Liane Okdinawati: Strategic Capacity (Part 2)

Summary

In this video, the importance of capacity management in supply chain optimization is explored. It discusses three primary strategies for adjusting capacity in response to fluctuating demand: leading capacity strategy, lagging capacity strategy, and matching capacity strategy. Each strategy has its advantages and disadvantages, such as minimizing risk versus potentially increasing costs. The video also defines key terms like design capacity, effective capacity, and actual capacity, emphasizing the significance of operational efficiency and utilization in maximizing resource effectiveness. Viewers are invited to continue learning about capacity management and bottlenecks in future content.

Takeaways

• 😀 Capacity management optimizes supply chains by ensuring customer needs are met with minimal costs.
• 😀 Key factors in capacity planning include balancing product/service availability with demand to avoid shortages or excess capacity.
• 😀 The 'Lead Capacity Strategy' increases production before demand peaks, minimizing risks but potentially leading to excess inventory and higher costs.
• 😀 The 'Lag Capacity Strategy' increases capacity only after demand has been established, avoiding over-investment but risking missed opportunities.
• 😀 The 'Match Capacity Strategy' adjusts capacity incrementally as demand grows, reducing risks of overcapacity or undercapacity but possibly facing fluctuations.
• 😀 Capacity can be classified into three categories: Design Capacity, Effective Capacity, and Actual Capacity.
• 😀 Design Capacity refers to the theoretical maximum output under ideal conditions.
• 😀 Effective Capacity considers real-world operational losses such as downtime, inefficiencies, and limitations.
• 😀 Actual Capacity is the real-world output, influenced by factors like absenteeism or equipment issues.
• 😀 Efficiency and capacity utilization are critical for ensuring resources are used effectively and minimizing waste.

Q & A

What is the primary focus of capacity management in operations?

The primary focus of capacity management is to ensure that a company can supply customers with the desired products or services in a timely manner while minimizing costs.

What are the two main consequences of having too little capacity?

Having too little capacity can lead to missed opportunities and dissatisfied customers.

What is one major downside of operating with excess capacity?

Operating with excess capacity results in higher operational costs for the company.

What are the three basic capacity strategies mentioned in the script?

The three basic capacity strategies are lead capacity strategy, lag capacity strategy, and match capacity strategy.

How does the lead capacity strategy work?

The lead capacity strategy involves increasing production capacity in anticipation of future demand to minimize risk.

What is the benefit of the lag capacity strategy?

The lag capacity strategy benefits companies by allowing them to invest in capacity only after demand has been confirmed, leading to more stable expenditures.

What does the match capacity strategy aim to achieve?

The match capacity strategy aims to invest in capacity in small increments that parallel the increase in demand, helping to balance overcapacity and undercapacity.

What are the three categories of capacity defined in the transcript?

The three categories of capacity are design capacity, effective capacity, and actual capacity.

What does 'design capacity' refer to?

Design capacity refers to the ideal output a process can achieve under perfect conditions, representing maximum production potential.

How is capacity utilization measured?

Capacity utilization is measured as the percentage of available capacity that is used, indicating the efficiency of resource usage.