Managing Constrained Capacity: A Simulation Study

Abstract

This research focuses on the use of constrained capacity availability as a managerial decision variable in production systems. A simulation model was used to evaluate production system performance at various levels of constrained capacity before additional incremental levels of capacity were added. The results indicate that as levels of available capacity approach planned demand levels, or as demand approach capacity levels, the system performance declines. This deterioration of system performance begins at some capacity level higher than average production requirements. That is, at 100% planned capacity utilisation, system performance is considerably degraded, suggesting the need for local managerial manipulation of short-term available capacity levels. In addition, this paper reviews several issues related to constrained capacity and bottleneck management that need clarification.