Capacity Planning & Forecasting
What is your opinion on the questions below?
(1) How is capacity like the size of the hoses and tub in which water is flowing. Consider that there may be multiple tubs and hoses in a manufacturing business, as well as in other businesses. What role does customer demand play in capacity planning? Why is it necessary to do both short term and long term planning? What role does Line Balancing (bottleneck elimination) play in capacity. How are capacity, production, demand, and inventory related?
(1) How is capacity like the size of the hoses and tub in which water is flowing? Consider that there may be multiple tubs and hoses in a manufacturing business, as well as in other businesses.
- When we discuss capacity, we're discussing production capacity. Management is attempting to determine the total amount of capacity that can be handled to make a profit, without leaving money on the table (not fulfilling demand), and to the point where resources aren't strained, causing a potential excess expense. We can compare this to hoses going into the tub. If the water jams the hoses, it's going to create a bottleneck. The resources must be planned so that the water runs smoothly with no constraints (or as close to no ...
This solution extensively discusses capacity and the analogy to the tub in which water is flowing. The solution also discusses customer demand and its role in capacity planning, line balancing, bottlenecks, and inventory.