SHORT TERM CAPACITY

. SHORT-TERM CAPACITY STRATEGIES

Managers often use forecasts of product demand to estimate the short-term workload the facility

must handle. Managers looking ahead up to 12 months, anticipate output requirements for different

products, and services. Managers then compare requirements with existing capacity and then

take decisions as to when the capacity adjustments are needed.

For short-term periods of up to one year, fundamental capacity is fixed. Major facilities will

not be changed. Many short-term adjustments for increasing or decreasing capacity are possible.

The adjustments to be required depend upon the conversion process like whether it is capital

intensive or labour intensive or whether product can be stored as inventory.

Capital intensive processes depend on physical facilities, plant and equipment. Short-term

capacity can be modified by operating these facilities more or less intensively than normal. In

labour intensive processes short-term capacity can be changed by laying off or hiring people or

by giving overtime to workers. The strategies for changing capacity also depend upon how long

the product can be stored as inventory.

The short-term capacity strategies are:

1. Inventories: Stock of finished goods during slack periods to meet the demand during

peak period.

2. Backlog: During peak periods, the willing customers are requested to wait and their

orders are fulfilled after a peak demand period.

3. Employment level (hiring or firing): Hire additional employees during peak demand

period and layoff employees as demand decreases.

4. Employee training: Develop multi-skilled employees through training so that they can

be rotated among different jobs. The multi-skilling helps as an alternative to hiring employees.

5. Subcontracting: During peak periods, hire the capacity of other firms temporarily to

make the component parts or products.

6. Process design: Change job contents by redesigning the job

While converting raw material into required goods different operations are to be performed and

the selection of a particular path of operations for each piece is termed as ‘Routing’. This

selection of a particular path, i.e. sequence of operations must be the best and cheapest to have

the lowest cost of the final product. The various routing techniques are:

1. Route card: This card always accompanies with the job throughout all operations. This

indicates the material used during manufacturing and their progress from one operation to

another. In addition to this the details of scrap and good work produced are also recorded.

2. Work sheet: It contains

(a) Specifications to be followed while manufacturing.

(b) Instructions regarding routing of every part with identification number of machines and

work place of operation.

This sheet is made for manufacturing as well as for maintenance.

3. Route sheet: It deals with specific production order. Generally made from operation

sheets. One sheet is required for each part or component of the order. These includes the following:

(a) Number and other identification of order.

(b) Symbol and identification of part.

(c) Number of pieces to be made.

(d) Number of pieces in each lot—if put through in lots.

(e) Operation data which includes:

(i) List of operation on the part.

(ii) Department in which operations are to be performed.

(iii) Machine to be used for each operation.

(iv) Fixed sequence of operation, if any.

(f) Rate at which job must be completed, determined from the operation sheet.

4. Move order: Though this is document needed for production control, it is never used

for routing system. Move order is prepared for each operation as per operation sheet. On this

the quantity passed forward, scrapped and to be rectified are recorded. It is returned

to planning office when the operation is completed

Scheduling strategies vary widely among firms and range from ‘no scheduling’ to very sophisticated

approaches.

These strategies are grouped into four classes:

1. Detailed scheduling: Detailed scheduling for specific jobs that are arrived from customers

is impracticable in actual manufacturing situation. Changes in orders, equipment breakdown, and

unforeseen events deviate the plans.

2. Cumulative scheduling: Cumulative scheduling of total work load is useful especially

for long range planning of capacity needs. This may load the current period excessively and under

load future periods. It has some means to control the jobs.

3. Cumulative detailed: Cumulative detailed combination is both feasible and practical

approach. If master schedule has fixed and flexible portions.

4. Priority decision rules: Priority decision rules are scheduling guides that are used

independently and in conjunction with one of the above strategies, i.e., first come first serve.

These are useful in reducing Work-In-Process (WIP) inv