Summary of key measures)
Inspect &
Pack
5 mins
The throughput time for the process is 55 minutes.

Cycle time is 20 minutes. The implication of this is that when the process operates in a
continuous manner, a pallet of finished toys come out every 20 minutes.
The spray painting is the bottleneck in the process.


Week 2
Some more measures of Interest
What is the daily output of this toy manufacturing process if they have 8
hours working schedule?
What is the utilization of each work station?
What is the idle time in each work station?


Week 2
Toy Manufacturing Example (Station Output)
Inspect &
Pack
5 mins
7.5 pallets/hr 5 pallets/hr 3 pallets/hr Not relevant 12 pallets/hr
The capacity calculation at Dry is not meaningful.

This is called a non-capacity constrained resource.


Week 2
Toy Manufacturing Example (Process Utilizations)
Inspect &
Pack
5 mins
7.5 pallets/hour 5 pallets/hour 3 pallets/hour Not relevant 12 pallets/hour
Station Station Output per Line Output per Utilization

hour hour
Prepare 7.5 3.0 3.0/7.5 = 40%
Pre-Treat 5.0 3.0 3.0/5.0 = 60%
Paint 3.0 3.0 3.0/3.0 = 100%
Dry Not Relevant
Inspect & Pack 12.0 3.0 3.0/12.0 = 25%


Week 2
Toy Manufacturing Example (Station Idle Times)
Inspect &
Pack
5 mins
7.5 pallets/hour 5 pallets/hour 3 pallets/hour Not relevant 12 pallets/hour
Station Cycle Time (min) Station Process Idle Time

Time (min) (min)
Prepare 20 8 12
Pre-Treat 20 12 8
Paint 20 20 0
Dry Not Relevant
Inspect & Pack 20 5 15

B Mahadevan
Week 2
Capacity Estimation & Debottlenecking


Week 2
Toy Manufacturing Example (Additional Information)
Let us include some more information pertaining to our toy manufacturing

example.
The Preparation stage has two parts to it:
Part 1 is to set up the pallets, which takes 4 minutes.
Part 2 is arranging a set of four toys into each pallet, which takes 4 minutes
per pallet.
Further, the painting booth can hold up to 3 pallets at a time.


Week 2
Toy Manufacturing Example (Options for Increasing the output)
There are two choices to improve the output from the system:
Adding more units of capacity at the stations to increase the output.
Increasing the number of pallets processed at a time from one up to a
maximum of three (because the paint booth can accommodate that
many).


Week 2
Toy Manufacturing Example (Impact of 2 painting booths)
Existing Scenario: Batch Size of the Process = 1 pallet, 1 painting booth
Prepare Pre-treat Paint Inspect & Pack

(8 mins) (12 mins) (20 mins) Dry (5 mins)
7.5 pallets/hour 5 pallets/hour 3 pallets/hour 12 pallets/hour
Scenario 1: Batch Size of the Process = 1 pallet, 2 painting units

Paint
(20 mins)
Prepare Pre-treat 3 pallets/hour Inspect & Pack
(8 mins) (12 mins) Dry (5 mins)
7.5 pallets/hour 5 pallets/hour Paint 12 pallets/hour
(20 mins)
3 pallets/hour


Week 2
Impact of Debottlenecking option
The output did not double when we added the second painting booth. In
fact the line output went up from 3 to 5 only.
Bottleneck shifted out of Painting. Pre-treatment now becomes the
bottleneck. This is known as wandering bottleneck.
This has important implication in investment justification when new
capacity is added at a bottleneck station.
We may not be able to calculate the net increase in production unless
we locate where the new bottleneck is.


Week 2
Toy Manufacturing Example (Impact of Policy Changes)
It is also important to know that certain operating policies can help us

alter the output from the system.
In our example, it is possible to accommodate up to 3 batches of pallets
in the paint booth.
Therefore, we shall increase the pallets processed at the painting booth
and see its impact on output.


Week 2
Toy Manufacturing Example (Impact of Policy Changes)

Existing Scenario: Batch Size of the Process = 1 pallet

Scenario 1: Batch Size of the Process = 2 pallets
Prepare
Pre-treat Paint Inspect & Pack
(4+ (2*4) = Dry
(12 mins) (20 mins) (5 mins)
12 mins)
5 pallets/hour 6 pallets/hour 12 pallets/hour
10 pallets/hour
Scenario 2: Batch Size of the Process = 3 pallets
Prepare Inspect & Pack

Pre-treat Paint
(4+ (3*4) = Dry (5 mins)
(12 mins) (20 mins)
16 mins) 12 pallets/hour
5 pallets/hour 9 pallets/hour
11.25 pallets/hour
Source: Mahadevan, B. (2015), Operations Management: Theory & Practice, Pearson Education, 3rd Edition, pp 188. All Rights Reserved, Indian Institute of Management Bangalore

Week 2
Impact of Policy Change Option
The bottleneck shifted out of Painting. Pre-treatment now becomes the

bottleneck.
By changing the operating policy at the process, we have been able to
increase the output from the line from 3 pallets per hour to 5 pallets
per hour.


Week 2
Toy Manufacturing Example (Hybrid Option)
Hybrid Option: We can simultaneously implement operational policy

change and capacity addition alternatives
We shall add one more pre-treatment unit and,
Also implement a policy of processing three pallets at a time


Week 2
Toy Manufacturing Example (Hybrid Option)
Existing Scenario: Batch Size of the Process = 1 pallet, 1 painting booth

Scenario 1: Batch Size of the Process = 3 pallets, 2 pre-treatment units

Pre-treat
(12 mins)
5 pallets/hour
Prepare Inspect & Pack
(4+ (3*4) =
Paint
16 mins) (20 mins) Dry (5 mins)
11.25 pallets/hour Pre-treat 9 pallets/hour 12 pallets/hour
(12 mins)
5 pallets/hour

Week 2
Toy Manufacturing Example (Summary of Findings)

When we added one more painting booth, the capacity went up from 3
pallets per hour to 5 pallets per hour.
We could have achieved the same increase in output by avoiding the
capacity investment and instead changing the operating policy.
When we used a combination of both of these, the output could indeed
go up to 9 pallets per hour.


Week 2
Toy Manufacturing Example (Key Inferences)
The above examples point to us certain important issues related to

capacity improvement & addressing bottlenecks.
Capacity is not increased merely by adding more units at the
bottleneck stage.
Process choices can also contribute to improving the output.
A judicious combination can provide innovative options for
organizations to increase their output at least cost of capacity addition.

B Mahadevan
Week 2
Capacity Estimation (Multiple Jobs)

Process Analysis in the case of Multiple Jobs B Mahadevan

Week 2
A Health Diagnostics Example (cont.)
Suppose there is a health diagnostic center which provides services to the

arriving patients.
Three types of patients arrive and they undergo a preliminary investigation before
further tests are done.
There are dedicated preliminary investigation facilities available for each of the
three types of customers.
Patient Type 1 compulsorily have to undergo tests in the Coronary Unit and the
Radiology departments in the diagnostics center in that order.
Patient Type 2 generally require some tests in the Radiology Department. After
Preliminary Investigation, 20% of them will be asked to go the Coronary Unit first for
some tests and from there they will proceed to the Radiology Department.
Patient Type 3 undergo Gynecology related tests.

Week 2
A Health Diagnostics Example

After all tests are done, all the three types of patients visit a common facility
in which a pool of doctors is available.
One of the doctors meets with the patient, reviews the reports and provides
further advice wherever required.
Irrespective of the patient type, they meet any of the available doctor for this
final review.
Based on some historical trends, the diagnostic center expects the potential
daily arrivals of the three patient types as follows:
Patient Type 1: 100
Patient Type 2: 200
Patient Type 3: 220

Week 2
A Health Diagnostics Example (Process Details)

Process Time No. of Resources
Department
(Minutes) Available
Preliminary Investigation
(Patient Type 1)
20 5
(Patient Type 2)
15 6
(Patient Type 3)
10 5
Coronary Unit 30 5
Radiology Department 10 6
Gynecology Department 20 8
Final Review 10 10


Week 2
A Health Diagnostics Example (Process Flow Diagram)
Preliminary Coronary Radiology Final

Investigation (P1) Unit Unit Review
20%
80%
Preliminary
Investigation (P2)
Preliminary Gynecology
Investigation (P3) Unit
Patient (Type 1)
Patient (Type 2)
Patient (Type 3)


Week 2
A Health Diagnostics Example (Capacity Calculations)

Capacity Potential
Number of Demand Actual
Process per hour Daily
Process Step Resources at the Station
Time (min) per available Station
Available Station Output
resource Output
(P1) 20 3 5 120 100 100
(P2) 15 4 6 192 200 192
(P3) 10 6 5 240 220 220
Coronary Unit 30 2 5 80 138.4 80
Radiology Department 10 6 6 288 233.6 233.6
Gynecology Department 20 3 8 192 220 192
Final Review 10 6 10 480 425.6 425.6


Week 2
A Health Diagnostics Example (Inferences)
Even though 520 patients can potentially make use of the diagnostic
center services, the center can handle only 425.60 patients every day.
There is a foregone opportunity on account of bottlenecks in the
system.
Coronary Unit is a bottleneck in the system as it controls the output of type 1 and
type 2 patients coming into the system.
Therefore, efforts to improve the system output will invariably need some
capacity additions in this stage of the processing.
The gynecology department constraints the flow of type 3 patients in the system
as it is the bottleneck in the current state of the process.


Week 2
A Health Diagnostics Example (Output 6 Coronary Units)

Capacity Potential
resource Output
(P1) 20 3 5 120 100 100
(P2) 15 4 6 192 200 192
(P3) 10 6 5 240 220 220
Coronary Unit 30 2 6 96 138.4 96
Radiology Department 10 6 6 288 249.6 249.6
Final Review 10 6 10 480 441.60 441.60


Week 2
A Health Diagnostics Example (Output 9 Coronary Units)

Capacity Potential
resource Output
(P1) 20 3 5 120 100 100
(P2) 15 4 6 192 200 192
(P3) 10 6 5 240 220 220
Coronary Unit 30 2 9 144 138.4 138.4
Radiology Department 10 6 6 288 292 288.0
Final Review 10 6 10 480 480.00 480.00


Week 2
A Health Diagnostics Example (Inferences)
As more number of units are added to the coronary unit the wandering
bottleneck phenomenon sets in.
At a capacity of 9 in the coronary units, the bottleneck shifts to
radiology department for the type 1 and type 2 patients.
The output at the coronary unit can be increased not merely by adding
more units.
There may be other process choices and improvement opportunities
which may bring down the process time and thereby increase the
capacity.

B Mahadevan
Week 2
Capacity Estimation (Worker Paced Systems)

B Mahadevan
Capacity Estimation (Worker Paced Systems)

Week 2
Several situations in real life where the capacity decisions are made on
the basis of certain targeted output from the operating system.
Such systems are predominantly worker paced.
Typically involve final assembly, finishing operations and delivery of the
product or service to the customer.

Capacity Estimation (Worker Paced Systems) B Mahadevan

Week 2
Examples
Maruti Suzuki Limited, Indias largest manufacturer of passenger cars produces
about 1.35 million cars a year.
Suppose Maruti works for 15 hours a day and 25 days a month.
This would mean that every 12 seconds one car must roll out of its final assembly shop.
Consider a fast food joint such as McDonalds or Hotel Saravana Bhavan.
During peak hours, the number of customers that they need to serve is say 40 per hour.
This would translate into a per customer serving time of 90 seconds.
In both the above examples the operations must be aligned to this aspect.
The number of workers required & the process design are determined on the
basis of the targeted output from the system.


Week 2
Fast Food Joint Example
The food delivery section of a fast food joint needs to be designed for a
targeted daily service rate of 320 customer orders.
The restaurant works for 8 hours. Irrespective of variations in the customer
order, the delivery of the food as per customer order follows a standardized
process.
With this information we need to design the process and address capacity
related issues for meeting the targeted daily requirement of 320 customer
orders.


Week 2
Fast Food Joint Example (Activities & Process Times)
It consists of 8 steps, the details and process times are as follows:

1. Deconstruct the order and identify the ingredients for the order 70 seconds.
2. Prepare the main dish as per the order 80 seconds.
3. Prepare the topping/additives for the main dish 40 seconds.
4. Obtain Delivery tray 20 seconds.
5. Prepare the beverages as per the order 40 seconds.
6. Microwave the main dish along with toppings 30 seconds.
7. Dish out side dishes for the menu 50 seconds.
8. Verify and Assemble the order and handover 50 seconds.


Week 2
Fast Food Joint Example (Precedence Constraints)

Prepare
Main Dish
Micro-wave
Main Dish
Topping/
Additives
Assemble
Identify Add Verify
Ingredients Side Dishes Deliver
Delivery
Tray
Prepare
Beverages


Week 2
Fast Food Joint Example (Targeted Cycle Time)


Week 2
Fast Food Joint Example (Minimum No. of workstations required)


Week 2
Fast Food Joint Example (Design of Workstations)

Main Additives & Delivery Micro- Side
Prepare Beverage Deliver
Dish Toppings Tray wave Dishes
70 80 40 20 40 30 50 50
Station 1 2 3 4 5
Prepare Main Dish Additives & Beverage, Delivery
Tasks Toppings, Side Dishes Tray, Deliver
Micro-wave
Process 70 80 40 + 30 = 40 + 50 = 20 + 50 =
Time 70 90 70
Idle Time 20 10 20 0 20
Utilization 70/90 = 80/90 = 77.78% 100% 77.78%
77.78% 88.89%


Week 2
Fast Food Joint Example (Inferences)
The most important requirement is that the cycle time of the station
should not exceed 90 seconds.
As long as we are able to accommodate precedence constraints, we can
group the activities in any fashion.
We may want to use practical considerations for grouping the tasks.
This will have implications for skill level, training, the extent of
imbalance across stations etc.


Week 2
Fast Food Joint Example (Impact of increased Demand)
Suppose if the daily demand is likely to increase to 400 from the current
level of 320.
8 60 60
= = 72
400
380
. = = 5.27 6
72


Week 2
Fast Food Joint Example (Impact of increased Demand)
It is not possible to meet the demand with 5 work stations.

We need to add a sixth workstation and accordingly redistribute the
tasks among the six work stations.
Main dish has a process time of 80 seconds. The only way to bring down
this process time below 72 is to duplicate one more unit at this
workstation.
All these changes will reduce the average resource utilization but we will
be able to meet the targeted daily demand of 400.

B Mahadevan
Week 2
Other Issues in Capacity Planning

Capacity Planning under uncertainty B Mahadevan

Week 2
Use of Queueing Theory

In all the examples that we have seen so far demand and process
times were assumed to be known and deterministic.
However, in reality, both these information tend to be varying and
quite uncertain. The question of interest is how will this impact the
capacity?
One way to address this is to incorporate these idiosyncrasies into our
analysis and then compute measures such a delays, waiting times,
utilization etc.
Queueing Theory or Waiting Line Models provide a structured
approach to address capacity issues under such conditions.


Week 2
Components of a Queueing System
Population
Arrivals
Waiting Line Server Served
customers
This is a single server queue.



Week 2
Relevant Measures in Queueing Systems
Mean Arrival rate

Mean Service rate
Utilization of the Server
Lq Average number of customers in the waiting line
(Length of the Queue)
Single server Queue L =
(Exponential service time) q


Week 2
Some Managerial Implications

The formula for the length of the queue implies the following:
As the difference between the service rate and arrival rate narrows
down, the queue can build longer and longer.
Since utilization is a ratio of these two numbers, at higher utilization the
queue gets longer.
When the service rate and the arrival rate are the same, the utilization is
100% and the queue length becomes infinite.
This means that when we deal with uncertainties in demand and service
times we should not design a process for 100% utilization of resources.


Week 2
Effect of reducing uncertainty

Suppose we were able to automate the step in the process and reduce
the variability in service time to zero.
The mean remains at , but the standard deviation is zero.
Single server Queue
Lq =
Deterministic service time
The queue length has halved compared to the earlier case. This greatly
motivates us to put efforts in process variability.
Automation, better training, unambiguous policies, clear authorization,
availability of right information and well-designed processes are ways
by which we can reduce variability.


Week 2
Some Managerial Implications
In real life situations involving complex network of queues, the following

two results are invariable:
Higher utilization leads to delays and huge pile ups.
It pays to invest in reducing process time variability.


Week 2
Flexibility/Utilization Trade-off
High utilization
Low cost of operation
Operational Performance Poor service
Measures
Low utilization
High cost of operation
Good service
0 100%
Utilization

Week 2
Cost of the service
Expected costs
Total cost
Service
cost
Waiting Costs
Level of service

B Mahadevan
Other Alternatives for increasing the capacity

Week 2
Let us consider a service system such as a restaurant:

Peak Demand: Between 7.30 am and 9.30 am
Non-Peak Demand: Between 3.00 pm and 5.00 pm
Most service systems have peak hour and non-peak hour zones of
demand.
How do we address capacity requirements during peak hours?

Increasing the capacity in the system B Mahadevan

Week 2
Other alternatives (Product Portfolio Choices)
Narrow the service portfolio offered to the customers

If we offer too many varieties, we lose capacity in changing over from one
variety to the other, setting up the system for a new variety etc.
Shift the excess demand from the peak zone to a non-peak zone.
Introduce capacity reservation system & prior appointments such as
table reservations and doctor appointments.
Use pricing strategies to address capacity problems.
Offering discounts will help shift the demand from peak to non-peak.
Offering premium pricing for the peak hour capacity will also adjust the
demand.


Week 2
Other alternatives (Multi-skilling)

Have multi-skilling of the work force so that one can utilize a
flexible work force in various stages of the service delivery to
address the demand.
During the peak hour time, the order taking personnel can also
double up as severs by addressing certain service requirements.
In the kitchen area multi-skilled flexible workforce can address the
surge in demand more effectively.
One can also hire temporary workers to increase capacity.
This will be limited to semi-skilled and unskilled trade.


Week 2
Other alternatives
Use alternative planning premises to address capacity issues during

peak-hour.
There are three planning premises normally used in businesses.
Made-to-Order (MTO)
Made-to-Stock (MTS)
Assemble-to-Order (ATO)
In the case of MTS the requirement is fulfilled using what is already
available in inventory as semi-configured.


Week 2
Other alternatives (Planning Modifications)
In most cases, services cannot be inventoried. Therefore MTS has a

limited use in service businesses.
However, services make use of ATO.
A planning premise in which part of the service is pre-processed.
The preparatory work is done during the non-peak zone that precedes the
peak hour.
Capacity required for delivering service during peak hour is minimized.
As soon as the customer arrives in the system, the balance work is done
and service is delivered faster.


Week 2
Other alternatives (Planning Modifications)
During non-peak hours a service system can resort to other process

choices and offerings. These include:
MTO method of handling service requests
specialized work force
Wide service portfolio

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Introduction to Operations Management - I

Capacity Issues in Operations

Section 2, Sub-section 2.1

All Rights Reserved, Indian Institute of Management Bangalore

Three broad flow patterns in the overall configuration of manufacturing

All Rights Reserved, Indian Institute of Management Bangalore

Options for Improving Operations

Improving the operations requires addressing some of the core aspects of

All Rights Reserved, Indian Institute of Management Bangalore

The Notion of Capacity in organizations

Section 2, Sub-section 2.2

All Rights Reserved, Indian Institute of Management Bangalore

Some examples of capacity in organizations

Associated Cements Corporation (ACC) has an installed capacity of 17.65

All Rights Reserved, Indian Institute of Management Bangalore

Capacity and its relationship to competitiveness of business firms.

All Rights Reserved, Indian Institute of Management Bangalore

Importance of Capacity (cont.)

All Rights Reserved, Indian Institute of Management Bangalore

Capacity directly relates to the quantum of these resources that an operating

All Rights Reserved, Indian Institute of Management Bangalore

Capacity is measured in two ways in any organization:

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Process Design & Capacity Analysis

Section 2, Sub-section 2.3

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Capacity Planning Issues

What is of interest to us are the following:

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Capacity Planning Issues B Mahadevan

Issues affecting capacity in a typical hospital:

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Process Analysis is a method by which:

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Process Analysis B Mahadevan

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Activities & Process Constraints: B Mahadevan

The Case of Shirt Manufacturing

Collar Cuff Sleeve Front Back Shoulder

Attach Co Attach S Sew Hem

Inspect Iron Fold & Pack

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Activities & Process Constraints: B Mahadevan

The Case of Insurance Services

Review Under Policy

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Process Analysis B Mahadevan

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Process Times & Resource Availability: B Mahadevan

The Case of Shirt Manufacturing

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Process Times & Resource Availability: B Mahadevan

The Case of Insurance Services

(4) (2) (6) (5)

35 mins 26 mins 70 mins 45 mins

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Process Analysis Fundamentals B Mahadevan

The basic information required for process and capacity analysis:

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Process Analysis B Mahadevan

Toy Manufacturing Example

Process Analysis B Mahadevan

Toy Manufacturing Example (Process Flow Diagram)