Capacity planning

Introduction.......

Capacity planning is the process of determining the production capacity needed by an organization to meet in change the demandsfor itsproducts. In capacity planning, "capacity" is the maximum amount of product that an organization is capable of producing in a given period of time.

A discrepancy between the capacity of an organization and the demands of its customers results in inefficiency, either in under-utilized resources or dissatisfied the customers. The goal of capacity planning is to minimize this discrepancy or error in the product. Demand for an organization's capacity varies based on changes in production output, such as increasing or decreasing the production quantity of an existing product, or producing new products. M&M always try that they provide a new product with a better technology.

"Capacity is calculated: (number of machines or workers) × (number of shifts) × (utilization) × (efficiency)."

The broad classes of capacity planning are lead strategy, lag strategy, and match strategy.

Lead strategy is adding capacity in anticipation of an increase in demand. Lead strategy is anaggressive strategywith the goal of luring customers away from the company's competitors.

Lag strategy refers to adding capacity only after the organization is running at full capacity or beyond due to increase in demand (North Carolina State University, 2006). This is a more conservative strategy. It decreases the risk of waste, but it may result in the loss of possible customers.

Match strategy is adding capacity in small amounts in response to changing demand in the market. This is a more moderate strategy.


Step taken by M&M

Tamil Nadu Cabinet Approves Mahindra & Mahindra 's Project At Chennai -Tamil Nadu Cabinet has cleared the proposal of India-based Mahindra & Mahindra to establish an automobile project at Cheyyar near Chennai. The company will be investing INR18bn in the project. The government has allocated 200 acres of the total 450 acres required for the project, which will have a capacity of 150,000. The facility will be used to produce tractors, SUVs and commercial vehicles besides auto parts.

  • Chakan plant to begin production from month-end -M&M will start production from its Chakan plant near Pune. The new plant has a production capacity of 3, 20,000 vehicles in the first phase. The company plans to increase production capacity in future. The Chakan plant will also help to cut logistics cost by up to 5% of the company.

  • M&M Eyes Acquisitions In Electronic Scooter Space - The company plans to make acquisitions in the electronic scooter space. It plans to launch a motorcycle next year. The company is planning to tie-up with cooperatives and grameen banks. The company had entered the two-wheeler market by acquiring the assets of Kinetic Motor in 2008. The company decided to launching scooters and motorcycles. M&M has launched of two new scooters, Rodeo (Rs 41,299) and Duro (Rs 38,299).

  • Mahindra launches compact truck `Gio` - The company launched a compact truck - Gio - meant for intra-city operations. The utility vehicle, priced at Rs 1,650 billion, is aimed particularly at rural and semi-urban consumers. The truck will be available in north, east and west of India. Phase II is expected to be launched in January in the south. The product will be sold in 500 outlets through 152 dealers. The initial production capacity for Gio stands at 20,000 units per annum.

  • M&M likely to buy stake in Swaraj Engines from Kirloskar The company is planning to consolidate its stake in Swaraj Engines. This is a part of company`s plan to expand the diesel engine business. M&M acquired a 33.2% stake in Swaraj Engines and a 14% stake in Swaraj Mazda through its acquisition of Punjab Tractors in 2007. Swaraj Engines, 23 years old, provides diesel engines for Swaraj Tractors. The company was formed in technical collaboration with Kirloskar Oil Engines (KOE), which currently holds a 17% stake in the company. M&M is in talks with KOE to buy out this stake.

  • M&M likely to decide on US plant by mid-2010 -The company is likely to decide by mid-2010, whether it should produce in the US or not. Mahindra, which already sells tractors to US farmers, plans to bring its pickup trucks to US markets in the first quarter of 2010. The company said that if sales are right, they will start manufacturing in the US.

  • Ties up with PNB for vehicle finance The company has entered into an agreement with Punjab National Bank (PNB) for vehicle finance. Following the tie-up, Punjab National Bank will be a preferred financier for Mahindra vehicles. For passenger vehicles, loans will be available at a rate of 10.5% (for up to three years) and 11% (for more than three years). The extent of the loan will be up to 90% of the vehicle`s on-road price for a tenure of seven years.

  • MoU with Bank of Rajasthan for vehicle finance The company signed a MoU with Bank of Rajasthan (BoR) for vehicle finance. As a result of this MoU, Bank of Rajasthan will be a preferred financier for Mahindra vehicles, encompassing both commercial vehicles and passenger vehicles. For commercial vehicle financing, customers can avail of a loan of up to 80% of the vehicle`s on road price (including registration and insurance), with tenure of 5 years at a competitive rate of 12% IRR.

  • M&M, foreign company in discussions to build aircraft

    The company is in advanced talks with a foreign company for manufacturing aircraft.

    The company is also trying to commercialize a five-seater aircraft project that it had initially taken up to showcase its aviation capabilities to prospective foreign partners. Mahindra Aerospace (P), an arm of Mahindra Systech, the group`s automotive division, is planning to seek regulatory approval to launch the aircraft commercially. M&M is likely to join hands with a foreign partner to make 8- and 14-seater aircraft.

  • Mahindra unveils pick-up truck in Australia - Mahindra Automotive Australia (MAA), a joint venture between (JV) Mahindra & Mahindra (M&M) and TMI Pacific, launched its next generation pick-up utility vehicle with additional safety features, interior enhancements and a fresh new look.

Key Concerns

  • Recession in global economy and tight liquidity conditions.

  • Fluctuations in exchange rates.

  • High competition from global as well as domestic players.

  • Increasing number of models in Indian or local market.

  • The growth of mass transit system may reduce the demand for domestic passenger vehicles.

  • Adverse Govt. policies.

Production Processes

Production adds value, or utility, to materials or processes.

There are three basic requirements of production process:

  1. To build and deliver products in response to the demands of the customer at a scheduled delivery time

  2. To provide an acceptable quality level

  3. To provide everything at the lowest possible cost.
  • Process manufacturing physically or chemically changes materials permanently

  • Assembly process puts together components to make a product. Ex. Cars

  • Continuous process is one in which long production runs turn out finished goods over time. The process never stops. Probably has three shifts of workers. Ex. Waste treatment plant,

  • Intermittent process the production run is short and the machines are changed frequently to make different products.
  • The Need to Improve Production Techniques and Cut Costs

    • The ultimate goal of manufacturing and operations management is to provide high-quality goods and services instantaneously in response to customer demand.

    • Over the years, low cost often came at the expense of quality and flexibility.

    Computer Aided Design and Manufacturing - M&M use the new technology CAD and Cam to make a better product .

  • CAD allows designers to work in three dimensions.

  • CAM is the use of computers in the manufacturing of products.

  • CAD/CAM makes it possible to custom design products to meet the needs of small markets with very little increase in cost.

  • A manufacturer programs the computer to make a simple design change, and that change can be incorporated directly into the production line.

  • Computer-integrated manufacturing (CIM) is using expensive software programs to unite CAD with CAM.
  • Flexible Manufacturing

  • Flexible manufacturing involves designing machines to do multiple tasks so that they can produce a variety of products. For the better product with better design M&M use a flexible manufacturing process

  • Manufacturing

    • Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product.

    Mass Customization

    • To customize means to make a unique product or provide a specific service to specific individuals.

    • Mass customization means tailoring products to meet the needs of a large number of individual customers.

    • Customers choose model, size, color, design, etc...

    • Dell, Nike, American Girl, M&Ms, etc...

    • Can be used in the service sector as well. Health clubs, travel agencies, computer software.

    Operations Management Planning

    • Involves many of the same issues in both the service and manufacturing sectors. Facility location, facility layout, materials requirement planning, purchasing, inventory control and quality control.

    Facility Location

    • Facility Location is the process of selecting a geographic location for a company's operations.

    • One strategy is the find a site that makes it easy for consumers to access the company's services and to maintain a dialogue about their needs.

    • Facility location for Manufacturers

    • Issues that influence site selection include labor costs; availability of resources, such as labor; access to transportation that can reduce time to market; proximity to suppliers; proximity to customers; low crime rates; quality of life for employees; cost of living; and the ability to train or retrain the local workforce. M&M select a better Location where he bears a less transportation cost and also a labour cost.

    Facility Layout

    • Facility Layout is the physical arrangement of resources in the production process.

    • The idea is to have offices, machines, storage areas and other items in the best possible position to enable workers to produce goods and provide services for customers.

    • For services, the layout is usually designed to help the consumer find and buy things .

    • A process layout is one in which similar equipment and functions are grouped together.

    • A fixed position layout allows workers to congregate around the product to be completed.

    Materials Requirement Planning (MRP)

    • MRP is a computerbased operations management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place in a specific company.

    • Enterprise Resource Planning (ERP) - M&M use a ERP. It is a computer application that enables multiple firms to manage all of their operations on the basis of a single, integrated set of corporate data.

    Just In Time Inventory Control

    • One major cost of production is holding parts, motors, and other items in storage for later use.

    • Storage not only subjects items to obsolescence, pilferage, and damage but also requires construction and maintenance of costly warehouses.

    • Just in time (JIT) inventory control is a system that keeps a minimum of inventory on the premises—and parts, supplies, and other needs are delivered just in time to go on the assembly line.

    • The process requires excellent coordination with carefully selected suppliers.

    • A manufacturer sets a production schedule (using ERP) to determine what parts and supplies will be needed.

    • Suppliers are connected electronically, so they know immediately what will be needed and when.

    Quality Control

    • Quality Quality is consistently producing that product what the customer wants while reducing errors before and after delivery to the customer.

    • Earlier in the US, quality control was often done by quality control departments at the end of the production line . . . products were completed and then tested.

    • Quality is not an outcome; it is a never-ending process of continually improving what a company produces.

    • Six sigma quality detects potential problems to prevent their occurrence should be just 3.4 defects per million opportunities.

    • tatistical quality control (SQC) is the process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning.

      Statistical process control (SPC) is the process of taking statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards. ISO 9000 and ISO 14000 Standards

    Supply Chain Management Benefit

    supply chain management also plays a large part in reducing costs. Depending on the industry, companies leading in supply chain performance achieve savings equal to three to seven percent of revenues. One Efficient Consumer Response Study, sponsored by M&M , estimated that forty two days could be removed from the typical grocery supply chain, freeing up $30 billion in current costs, and reducing inventories by forty-one percent.


    REQUIREMENTS OF SCM

    CUSTOMER FOCUS.

    All sources agree the fundamental focus of supply chain management begins by understanding the customer, their values, and requirements. This includes internal customers of the organization and the final customer as well. Companies must seek to know exactly what the customer expects from the product or service and must then focus their efforts on meeting these expectations.

    MEASUREMENT.

    M&M undertake ways to improve themselves without also thinking about how to measure whether or not they have been successful. Performance measurement must consider the entire supply chain and be related to the effect on the ultimate goal of customer satisfaction. Therefore the final concept of supply chain management is ensuring measurement techniques are adequately considered during the implementation of supply chain management techniques.

    Conclusion

    M&M is the one of the largest producers of the car and they use the the different technology and strategy to satisfy their customer. For the satisfaction for the customer the tie up with the different bank like PNB and Rajasthan bank so that these bank provide the loan to the customer so that they easily buy M&M product. And also they launch their New product time to time so that customer buy more and more also they have use capacity planning to increase the demand of the product and consumer buy more and more. M&M also tie up with the foreign company to make his product to provide foreign technology to customer. M&M has also a plant layout where they manufacture their Product and easily provide to the customer. M&M is also used a different type of technology like CAD, CAM to design their product and it is also a way to attract a customer towards itself. And also M&M is good inventory system Good Quality System and Also a good supply chain management. These all is helpful to making a good organization among their competitors. In the end M&M has all the Facility All the strategy all the planning which makes a better automobile industry.

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