Capacity Planning Case Study

Capacity planning is done for the planning horizon. In this case the planning horizon mentioned as one year. Demand during the planning horizon is the basis for estimating capacity requirements.
First of all, let us compute the demand for one year as follows:
Number of working days in a year = 310 days
Number of cubicles to be fabricated in a day = 10 cubicles
Therefore Demand per year (D) = 310 x 10 = 3100 cubicles.
Standard time for fabricating one cubicle (SM) =120 minutes = 2 hours
Efficiency of the machine (EM) = 75% = 75/100 = 0.75
Capacity requirements (Machine) = (D X S_M)/E_M = (3100 X 2)/(0.75) = 8266.67 machine hours
Standard time required to paint 1 m2 of area (Sl) = 15 minutes
= (15/60) hour = 0.25 hour Square metres

For evaluating purposes, several models are used in capacity planning process. They are as follow:
• Present Value (PV) analysis: This model is used whenever the time value of capital investments and fund flows have to be considered while evaluating capacity planning strategies.
• Aggregate planning models: They are useful to examine the optimum use of existing resources in short term.
• Breakeven analysis: It is helpful in identifying minimum breakeven volumes corresponding to the projected costs and

• Operational performance based method: In this method, all the alternatives are analysed with respect to capacity utilisation factor and waiting time of the jobs.
Decision tree analysis “A decision tree is a schematic model in which different sequences and steps involved in a problem and the consequences of the decisions are systematically represented”.
Another definition of decision tree is as follows: “A Decision tree is a diagram that is used to structure and analyse a decision problem. It is a systematic sequential layout of decision points, alternatives and chance events.”
Chance event is an event that potentially leads to several different outcomes, but only one of which will definitely occur and the decision maker has no control over the occurrence of a particular outcome.
Decision trees are useful to evaluate alternative capacity choices on the basis of costs and benefits. It is especially applicable to long term capacity planning of facility expansion.
The three step approach to decision tree analysis is shown by figure