NNW INSDUSTRY

CAPACITY PLANNING WEBINAR

September 30, 2021 (10:30AM –1:30 PM)
ENGR. MA. CHERRY CORPUZ ENGR. MICHELLE BANANIA
Host Host
New Normal Warehouse Industry
BELIEVING, ACHIEVING, AND SUCCEEDING
FOR A BETTER FUTURE,
House Rules
o Respect and professionalism are expected to be observed.
o This webinar will be video and audio-recorded and will be posted.
o Putting your camera on during the discussion will be help on your
discretion.
o Please turn off your microphones for ease of communication.
o You may use chat box for your questions or any feedback, and the
moderator will relay them to the speaker during the allotted time.
OPENING PRAYER

HD
National Anthem

HD
OPENING REMARKS

ENGR. JOHN RYAN DAYAT

NNW INDUSTRY CEO
ICE BREAKER
 C
Y C A A I T P
C A P A C I T Y
U T N

T A L O Z I I I
U T I L I Z A T I O N
 TOPIC OUTLINE

CAPACITY

BOTTLENECK Capacity AND THE

ANALYSIS
o Design and Effective
THEORY
o Capacity OF CONTRAINTS
and Strategy
o Capacity Considerations
o Managing Demand
o Demand and Capacity Management in the Service
Sector
ENGR. MA. CHERRY CORPUS
CHIEF SUPPLY CHAIN OFFICER
 What is Capacity?
• The throughput, or the number of
units a facility can hold, receive,
store, or produce in a period of time.
• Determines fixed costs.
• Determines if demand will be
satisfied.
x
Capacity Planning
is the process of establishing the output rate that
may be needed at a facility
 PLANNING OVER A TIME HORIZON

Three time horizons. Long-range Add facilities

• Long-range planning planning

Add long lead equipment
*
• Intermediate-range Intermediate- Subcontract

planning range
planning
Add equipment
Add shifts
Add personnel
Build or use inventory

• Short-range planning
Short-range Schedule jobs

planning * Schedule personnel

Allocate Machinery

Modify Capacity Use Capacity

* Limited Options exist

 DESIGN AND EFFECTIVE CAPACITY

DESIGN CAPACITY
• The theoretical maximum output
of a system in a given period
under ideal conditions.
• Normally expressed as a rate.
DESIGN AND EFFECTIVE CAPACITY

EFFECTIVE CAPACITY
• The capacity a firm expect to
achieve given the current
operating constraints.

• Often lower than design capacity.

DESIGN AND EFFECTIVE CAPACITY
ENGR. EVANGELINE CARANTO
WAREHOUSE LEAD
Two measures of system performance

UTILIZATION EFFICIENCY
Two measures of system performance
Utilization

• Simply the percent of design capacity actually achieved.

Actual Output
Utilization =
Design Capacity
Two measures of system performance
EFFICIENCY
• The percent of effective capacity actually achieved.
• Efficiency may be difficult or impossible to reach 100% depending on
how facilities are used and managed

Actual Output
Efficiency =
Effective Capacity
EFFECTIVE CAPACITY DESIGN CAPACITY
(EC) (DC)
EFF (%) UTI (%)
EXAMPLE NO. 1: DETERMINING CAPACITY,
UTILIZATION AND EFFICIENCY
Bakery Example
Sara James Bakery has a plant for processing Deluxe
breakfast rolls and wants to better understand its capability.
Determine the design capacity, utilization, and efficiency for this
plant when producing this Deluxe roll.
Last week the facility produced 148,000 rolls. The
175,000 rolls. The production line operates
effective capacity is
7 days per week, with three 8 hour shifts per day. The
line was designed to process the nut-filled, cinnamon-flavored
Deluxe roll at a rate of 1,200 per hour. The firm first to
computes the design capacity, utilization, and efficiency.
GIVEN:
Actual Output = 148,000 rolls
Effective Capacity = 175,000 rolls per week
Design Capacity = 1,200 rolls per hour
Bakery Operates = 7 days, three 8-hour shifts
per day

SOLUTION:
𝟕 𝒅𝒂𝒚𝒔 𝟖 𝒉𝒐𝒖𝒓𝒔 𝟑 𝒔𝒉𝒊𝒇𝒕𝒔
Operation = x x
𝒘𝒆𝒆𝒌 𝒔𝒉𝒊𝒇𝒕 𝒅𝒂𝒚𝒔

Operation = 168 hours per week

GIVEN:
Actual Output = 148,000 rolls Operation = 168 hours per week
Effective Capacity = 175,000 rolls
Design Capacity = 1,200 rolls per hour
Bakery Operates = 7 days, three 8-hour shifts
per day

SOLUTION:

DESIGN CAPACITY = (168 hours per week) x (1,200 rolls per hour)

DESIGN CAPACITY = 201,600 Deluxe rolls per week

GIVEN:
Actual Output = 148,000 rolls Operation = 168 hours per week
Effective Capacity = 175,000 rolls Design Capacity = 201, 600 rolls
Design Capacity = 1,200 rolls per hour
Bakery Operates = 7 days, three 8-hour shifts
per day

SOLUTION:
Actual Output
UTILIZATION =
Design Capacity
148, 000 𝒓𝒐𝒍𝒍𝒔
UTILIZATION =
𝟐𝟎𝟏,𝟔𝟎𝟎 𝒓𝒐𝒍𝒍𝒔

UTILIZATION = 0.7341

UTILIZATION = 73.4%
GIVEN:
Actual Output = 148,000 rolls Operation = 168 hours per week
Effective Capacity = 175,000 rolls Design Capacity = 201, 600 rolls
Design Capacity = 1,200 rolls per hour
Bakery Operates = 7 days, three 8-hour shifts
per day

SOLUTION:
Actual Output
EFFICIENCY =
Effective Capacity
148, 000 𝒓𝒐𝒍𝒍𝒔
EFFCIENCY =
𝟏𝟕𝟓,𝟎𝟎𝟎 𝒓𝒐𝒍𝒍𝒔

EFFICIENCY= 0.846

EFFICIENCY = 84.6%
Example no. 2: DETERMINING EXPECTED
OUTPUT
The manager of Sara James Bakery now needs to increase
production of the increasingly popular deluxe roll. To meet this
demand, she will be adding a second production line.

The manager must determine the expected output of this

second line for the sales department. Effective capacity on the
second line is the same as on the first line, which is 175,000 deluxe
rolls. The first line is operating at an efficiency of 84.6%, as
computed in example 1. But output on the second line will be less
than the first line because the crew will be the primarily new hires;
so the efficiency can be expected to be no more than 75%. What is
the expected output?
GIVEN:
Effective Capacity = 175,000 Deluxe rolls per week
Efficiency Line 1 = 84.6% or .846
Efficiency Line 2 = ≤ 75% or ≤ .75

SOLUTION:
Actual Output
EFFICIENCY = 𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕 = 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒆 𝑪𝒂𝒑𝒂𝒄𝒊𝒕𝒚
Effective Capacity

𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕 = 𝟎. 𝟕𝟓 𝐱 𝟏𝟕𝟓, 𝟎𝟎𝟎 𝑫𝒆𝒍𝒖𝒙𝒆 𝐫𝐨𝐥𝐥𝐬

𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕 = 𝟏𝟑𝟏, 𝟐𝟓𝟎 𝐃𝐞𝐥𝐮𝐱𝐞 𝐫𝐨𝐥𝐥𝐬 𝐩𝐞𝐫 𝐰𝐞𝐞𝐤

GIVEN:
Effective Capacity = 175,000 Deluxe rolls
Efficiency Line 1 = 84.6% or .846
Efficiency Line 1 = ≤ 75% or ≤ .75

After 1 month of training, the crew on the second line production line is expected to
perform at 80% efficiency.
SOLUTION:
𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕 = 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒆 𝑪𝒂𝒑𝒂𝒄𝒊𝒕𝒚

𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕 = 𝟎. 𝟖𝟎 𝐱 𝟏𝟕𝟓, 𝟎𝟎𝟎 𝑫𝒆𝒍𝒖𝒙𝒆 𝐫𝐨𝐥𝐥𝐬

𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅 𝑨𝒄𝒕𝒖𝒂𝒍 𝑶𝒖𝒕𝒑𝒖𝒕 = 𝟏𝟒𝟎, 𝟎𝟎𝟎 𝐃𝐞𝐥𝐮𝐱𝐞 𝐫𝐨𝐥𝐥𝐬 𝐩𝐞𝐫 𝐰𝐞𝐞𝐤

Intermission

HD
ENGR. HANSEL BARUELA
WAREHOUSE MANAGER
Capacity and strategy
• Capacity decision impact all 10
decision of operations management
as well as other functional areas of
the organization.

• Capacity decision must be

integrated into the organization’s
mission and strategy.
 Situation no. 1

<

CAPACITY DEMAND
= SHORTAGE
STRATEGY 1: DECREASE THE DEMAND
STRATEGY 2: INCREASE THE CAPACITY
 Situation no. 2

CAPACITY > DEMAND

= SURPLUS

STRATEGY 1: DECREASE THE CAPACITY

STRATEGY 2: INCREASE THE DEMAND
CAPACITY CONSIDERATIONS
1. Forecast demand accurately
An accurate forecast is paramount
to the capacity decision.
CAPACITY CONSIDERATIONS
2. Understanding the technology and capacity increments
The number of initial alternatives may be large, but once the
volume is determined, technology decisions may be aided by
analysis of cost, human resources required, quality and reliability.
CAPACITY CONSIDERATIONS
3. Find the optimum operating size (volume)
Technology and capacity increments often dictate an optimal size
for a facility.
 Economies and Diseconomies of Scale

(dollars per room per

Average unit cost
25 - Room Roadside
Motel 75 - Room Roadside
Motel

night)
Economies of Diseconomies
scale of scale

25 50 75
Number of Rooms
CAPACITY CONSIDERATIONS
4. Build for change
In our fast- paced , change is inevitable
ENGR. JOHN RYAN DAYAT
NNW INDUSTRY CEO
MANAGING DEMAND
• Demand exceeds capacity
− Curtail demand by raising prices, scheduling longer lead
time
− Long term solution is to increase capacity
MANAGING DEMAND
• Capacity exceeds demand
− Stimulate market
− Product changes

= INCREASED COST = REDUCED PROFIT

 MANAGING DEMAND
• Adjusting to seasonal demand
− Produce product with complimentary demand patterns

Complementary Demand Patterns

By combining both,
the variation is
4,000 – reduced
Sales in units

3,000 – Snowmobile sales

2,000 – Jet ski sales

1,000 –

JFMAMJJASONDJFMAMJJASONDJ
Time (months)
TACTICS FOR MATCHING CAPACITY TO DEMAND
1. MAKING STAFFING CHANGES
2. ADJUSTING EQUIPMENT AND PROCESSES
• PURCHASING ADDITIONAL MACHINERY
• SELLING OR LEASING OUT EXISTING EQUIPMENT
3. IMPROVING METHODS TO INCREASE THROUGHPUT
4. REDESIGNING THE PRODUCT TO FACILITATE MORE THROUGHPUT
5. ADDING PROCESS FLEXIBILITY TO BETTER MEET CHANGING
PRODUCT PREFERENCES
6. CLOSING FACILITIES
Demand and capacity management in
the service sector

• Demand Management - When

demand and capacity are fairly
well matched , demand
management can often be handled
with appointments, reservations,
or a first –come, first served rule.
Demand and capacity management in
the service sector
• Capacity Management- When
managing demand is not feasible ,
then managing capacity through
changes in full- time, temporary, or
part- time staff may be an option.
ICE BREAKER
B K

C N T E L O T E
B O T T L E N E C K
C T
M C I E L Y E
C Y C L E T I M E
O S

C T A T R N N S I
C O N S T R A I N T S
 TOPIC OUTLINE

CAPACITY

BOTTLENECK ANALYSIS AND THE

THEORY OF CONTRAINTS
o Process Times for Stations, Systems and Cycles
o Theory of Constraints
o Bottleneck Management
ENGR. EVANGELINE CARANTO
WAREHOUSE LEAD
 Capacity Analysis
means of determining throughput capacity of
workstations or an entire production system.

?
??
Bottleneck
The limiting factor or constraint in a system.
ENGR. ANTHONY BALDONADO
GOOD FLOW MANAGER
 PROCESS TIMES FOR STATIONS,
SYSTEMS AND CYCLES

• Process time of a station- is the time

it takes to produce a unit at that workstation
PROCESS TIMES FOR STATIONS,
SYSTEMS AND CYCLES
• Process time of a system- is the
time of the longest(slowest) process time
in the system.
 PROCESS TIMES FOR STATIONS,
SYSTEMS AND CYCLES
• Process cycle time -is the time it takes for a product to
go through production from start to end (assuming no
waiting).
 A THREE-STATION ASSEMBLY LINE
A box represents an operation, a
triangle represents inventory,
and arrows represents
precedence relationship.

2 min/unit 4 min/unit 3 min/unit

A B C
Example no. 1: CAPACITY ANALYSIS
WITH PARALLEL ANALYSIS
Howard Kraye's sandwich shop provides healthy sandwiches
for customers. Howard has two identical sandwich assembly lines. A
customer first places and pays for an order, which take approximately
30 seconds. The order is then sent to one of two assembly lines. Each
assembly line has two workers and three major operations: (1) worker 1
retrieves and cuts the bread (15 seconds/sandwich), (2) worker 2 adds
ingredients and places the sandwich onto the toaster conveyor belt (20
seconds/sandwich), (3) the toaster heats the sandwich (40
second/sandwich)/ A wrapper then wraps heated sandwiches coming
from the both lines and provides final packaging for the customer (37.5
seconds/sandwich). A flowchart of the customer order is shown below.

Clearly the toaster is the single slowest resource in the five-

step process, but is it the bottleneck? Howard should first determine the
process times of each assembly line, then the process time of the
combined assembly lines, and finally the process time of the entire
operation.
 BREAD FILL TOAST

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

ORDER WRAP

30 sec/sandwich 37.5 sec/sandwich

BREAD FILL TOAST

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

 BREAD FILL TOAST

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

ORDER WRAP

30 sec/sandwich 37.5 sec/sandwich

BREAD FILL TOAST

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

PROCESS TIME OF THE SYSTEM

PROCESS TIME CAPACITY

𝟑𝟕. 𝟓 𝒔𝒆𝒄 𝟏 𝒔𝒂𝒏𝒅𝒘𝒊𝒄𝒉

𝒔𝒂𝒏𝒅𝒘𝒊𝒄𝒉 𝟑𝟕. 𝟓 𝒔𝒆𝒄
𝟏 𝒔𝒂𝒏𝒅𝒘𝒊𝒄𝒉 𝟔𝟎 𝒔𝒆𝒄 𝟔𝟎 𝒎𝒊𝒏𝒔
Process time of the system = x x
𝟑𝟕.𝟓 𝒔𝒆𝒄 𝟏 𝒎𝒊𝒏𝒔 𝟏 𝒉𝒐𝒖𝒓

Process time of the system = 96 sandwiches per hour

 BREAD FILL TOAST

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

ORDER WRAP

30 sec/sandwich 37.5 sec/sandwich

BREAD FILL TOAST

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

PROCESS CYCLE TIME

Process Cycle time = 30 + 15 + 20 + 40 + 37.5
Process Cycle time = 142.5 seconds

Process Cycle time = 2 mins and 22.5 seconds

 Adding Another Wrapping Station And Person

BREAD FILL TOAST WRAP

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich 37.5 sec/sandwich

ORDER

30 sec/sandwich
BREAD FILL TOAST WRAP

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich 37.5 sec/sandwich

 BREAD FILL TOAST WRAP

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich 37.5 sec/sandwich

ORDER

30 sec/sandwich
BREAD FILL TOAST WRAP

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

37.5 sec/sandwich

PROCESS TIME OF THE SYSTEM

PROCESS TIME CAPACITY

𝟑𝟎 𝒔𝒆𝒄 𝟏 𝒔𝒂𝒏𝒅𝒘𝒊𝒄𝒉
𝒔𝒂𝒏𝒅𝒘𝒊𝒄𝒉 𝟑𝟎𝒔𝒆𝒄
𝟏 𝒔𝒂𝒏𝒅𝒘𝒊𝒄𝒉 𝟔𝟎 𝒔𝒆𝒄 𝟔𝟎 𝒎𝒊𝒏𝒔
Process time of the system = x x
𝟑𝟎 𝒔𝒆𝒄 𝟏 𝒎𝒊𝒏𝒔 𝟏 𝒉𝒐𝒖𝒓

Process time of the system = 120 sandwiches per hour

ENGR. MICHELLE BANANIA
COMMUNICATIN AND INTERIOR DESIGNER
MANAGER
Example no. 2: CAPACITY ANALYSIS
WITH PARALLEL ANALYSIS
Dr. Cynthia Knott's dentistry practice has been cleaning
customers' teeth for decades. The process for a basic dental cleaning
is relatively straightforward: (1) the customer checks in (2 minutes);
(2) a lab technician takes and develops four X-rays (2 and 4 minutes,
respectively); (3) the dentist processes and examines the X-rays (5
minutes) while the hygienist cleans the teeth (24 minutes); (4) the
dentist meets with the patient to poke at a few teeth, explain the X-
ray results, and tell the patient to floss more often

With simultaneous processes, an order or a product is

essentially split into different paths to be rejoined later on. To find
the bottleneck time, each operation is treated separately, just as
though all operations were on a sequential path. To find the
throughput time, the time over all paths must be computed, and it is
the longest path.
 Cleaning
24 min/unit
Takes Develops Check
Check In Dentist
X-ray X-rays out
2 min/unit 2 min/unit 4 min/unit 8 min/unit 8 min/unit
X-ray
exam
5 min/unit
 Cleaning

24 min/ patient
Takes Develops
Check In Dentist Check out
X-ray X-rays

2 min/patient 2 min/ patient 4 min/ patient 8 min/ patient 8 min/ patient

X-ray exam

5 min/ patient

• All possible paths must be compared

PROCESS TIME OF THE SYSTEM
PROCESS TIME CAPACITY

𝟐𝟒 𝒎𝒊𝒏𝒔 𝟏 𝒑𝒂𝒕𝒊𝒆𝒏𝒕
𝒑𝒂𝒕𝒊𝒆𝒏𝒕 𝟐𝟒 𝒎𝒊𝒏𝒔
𝟏 𝒑𝒂𝒕𝒊𝒆𝒏𝒕 𝟔𝟎 𝒎𝒊𝒏𝒔
Process time of the system = x
𝟐𝟒 𝒎𝒊𝒏𝒔 𝟏 𝒉𝒐𝒖𝒓

Process time of the system = 2.5 patient per hour

 Cleaning

24 min/ patient
Takes Develops
Check In Dentist Check out
X-ray X-rays

2 min/patient 2 min/ patient 4 min/ patient 8 min/ patient 8 min/ patient

X-ray exam

5 min/ patient

PROCESS CYCLE TIME

Cleaning Path
Process Cycle time = 2 + 2 + 4 + 5 + 8 + 6
Process Cycle time = 46 mins

X-ray Exam Path

Process Cycle time = 2 + 2 + 4 + 24 + 8 + 6
Process Cycle time = 27 mins
 THEORY OF CONSTRAINTS
THEORY OF CONSTRAINTS (TOC) - A body of knowledge that deals
with anything that limits an organization’s ability to achieve its goals.

FIVE-STEP PROCESS FOR RECOGNIZING AND

MANAGING LIMITATIONS
Step 1: Identify the constraint
Step 2: Develop a plan for overcoming the constraints
Step 3: Focus resources on a accomplishing step 2
Step 4: Reduce the effects of constraints by offloading work or
expanding capacity
Step 5: Once overcome, go back to step 1 and find new
constraints.
BOTTLENECK MANAGEMENT
1. Release work order to the system
at the pace set by the bottleneck
2. Lost time at the bottleneck
represent lost time for the whole
system.
3. Increasing the capacity of a
bottleneck increases the capacity
of the whole system.
4. Increasing the capacity of a non-
bottleneck station is a mirage.
ENGR. CAMILO CADELIÑA
Operations Management Professor
 Closing Remarks

THANK YOU!
References:
x Operation Management, 10th Edition by Heizer and Render
QCU Hymn

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