Capacity Management Through Simulation
Capacity Management
Capacity management is the practice of managing the limitations of business and technology services. Its goal is typically to meet service scalability levels defined by business strategy and service level agreements (SLAs) while managing costs. Capacity management seeks to balance these costs with the capacity of services to handle average and peak demand such as disaster recovery scenarios. Capacity management functions include:
A systematic approach to capacity management breaks down the barriers between functional units of design, planning, operations, and control by integrating and building on data from existing systems such as production control systems, process planning systems, CAD/CAM systems,, or quality management systems.
Levels of Capacity Management
Capacity management can happen at three (3) levels: business, service or goods production, and component levels. Business capacity is defined by the volume of work that can be handled by the organization, teams, processes and equipment. The goods or service production capacity is defined in terms of the output of goods/parts, or customers serviced per some specified interval. Service capacity is usually associated with costs, such as the need to hire more people or buy more equipment.
Business Capacity
Business capacity is defined by the volume of work that can be handled by the organization, teams, processes and equipment.
The resource view of an organization or any of its parts as a bundle of resources (real assets). Viewing operations as a bundle of real assets is most useful when the decision is on amounts human resources of particular role types that the operation needs. This investment or capital budgeting decision, along with the allocation of resources to activities, is one of the major tasks of management. Viewing operations as a bundle of real assets is most useful when decision on amounts and types of resources the operation needs.
The resources/assets can be categorized into tangible resources (i.e., people/human resources, capital assets – property, plant and equipment), and intangible resources (i.e., relationship with suppliers and customers, intellectual property, reputation and brands, knowledge and experience in processing, technologies and markets).
Production Capacity
Production capacity is defined as the maximum output that an organization can produce with the available resources in a given period. Production capacity can be calculated based on a single type of product or a mix of products.
Manufacturing and service production operations should be driven by capacity considerations not raw material availability in the case of manufacturing. The service production system encompasses processes that define a network of processing centers connected and coordinated by the product routing. A production process is a network of activities with specific precedence relationships among activities - the relationships that specify which activities must be finished before another activity can begin.
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Capacity management is focused on the operational capabilities and the operations of manufacturing and service production.
Capacity management is the practice of managing the limitations of business and technology services. Its goal is typically to meet service scalability levels defined by business strategy and service level agreements (SLAs) while managing costs. Capacity management seeks to balance these costs with the capacity of services to handle average and peak demand such as disaster recovery scenarios. Capacity management functions include:
- Capacity forecasting - []
- Design Assessment - Assessment of production system design where comparisons of different facility organizations (group of machines, work centers, assembly lines, prep stations and buffers) , and resource capabilities are evaluated.
- Capacity Requirements planning and analysis - Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. In the context of capacity planning, design capacity is the maximum amount of work that an organization is capable of completing in a given period. Requirements planning entails evaluating the ability of current resource levels to meet current orders/demand and projected demand. The current shop floor status and inventory levels are considered and process plans are used to calculate the loads at work centers. In the planning stage, the load at each work center is evaluated with regard to the actual capacity of the work center. Corrective actions are made as required by rescheduling order, hiring and layoff reassignments, overtime, outsourcing, alternate routing, etc. Capacity requirements analysis is concerned with controlling capacity during the execution of production plan
- Scheduling - Scheduling means establishing job start and completion times for the orders that have been released to the shop floor. Scheduling must account for all the the specific operational constraints of the production facility, including limited resources, breaks, shifts, machine availability, personnel availability, material availability, and material handling capabilities. Operational procedures such as just-in-time, kanban, scheduling by due dates, priority assessment are all included in the computations to produce the schedule. etc. Because of this complexity and the diverse nature of scheduling philosophy - backward scheduling, forward scheduling, scheduling the bottlenecks first, etc. - simulation is necessary in all but the simplest environments.
- Schedule Management - Schedule management entails assessing schedules and the ability to change or manage the, Schedule management can be used to evaluate the effect of expediting jobs or taking on new sales opportunities within the current status and schedule. This function is performed best in a graphical and interactive visual environment using displays based on Gantt charting techniques.
- Schedule execution and dispatching - The philosophy of total capacity management entails that a schedule must be executed as prescribed otherwise the function will suffer.
- Status presentation and statistics - Data obtained from manufacturing operations can be displayed graphically in a an interactive visual environment using various statistical charting techniques such as bar graphs for resource (human resource and equipment) load, utilization levels, in process inventory levels, process output rates as well as production system's output performance rates.
A systematic approach to capacity management breaks down the barriers between functional units of design, planning, operations, and control by integrating and building on data from existing systems such as production control systems, process planning systems, CAD/CAM systems,, or quality management systems.
Levels of Capacity Management
Capacity management can happen at three (3) levels: business, service or goods production, and component levels. Business capacity is defined by the volume of work that can be handled by the organization, teams, processes and equipment. The goods or service production capacity is defined in terms of the output of goods/parts, or customers serviced per some specified interval. Service capacity is usually associated with costs, such as the need to hire more people or buy more equipment.
Business Capacity
Business capacity is defined by the volume of work that can be handled by the organization, teams, processes and equipment.
The resource view of an organization or any of its parts as a bundle of resources (real assets). Viewing operations as a bundle of real assets is most useful when the decision is on amounts human resources of particular role types that the operation needs. This investment or capital budgeting decision, along with the allocation of resources to activities, is one of the major tasks of management. Viewing operations as a bundle of real assets is most useful when decision on amounts and types of resources the operation needs.
The resources/assets can be categorized into tangible resources (i.e., people/human resources, capital assets – property, plant and equipment), and intangible resources (i.e., relationship with suppliers and customers, intellectual property, reputation and brands, knowledge and experience in processing, technologies and markets).
Production Capacity
Production capacity is defined as the maximum output that an organization can produce with the available resources in a given period. Production capacity can be calculated based on a single type of product or a mix of products.
Manufacturing and service production operations should be driven by capacity considerations not raw material availability in the case of manufacturing. The service production system encompasses processes that define a network of processing centers connected and coordinated by the product routing. A production process is a network of activities with specific precedence relationships among activities - the relationships that specify which activities must be finished before another activity can begin.
[TBD]
Capacity management is focused on the operational capabilities and the operations of manufacturing and service production.
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Goods Production Capacity
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Service Production Capacity
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Capacity Management Decisions
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Goods Manufacturing
All manufacturers set out to perform the same basic function: to transform resources into finished goods. To perform this function in today’s business environment, manufacturers must continually strive to improve operational efficiency. They must fine-tune their production processes to focus on quality, to hold down the costs of materials and labor, and to eliminate all costs that add no value to the finished product. Making the decisions involved in the effort to attain these goals is the job of the operations manager. That person’s responsibilities can be grouped as follows:
[TBD]
Functions related to manufacturing operations may include the following:
The ordinary risks associated with the manufacturing function are those related to markets, equipment, and research and development investments, inventory, defective products, warranty, bad debts, product liability and the environment. The functions and risks have an impact on the profitability of the organization.
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Manufacturing Operations is where people, processes and equipment come together to add value to material and produce goods for sale.
Operations management is important in a business organization because it helps effectively manage, control and supervise goods, services and people.
Goods Manufacturing Systems Capacity
Manufacturing processes create and deliver products and/or parts consumed in the production of goods delivered to customers. A process is a network of activities with specific precedence relationships among activities - the relationships that specify which activities must be finished before another activity can begin.
The manufacturing system capacity can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
[TBD]
These manufacturing and service delivery systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
[TBD]
Manufacturing Operational Decisions
[TBD]
Goods Manufacturing Systems Simulation Model
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Creating a simulation experiment to investigate production (product manufacturing) effective capacity, and capacity decisions related to creation and delivery of value to customers involves:
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
All manufacturers set out to perform the same basic function: to transform resources into finished goods. To perform this function in today’s business environment, manufacturers must continually strive to improve operational efficiency. They must fine-tune their production processes to focus on quality, to hold down the costs of materials and labor, and to eliminate all costs that add no value to the finished product. Making the decisions involved in the effort to attain these goals is the job of the operations manager. That person’s responsibilities can be grouped as follows:
- Production planning - During production planning, managers determine how goods will be produced, where production will take place, and how manufacturing facilities will be laid out.
- Production control - Once the production process is under way, managers must continually schedule and monitor the activities that make up that process. They must solicit and respond to feedback and make adjustments where needed. At this stage, they also oversee the purchasing of raw materials and the handling of inventories.
- Quality control - Finally, the operations manager is directly involved in efforts to ensure that goods are produced according to specifications and that quality standards are maintained.
[TBD]
Functions related to manufacturing operations may include the following:
- Production system design - the design and development of production lines,
- Purchasing - purchasing raw materials and components,
- Supply Chain - selection of raw material suppliers and subcontractors,
- Product development - product design,
- Research and Development - research and development
- Production planning - production planning,
- Production - manufacturing of products,
- Quality management - quality control, and
- Inventory Management - inventory control;
The ordinary risks associated with the manufacturing function are those related to markets, equipment, and research and development investments, inventory, defective products, warranty, bad debts, product liability and the environment. The functions and risks have an impact on the profitability of the organization.
[TBD]
Manufacturing Operations is where people, processes and equipment come together to add value to material and produce goods for sale.
Operations management is important in a business organization because it helps effectively manage, control and supervise goods, services and people.
Goods Manufacturing Systems Capacity
Manufacturing processes create and deliver products and/or parts consumed in the production of goods delivered to customers. A process is a network of activities with specific precedence relationships among activities - the relationships that specify which activities must be finished before another activity can begin.
The manufacturing system capacity can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
[TBD]
These manufacturing and service delivery systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
[TBD]
Manufacturing Operational Decisions
[TBD]
Goods Manufacturing Systems Simulation Model
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Creating a simulation experiment to investigate production (product manufacturing) effective capacity, and capacity decisions related to creation and delivery of value to customers involves:
- Creating product demand forecast model for products and services - This includes information about the average rates at which customers request for products and/or services including the breakdown of customer order request types (e.g., for a coffee shop regular coffee vs. espresso, for a barbershop haircut vs. shaves, etc.) – at different times of the day, and the orders' sizes
- Creating configuration model for the production and/or service delivery functional unit including the configuration model of the people and equipment resources.
- Creating configuration model for the products and services mix offered by the organization
- Creating configuration model for the workforce (people) and their roles as well as their schedules
- Creating configuration model for the equipment including operations and maintenance schedules
- Creating schedules for the organization's operating calendar - workdays, times and holidays.
- Generate/Run operations process simulation models
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Service production Capacity
Services and Service Package
Types of Services
Services, as economic activities, can be classified into different types, such as business services - consulting, banking and financial services; trade services - retailing, maintenance and repair; social/personal services - restaurants and healthcare; public services - government and education; and infrastructure services - transportation and communication.
Service Operations process is an open transformation process of converting inputs (consumers) to desired outputs (satisfied consumers) through the appropriate application of resources (family, material, labor, information, and the consumer as well).
Services can also be categorized into types based on the transformation processes involves, such as:
The variety of services within those categories is endless, there are however, a number of characteristics that most
Service Operations Management
Operations management for services has the functional responsibility for producing the services of an organization and providing them directly to its customers. It specifically deals with decisions required by operations managers for creating service offering. These decisions concern the process, people, information and the system that produces and delivers the service. It differs from operations management in general in manufacturing organization, since the processes of service organizations differ from those of manufacturing organizations.
[TBD]
The service production/delivery system is comprised of a service production system and fulfillment system.
These service delivery systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Service Production Capacity Management
[TBD]
Measuring Performance and Quality Control
The intangibility of services sometimes makes it difficult for the service firm to identify their product. Is the product at a restaurant the food itself, the service, or the atmosphere? Another problem, due to intangibility, is the difficulty in measuring output. Service output tends to be variable and nonstandard, making quality control and productivity measurement a problem. In fact, quality control is usually limited to process control. Even this is difficult since a high degree of personal judgment by the individual performing the service makes homogeneous input a near impossibility. Measures of effectiveness and efficiency are also subjective.
Although services are generally regarded as intangible, that is, you can't see, feel, or test a service's performance before purchasing it. Hence, reputation is extremely important. Since services are intangible, it makes sense that they can't be patented.
Service Production Systems Simulation Model
These service production systems are operations systems whose processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Creating a simulation experiment to investigate production (product manufacturing) effective capacity, and capacity decisions related to creation and delivery of value to customers involves:
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Services and Service Package
Types of Services
Services, as economic activities, can be classified into different types, such as business services - consulting, banking and financial services; trade services - retailing, maintenance and repair; social/personal services - restaurants and healthcare; public services - government and education; and infrastructure services - transportation and communication.
Service Operations process is an open transformation process of converting inputs (consumers) to desired outputs (satisfied consumers) through the appropriate application of resources (family, material, labor, information, and the consumer as well).
Services can also be categorized into types based on the transformation processes involves, such as:
- Consumer Services - Intangible service products or actions that are typically produced and consumed simultaneously. Some common examples are haircuts, auto repairs, and landscaping.
- Producer Services - Intangible service products or actions that produce and deliver goods and services such as consulting advise, legal advise, IT support, transportation and maintenance facilities.
- Retail Services - Retail/Supply Service involve transformation of the ownership of goods involving transfer of ownership from the supplier (service provider) to the customer.
The variety of services within those categories is endless, there are however, a number of characteristics that most
Service Operations Management
Operations management for services has the functional responsibility for producing the services of an organization and providing them directly to its customers. It specifically deals with decisions required by operations managers for creating service offering. These decisions concern the process, people, information and the system that produces and delivers the service. It differs from operations management in general in manufacturing organization, since the processes of service organizations differ from those of manufacturing organizations.
[TBD]
The service production/delivery system is comprised of a service production system and fulfillment system.
These service delivery systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Service Production Capacity Management
[TBD]
Measuring Performance and Quality Control
The intangibility of services sometimes makes it difficult for the service firm to identify their product. Is the product at a restaurant the food itself, the service, or the atmosphere? Another problem, due to intangibility, is the difficulty in measuring output. Service output tends to be variable and nonstandard, making quality control and productivity measurement a problem. In fact, quality control is usually limited to process control. Even this is difficult since a high degree of personal judgment by the individual performing the service makes homogeneous input a near impossibility. Measures of effectiveness and efficiency are also subjective.
Although services are generally regarded as intangible, that is, you can't see, feel, or test a service's performance before purchasing it. Hence, reputation is extremely important. Since services are intangible, it makes sense that they can't be patented.
Service Production Systems Simulation Model
These service production systems are operations systems whose processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Creating a simulation experiment to investigate production (product manufacturing) effective capacity, and capacity decisions related to creation and delivery of value to customers involves:
- Creating product demand forecast model for products and services - This includes information about the average rates at which customers request for products and/or services including the breakdown of customer order request types (e.g., for a coffee shop regular coffee vs. espresso, for a barbershop haircut vs. shaves, etc.) – at different times of the day, and the orders' sizes
- Creating configuration model for the production and/or service delivery functional unit including the configuration model of the people and equipment resources.
- Creating configuration model for the products and services mix offered by the organization
- Creating configuration model for the workforce (people) and their roles as well as their schedules
- Creating configuration model for the equipment including operations and maintenance schedules
- Creating schedules for the organization's operating calendar - workdays, times and holidays.
- Generate/Run operations process simulation models
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Capacity Management Decisions
Production systems operations can be can be visualized through simulation; this enables managers and key operations staff to gain insight into the "real world" capacity problems facing the company, and improves their understanding of the factors that affect production systems output. The simulation and visualization informs decisions on:
[TBD]
Production systems operations can be can be visualized through simulation; this enables managers and key operations staff to gain insight into the "real world" capacity problems facing the company, and improves their understanding of the factors that affect production systems output. The simulation and visualization informs decisions on:
- Supply or Sourcing Decisions - These decisions specify which activities are performed internally, and which activities are outsourced, and how to manage suppliers. Decisions involve defining the process boundaries and interfaces. It includes strategic sourcing decisions, vertical integration, and supply network configuration.
- Technology Decisions - These decisions characterize how to process inputs into outputs. It includes the methods and systems employed, as well as the know-how and intellectual property. The technology decisions can be grouped into the following key categories:
- Coordination and Information technology decisions on how to coordinate, communicate, and plan execution throughout the network. Coordination is typically a managerial activity and includes assignment of responsibility, incentives, measurements and control.
- Product technology decisions in product philosophy, product architecture, and product capabilities;
- Process technology decisions on how to structure the conversion processes and methods used in execution; and
- Transportation technology decisions on how goods are exchanged among different activities in the network. This is a key driver in logistics and supply chain management, as well as how insurance policies are moved between the different processing steps.
- Demand Management Decisions - These decisions specify how to match demand to available supply. These decisions characterize the interfaces and relationships with customers and include demand planning and forecasting, as well as tactical capacity allocation and order management. Demand management is an important driver in inflexible supply processes that cannot quickly adapt to changes in demand such as the core processes in airlines, hotels, hospital wards, and car rental companies, It also relates to service and customer relationship management.
- Improvements and Innovation Decisions - These are decisions on characterizing the processes and incentives to improve and innovate products and processes.
[TBD]
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