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Monique Food Processing Company and Capacity

System capacity is the highest degree of the yield of products or services that a given system can possibly deliver over a given period. System capacity is the capacity of the business to create an acceptable number of products and services to meet the demands of clients. Most systems will work at the fullest for prolonged periods, due to inadequacies and different factors like mechanical breakdown and lack of access to staff. The limit is projected in individuals served, meals provided, or the capability to generate sales dollars. (Vonderembse, M. A. and G.P. White, 2013).

The bottleneck division decreases or restricts the stream of an item through the creation framework and starves downstream offices (Vonderembse, M. A. and G.P. White, 2013).

Production rate = number of units produced/amount of time

Department

Capacity (Units/Hour)

Production Rate

Slack or Unused Capacity

1

200

175

25

2

175

175

0

3

200

125

25

4

300

300

125

5

200

100

25

*What is the system capacity, and which is the bottleneck department?

The system capacity is the highest output created before the system bottlenecks, in this problem the system capacity is 175 units/hr.

Department 1 can deliver 200 units per hour to department 2, which can only use 175 units, department 2 limits the capability, this is where the bottleneck occurs because the process cannot move forward due to the problem.  Thus, this is where deals are lost; too much capacity means that money have been capitalized in resources that are not really needed. (Vonderembse, M.A. & White, G.P., 2013).

If department 2 has only 175 units to offer to department 3, which can receive 200 units but is missing due to the bottleneck in department, slack happens and this will result in possible sales and market share lost because the process is not being maximized. (Vonderembse, M.A. & White, G.P., 2013).

If departments 2 and 3 combine their inputs (375) units to be delivered to department 4, which can only receive (300) there is an excess of 75 units and an added bottleneck would occur.

If department 4 has 300 units to be delivered to department 5, which can accept only 200 units bottlenecking occurs in here as well. 

Department 2 is the bottleneck department.

*How much slack (unused capacity) is available in other departments?

Department 1 has an unused capacity of 25

Department 2 has an unused capacity of 0

Department 3 has an unused capacity of 25

Department 4 has an unused capacity of 125

Department 5 has an unused capacity of 25

*How much system capacity can be gained by adding capacity to the bottleneck?

Adding capacity to a bottleneck department will raise the capacity of a system, thus, bringing the capacity of the bottleneck department to even out with the other departments.  Though, capacity decisions must be founded on the top estimation of demand. (Vonderembse, M.A. & White, G.P., 2013).

Adding capacity to the bottleneck department will cause a rise in not used capacity or slack of 25 units / hours.  Consequently, the total sums will become 200.

*What are the key factors that determine when to add capacity?

Capacity is a variable; elements that define when to add capacity are related anticipated increases in demand for a prolonged period.  The increase must be under more normal situations, which can be met by the other less exclusive alternatives, such as superior scheduling, and operational procedures, adding additional period or increasing over time, better attributes of basic materials as well as raising staff motivation. (Vonderembse, M.A. & White, G.P., 2013). Once the estimated demand is known management can simply set capacity to meet the demand.

*Why would an organization want to reduce its capacity?

Companies may decrease capacity due to a diminution in the demand or relocating it to another place with better effectiveness and innovative technology.  In addition, capacity may also be decreased due to competition from a global environment and substitute products.

Reference

Vonderembse, M. A., & White, G. P. (2013). Operations management [Electronic version]. Retrieved from https://content.ashford.edu/

Respond to… 

A) What is the system capacity, and which is the bottleneck department?

System capacity according to Vonderembse and White (2013) is the ability of the organization to produce a sufficient number of goods and services to meet the demands of the customers. The system capacity is also the maximum rate of production, and can be determined by multiplying the maximum hourly production rate by the number of hours worked. The system capacity for Monique Good Processing Company would be highest output created before the system bottlenecks, which is at step 2 of 175 units/hour. Bottleneck is when a department, workstation, or operation limits the flow of product through the production system, and restricts the flow of product from upstream departments and staves downstream departments (Vonderembse & White, 2013).

B) How much slack (unused capacity) is available in other departments?

Slack or unused capacity is determined by subtracting the bottlenecks capacity from each step in Monique Food Processing Company.

Steps

Description 

Capacity (Units/Hour) 

Slack

1

Prepare food

200

(200-175) = 25

2

Measure and place in plastic pouch

175

(175-175) = 0

3

Prepare cardboard box

200

(200-175) = 25

4

Insert pouch into box

300

(300-175) = 125

5

Shrink-wrap box

200

(200-175) = 25

C) How much system capacity can be gained by adding capacity to the bottleneck?

When determining the amount of system capacity can be gained by adding capacity to the bottleneck, the evaluation of the slack is needed. By evaluating the slack, and basing our capacity based on the estimate of demand, we could add 25 units/hour to step 2 to increase capacity. By adding capacity to the bottleneck process, it will create a better balance with the other processes within Monique Food Processing Company.

D) What are the key factors that determine when to add capacity?

The key factors of when to add capacity can vary. Capacity is a variable according to Vonderembse and White (2013) which is subject to change through management innovation and decision making. Different factors such as time, or even materials can increase capacity. Figuring out the least expensive alternatives is a great way of increasing capacity without having to spend a lot money to do so. The only time capacity should be added, is when the demand for it is necessary.

E) Why would an organization want to reduce its capacity?

Organizations would want to reduce its capacity when they are faced with a lower demand for products or services (Vonderembse & White, 2013). Another reason is if a business wanted to direct capacity to a different location. This is done when a facility is replaced with a new facility or when the substitution of products is greatly reduced for the demand of another product (Vonderembse & White, 2013). Altogether highly competitive global environments and newer technology are additional reasons why organizations would want to reduce its capacity.

References

Vonderembse, M. A., & White, G. P. (2013). Operations management [Electronic version]. Retrieved from https://content.ashford.edu/  

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