Process Capacity Management

BY- PRASHANT SHUKLA

MBA-I
Capacity Management

 Capacity management refers to the strategy applied by businesses to maximize production efficiency
owing to the overall demand for a product or service in the market. Its goals include identifying and
eliminating bottlenecks in the manufacturing process and increasing the production speed by
optimizing available resources and removing time and capacity constraints.
Capacity Management Strategies

 1 – Lag Strategy

 2 – Lead Strategy

 3 – Dynamic Strategy

 4 – Match Strategy
Process Analysis

Process analysis utilizes some analytical mechanism to understand the impact of

 Process design on output, cost or any other performance metric
 Alternative process configurations on the chosen performance metric

Process Flow Charting

Design & Analysis of process begins with identification of
 Activities that constitute the process
 Time taken for each of the activity
 Nature of flow of materials/information in the process.
A Simplified Process Flow Chart
Case of Shirt Manufacturing

Inventory of
Cloth and other
Materials WIP Inventory
Stitching 1
Spreading Cutting
Stitching 2

Pressing And
Assembly
Inspection
Inventory of Shirts
Planning Premises in Process Design

Three generic planning premises are in use in operations management

 Make-to-Stock (MTS): More amenable for systems with fewer product varieties and high production
volume as in the case of continuous and streamlined flow systems
 Assemble-to-order (ATO): Useful for intermittent flow systems catering to the mid-volume mid-
variety situations
 Make-to-order (MTO): Organizations typically belong to manufacturer of high product variety
(jumbled flow process systems) use this planning methodology
Process Analysis
Performance Metrics

 Throughput time: Throughput time (TPUT) is the elapsed time from the first stage of the process to
the last stage of the process. It is also known as lead time.
 Cycle Time: Cycle time is the elapsed time between two successive output from a process that is
continuously operating in a given period of time.
 Bottleneck: That stage of the process that dictates the output of a process is the bottleneck.
 TPUT is a relevant measure for MTO systems.
 Measures such as Cycle Time and Bottleneck are relevant in the case of MTS systems.
Components of Lead Time in Organizations

Actual Lost Time

Operations (Scrap, Rework,
Time Moving Time Unnecessary Activities)
Waiting Time
Between Processing Units, Unclear Instructions, Missing Information,
People across Departments Approvals, Authorizations,
Non-availability of Material & Components,
Resources Awaiting Approvals, Decisions
Time lost in coordination among chain of customers
 Case Summary

 VTL has 2 production units one at Banglore, Karnataka and other at Vellore, Tamilnadu. It manufactures plastic
moulded and sheet metal components.
 The major product manufactured by the company are steering column combination switches for 4 wheelers, parking
lamps, headlamps etc.
 The main manufacturing is done at Banglore plant as it has desired tools and facilities.
Problem
 Increase in demand in automobile segment and demand for new technologies, improved quality and increased capacity.
The major problem attributed to 2 reasons
 High lead time
 High material movement
What is your assessment of problem at VTL? Will efforts to reduce lead time help in
maintaining competitive position

 The main problem that VTL is suffering from is the high lead time and high material movement
(transportation between subunits) that causes delay. This is further compounded by the fact that
they need to produce high quantities of the product owing to greater demand. The higher lead
time increases the work in process inventory which is not a good sign for the company’s
operation. The distances between assembly units can be reduced so as to bring all the units
nearby to the main plant. The reduction of lead time would definitely help VTL to improve its
competitive position. The reduction of lead time will lead to consequent reduction in Work-in-
progress inventory given the constant cycle time. As the work- in- progress decreases, the
associated working capital can also be curtailed. Moreover the company can ensure effective
floor space utilization and handling problems would also be resolved. Other imminent problems
that arise as a result of huge WIP such as quality problems, reduced flexibility etc. can also be
done away with. Reducing lead time will make a significant impact on Vasudhri Tooling Ltd.
 Based on the data available ,list the major causes for long lead time in VTL.

The major causes for the long lead time can be attributed to the fact that unnecessary time is consumed for the high
material movement and multiple inspection process in the same path along others. Soldering sub assembly, riveting, cable
sub assembly and bonding are the stages that require greater time for completion of which the Soldering sub assembly is
the bottleneck activity.
The three areas that need to be improved upon are:
 Inspection points and Storage activity
 Material delivery from other units
 Activities clubbed into various different stations
What should VTL do further in their efforts to reduce lead time? Identify 3 major areas that require
attention for reduction of Lead time. Do you have any suggestions to provide.

 Reducing bottleneck activity time and Automation of processes

One of the main solutions is to device efficient method to reduce bottleneck time. Automation
of the entire process would also be a possible alternative which could greatly improve the
productivity. Another approach can be to reduce the batch sizes, which will reduce the
average Work-in- Process (WIP), which results in lesser bottle-neck times as compared to the
present unreasonable times of more than 24 hours. It would reduce the lead time to a great
extent if implemented in to reduce the lead time.
 Revised Observed lead time and value/non-value added activity times are:

Activity Observed Lead Value - added Non- value Other(dela y) Value added to
Time added lead
time(percentag
e)
Final Assembly 33.5 8.50 1.50 23.50 25.37
Wiring harness 47.25 16.00 7.25 24 33.86
assembly
Wiring harness 31.25 10.40 15.10 6.00 33.28
sub- assembly
Material 6.00 0.75 4.25 1.00 12.50
movement