In this chapter, the following content will be discussed: Capacity, capacity management, matching capacity and demand, capacity planning process, resource planning, inputs to capacity planning, managing demand, tactics for managing demand, approaches to capacity expansion, breakeven analysis, decision tree and capacity expansion, net present value, capacity planning issues. | LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 19 1 Agenda for this Session Inventory Models for Independent Demand Production Order Quantity Model Quantity Discount Models 2 2 Agenda for this Session (Contd.) Probabilistic Models and Safety Stock Other Probabilistic Models Fixed-Period (P) Systems 3 3 Production Order Quantity Model Used when inventory builds up over a period of time after an order is placed Used when units are produced and sold simultaneously 4 4 Production Order Quantity Model Inventory level Time Demand part of cycle with no production Part of inventory cycle during which production (and usage) is taking place t Maximum inventory Figure 5 5 Production Order Quantity Model Q = Number of pieces per order p = Daily production rate H = Holding cost per unit per year d = Daily demand/usage rate t = Length of the production run in days = (Average inventory level) x Annual inventory holding cost Holding cost per unit per year = (Maximum . | LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 19 1 Agenda for this Session Inventory Models for Independent Demand Production Order Quantity Model Quantity Discount Models 2 2 Agenda for this Session (Contd.) Probabilistic Models and Safety Stock Other Probabilistic Models Fixed-Period (P) Systems 3 3 Production Order Quantity Model Used when inventory builds up over a period of time after an order is placed Used when units are produced and sold simultaneously 4 4 Production Order Quantity Model Inventory level Time Demand part of cycle with no production Part of inventory cycle during which production (and usage) is taking place t Maximum inventory Figure 5 5 Production Order Quantity Model Q = Number of pieces per order p = Daily production rate H = Holding cost per unit per year d = Daily demand/usage rate t = Length of the production run in days = (Average inventory level) x Annual inventory holding cost Holding cost per unit per year = (Maximum inventory level)/2 Annual inventory level = – Maximum inventory level Total produced during the production run Total used during the production run = pt – dt 6 6 Production Order Quantity Model Q = Number of pieces per order p = Daily production rate H = Holding cost per unit per year d = Daily demand/usage rate t = Length of the production run in days = – Maximum inventory level Total produced during the production run Total used during the production run = pt – dt However, Q = total produced = pt ; thus t = Q/p Maximum inventory level = p – d = Q 1 – Q p Q p d p Holding cost = (H) = 1 – H d p Q 2 Maximum inventory level 2 7 7 Production Order Quantity Model Q = Number of pieces per order p = Daily production rate H = Holding cost per unit per year d = Daily demand/usage rate D = Annual demand Q2 = 2DS H [1 - (d/p)] Q* = 2DS H[1 - (d/p)] p Setup cost = (D/Q)S Holding cost = HQ[1 - (d/p)] 1 2 (D/Q)S = HQ [1 - (d/p)] 1 2 8 8 Production Order Quantity Example D = 1,000 units p = 8 units per day
