GB527 Unit 3 Capacity Calculation Example

From 686 Regulators on Paper to a 92-Unit Weekly Gap: A Unit 3 Capacity Calculation

[Student Name]

Purdue University Global

GB527: Global Operations

Unit 3 Capacity Calculation

[Instructor Name]

[Date]

The plant, its lathes and every figure are composite and illustrative; the sources cited are real.

The Cell

Platte Valve Works machines the bodies of its pressure regulators, which hold water pressure steady at the end of a pivot, in a cell of three CNC lathes. It works a weekday schedule of two shifts, each eight hours long. Each regulator body takes 21.0 machine-minutes. The plant manager has used the cell's design capacity in next year's plan, which assumes 560 regulators a week in peak months.

Table 1: Design Capacity

Machines: 3.

Hours per machine each week: 2 shifts of 8 hours, 5 days, or 80 hours.

Machine-hours each week: 240.

Machine-minutes per regulator: 21.0.

Design capacity: 240 times 60, divided by 21.0, or about 686 regulators a week.

Design capacity is what the cell could produce if it never stopped. No cell runs that way.

Table 2: Deductions to Effective Capacity

Breaks: 30 minutes a shift on each machine, about 15 machine-hours a week.

Planned maintenance: about 12 machine-hours a week.

Changeovers: about 16 changeovers a week across the three lathes, at 50 minutes each, or about 13.3 machine-hours.

Effective machine-hours: 240 less 15, 12 and 13.3, or about 199.7.

Effective capacity: 199.7 times 60, divided by 21.0, or about 570 regulators a week.

Effective capacity is what the cell can produce under planned conditions. Heizer et al. (2020) define it as design capacity less the allowances a process must make for its normal operation, such as maintenance and changeovers.

Table 3: Efficiency and Actual Output

Twelve weeks of production records show the cell producing an average of about 468 regulators a week. Against effective capacity of 570, that is an efficiency of 82 percent. The shortfall comes from unplanned stops: tool breakage, waiting for castings, minor breakdowns and quality holds.

Actual expected output: 570 times 0.82, or about 468 regulators a week.

Planned demand in peak months: 560.

Weekly gap: about 92 regulators.

The plan counts on 686 regulators a week, the cell can be expected to make 468, and the difference is not a surplus of 126 but a shortfall of 92.

Table 4: Ways to Close the Gap

1. Faster changeovers. Cutting changeover time from 50 to 25 minutes through standard tooling and preparing the next job while the lathe runs would add about 6.7 effective machine-hours a week, worth about 16 regulators at 82 percent efficiency. Cost: about $12,000 in tooling carts and training.

2. Higher efficiency. Raising efficiency from 82 to 88 percent by reducing tool breakage and casting shortages would add about 34 regulators a week. Cost: a tool-life program and a kanban for castings, about $15,000 a year.

3. A Saturday shift in peak months. One eight-hour shift on all three lathes, less breaks, adds about 22.5 machine-hours, worth about 57 regulators at 88 percent efficiency. Cost: overtime of about $2,900 a week.

4. A fourth lathe. A fourth machine would raise expected output to about 624 regulators a week at current efficiency. Cost: about $310,000 installed.

Why Changeovers Come First

Changeover time is the cheapest capacity the cell has. Womack and Jones (2003) describe the lean approach of separating changeover tasks that must be done with the machine stopped from those that can be done while it runs, and moving as many as possible into the second group. At Platte, operators now fetch tools, find the program and measure the first part only after the lathe stops. Preparing the next job's tools on a cart, loading the program in advance and using preset tool holders could halve the stop. Shorter changeovers also allow smaller batches, which helps the custom orders that make up a growing share of regulator demand and shortens the waiting that the Unit 1 post found throughout the plant.

Combining the Options

Faster changeovers and higher efficiency together would raise expected output to about 519 regulators a week, closing nearly half the gap at modest cost. Adding the Saturday shift in peak months would bring the cell to about 575, slightly above demand. The fourth lathe would close the gap alone but would sit underused outside peak months.

Hopp and Spearman (2011) caution that planning a cell to run close to its full capacity leaves no room for variability, which shows up as long queues and late orders. A cell planned at 575 against demand of 560 would run at about 97 percent of its expected output, so the plan should also build regulator stock in the weeks before peak months.

Recommendation

Start the changeover and efficiency programs now, so their gains are in place before the January peak. Schedule Saturday shifts from January through April. Build about 300 regulators of stock in November and December. Review the fourth lathe if demand grows beyond 600 regulators a week or if efficiency does not reach 88 percent within six months. Most important, correct the plan: capacity should be stated as expected output, not design capacity.

Limits

The calculation uses averages from twelve weeks, and changeover counts vary with the product mix. If demand shifts toward more custom regulators, changeovers will rise and effective capacity will fall. The efficiency figure also hides causes that differ week to week, which the efficiency program should track separately.

References

Heizer, J., Render, B., & Munson, C. (2020). Operations management: Sustainability and supply chain management (13th ed.). Pearson.

Hopp, W. J., & Spearman, M. L. (2011). Factory physics (3rd ed.). Waveland Press.

Womack, J. P., & Jones, D. T. (2003). Lean thinking: Banish waste and create wealth in your corporation (Rev. ed.). Free Press.