___________________________________ 

MGS4700 Operations Management

___________________________________ 
Capacity and Facilities
___________________________________ 

___________________________________ 
Lecture 6
___________________________________ 

___________________________________ 

___________________________________ 
 

___________________________________ 

Lecture Outline ___________________________________ 

¾ Capacity Planning ___________________________________ 

¾ Facility Layout
„ Basic Layouts
___________________________________ 
„ Designing Process Layouts
„ Designing Service Layouts ___________________________________ 
„ Designing Product Layouts
„ Hybrid Layouts ___________________________________ 
¾ Facility Location
„ Location Analysis Techniques ___________________________________ 
2
 

___________________________________ 

Capacity ___________________________________ 

___________________________________ 
Š Maximum capability to produce
Š Capacity planning ___________________________________ 
„ establishes overall level of productive
resources for a firm ___________________________________ 
Š 3 basic strategies for timing of capacity
expansion in relation to steady growth in ___________________________________ 
demand (lead, lag, and average)
___________________________________ 
3
 
 Capacity Expansion Strategies ___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 
4
 

___________________________________ 

Capacity (cont.) ___________________________________ 

Š Capacity increase depends on ___________________________________ 

„ volume and certainty of anticipated demand
„ strategic objectives ___________________________________ 
„ costs of expansion and operation
Š Best operating level ___________________________________ 
„ % of capacity utilization that minimizes unit costs
Š Capacity cushion ___________________________________ 
„ % of capacity held in reserve for unexpected
occurrences
___________________________________ 
5
 

___________________________________ 

Economies of Scale ___________________________________ 

___________________________________ 
Š it costs less per unit to produce high levels of
output
„ fixed costs can be spread over a larger number of ___________________________________ 
units
„ production or operating costs do not increase ___________________________________ 
linearly with output levels
„ quantity discounts are available for material
purchases ___________________________________ 
„ operating efficiency increases as workers gain
experience
___________________________________ 
6
 
 ___________________________________ 

Best Operating Level for a Hotel ___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 
7
 

___________________________________ 

Facility Layout ___________________________________ 

___________________________________ 
Š Facility layout refers to the arrangement of
machines, departments, workstations, storage
___________________________________ 
areas, and common areas within an existing
or proposed facility. ___________________________________ 

___________________________________ 

___________________________________ 
8
 

___________________________________ 

Benefits of An Effective Layout ___________________________________ 

___________________________________ 
Š Overall, improved effectiveness and
efficiency of the operations system
„ Higher utilization of space, equipment, and labor ___________________________________ 
„ Improved flow of information, materials, and work
„ Lower material handling costs and/or redundant
movement
___________________________________ 
„ Reduced bottlenecks, cycle time, and service time
„ Higher product and service quality ___________________________________ 
„ More convenience to the customer
„ Improved employee morale and working conditions
„ Etc. ___________________________________ 
9
 
 ___________________________________ 

BASIC LAYOUTS ___________________________________ 

Š Process layouts ___________________________________ 

„ group similar activities together into departments or
work centers according to process or function they ___________________________________ 
perform
Š Product layouts ___________________________________ 
„ arrange activities in line according to sequence of
operations for a particular product or service
___________________________________ 
Š Fixed-position layouts
„ are used for projects in which product cannot be
moved ___________________________________ 
10
 

___________________________________ 

Process Layout ___________________________________ 

in Services
___________________________________ 
Women’s
lingerie Shoes Housewares
___________________________________ 

Women’s Cosmetics Children’s ___________________________________ 

dresses and Jewelry department
___________________________________ 
Women’s Entry and Men’s
sportswear display area department
___________________________________ 
11
 

___________________________________ 

Process Layout in Manufacturing ___________________________________ 

Milling
Lathe Department Department Drilling Department ___________________________________ 
M M D D D D
L L

M M D D D D ___________________________________ 
L L

G G G P ___________________________________ 
L L

G G G P
L L ___________________________________ 
Grinding Painting Department
Department
L L
A A A
Receiving and
Shipping
___________________________________ 
Assembly
12
 
 ___________________________________ 

A Product Layout ___________________________________ 

___________________________________ 
In
___________________________________ 

___________________________________ 

___________________________________ 
Out
___________________________________ 
13
 

___________________________________ 
Product Layout Examples
___________________________________ 
Assembly Lines
___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 

Generator assembly line Oil refinery

___________________________________ 
14
 

___________________________________ 

Product Layout in Services ___________________________________ 

___________________________________ 
Out of State Driver License Transfer Example
1) Review 2) Eye 3) Check
application Test file for ___________________________________ 
60 seconds 120 violations
seconds 60 seconds

___________________________________ 

4) Payment 5) Photo 6) Issue the

License
___________________________________ 
30 seconds 30 seconds 50 seconds

___________________________________ 
15
 
 ___________________________________ 

Comparison of Product
___________________________________ 
and Process Layouts
___________________________________ 
Product Process
Š Description Š Sequential Š Functional grouping
arrangement of of activities ___________________________________ 
activities
Š Type of process Š Continuous, mass Š Intermittent, job
production, mainly shop, batch ___________________________________ 
assembly production, mainly
fabrication
Š Product Š Standardized, made Š Varied, made to
to stock order
___________________________________ 
Š Demand Š Stable Š Fluctuating
Š Volume Š High Š Low
Š Equipment Š Special purpose Š General purpose ___________________________________ 
16
 

___________________________________ 

Comparison of Product ___________________________________ 

and Process Layouts
___________________________________ 
Product Process
Š Workers Š Limited skills Š Varied skills
Š Inventory Š Low in-process, high Š High in-process, low ___________________________________ 
finished goods finished goods
Š Storage space Š Small Š Large
Š Material handling Š Fixed path (conveyor) Š Variable path (forklift) ___________________________________ 
Š Aisles Š Narrow Š Wide
Š Scheduling Š Part of balancing Š Dynamic
Š Layout decision Š Line balancing Š Machine location
Š Goal Š Equalize work at each Š Minimize material
___________________________________ 
station handling cost
Š Advantage Š Efficiency Š Flexibility
___________________________________ 
17
 

___________________________________ 

Fixed-Position Layouts ___________________________________ 

ƒ Typical of projects in which ___________________________________ 

product produced is too
fragile, bulky, or heavy to ___________________________________ 
move
ƒ Equipment, workers,
materials, other resources ___________________________________ 
brought to the site
ƒ Low equipment utilization ___________________________________ 
ƒ Highly skilled labor
ƒ Often low fixed cost ___________________________________ 
ƒ Typically high variable costs
18
 
 ___________________________________ 

Designing Process Layouts ___________________________________ 

___________________________________ 
Š Goal: minimize material handling costs
Š Block Diagramming ___________________________________ 
ƒ minimize nonadjacent loads
ƒ used when quantitative data is available ___________________________________ 
Š Relationship Diagramming
ƒ based on location preference between areas ___________________________________ 
ƒ used when quantitative data is not available
___________________________________ 
19
 

___________________________________ 

Designing Product Layouts ___________________________________ 

___________________________________ 
Š Objective
„ Balance the assembly line ___________________________________ 
Š Line Balancing Problem
„ how to organize work elements (smallest ___________________________________ 
possible jobs or tasks) such that each
workstation has the same work load/time for ___________________________________ 
processing a unit
___________________________________ 
20
 

___________________________________ 

A Balanced Line ___________________________________ 

Every operation step in the process has the same cycle time
___________________________________ 
1) Review application 2) Eye Test 3) Check file
for violations
60 seconds 60 seconds
60 seconds
___________________________________ 

___________________________________ 
4) Payment 5) Photo 6) Issue the
License
60 seconds 60 seconds
60 seconds

In summary:
___________________________________ 
If each workstation on the assembly line takes the same amount of
time to perform the work elements that have been assigned, then
products will move smoothly from workstation to workstation with ___________________________________ 
no need for a product to wait or a worker to be idle.
21
 
 ___________________________________ 

An Unbalanced Line ___________________________________ 

___________________________________ 
Station 1 Station 2 Station 3
1 2 3 4 5 6 ___________________________________ 
Work 5 min/unit 8 min/unit 3 min/unit
element ___________________________________ 

What’s the problem here?

___________________________________ 

___________________________________ 
22
 

___________________________________ 

Line Balancing ___________________________________ 

___________________________________ 
Š Line balancing tries to equalize the
amount of work at each workstation ___________________________________ 
Š Two constraints in line balancing:
ƒ Precedence requirements ___________________________________ 
ƒ Cycle time restrictions
___________________________________ 

___________________________________ 
23
 

___________________________________ 

Precedence Requirement ___________________________________ 

___________________________________ 
Š Precedence requirements are physical restrictions on
the order in which operations are performed.
___________________________________ 
Work Element Precedence Time (Seconds)
A Review application --- 60 ___________________________________ 
B Eye test A 120
C Check file for violations B 60
D Payment C 30 ___________________________________ 
E Photo D 30
F Issue the license E 50 ___________________________________ 
24
 
 ___________________________________ 

Cycle Time Restrictions ___________________________________ 

___________________________________ 
Š Cycle time
„ Maximum amount of time a product is allowed to
spend at each station ___________________________________ 
Š Desired cycle time
Desired cycle time depends on demand requirement ___________________________________ 
Production time available
Cd =
Desired units of output
___________________________________ 
In order to achieve the production requirement (quota),
Actual cycle time ≤ Desired cycle time ___________________________________ 
25
 

___________________________________ 

Cycle Time Example ___________________________________ 

___________________________________ 
production time available
Cd = desired units of output
___________________________________ 

(8 hours x 60 minutes / hour)

Cd = ___________________________________ 
(120 units)
480
Cd = 120 = 4 minutes ___________________________________ 

___________________________________ 
26
 

___________________________________ 

Cycle Time vs. Flow Time ___________________________________ 

___________________________________ 
Š Cycle time = max time spent at any station
Š Flow time = time to complete all stations
___________________________________ 

1 2 3 ___________________________________ 
4 minutes 4 minutes 4 minutes

___________________________________ 
Flow time = 4 + 4 + 4 = 12 minutes
Cycle time = max (4, 4, 4) = 4 minutes
___________________________________ 
27
 
 ___________________________________ 
Line Balancing
___________________________________ 
Performance Measures
Minimum number ___________________________________ 
Efficiency of workstations
j j
___________________________________ 
∑t
i=1
i ∑t
i=1
i

E= N= ___________________________________ 
nCa Cd
where
ti = completion time for element i ___________________________________ 
j = number of work elements
n = actual number of workstations
Ca = actual cycle time ___________________________________ 
Cd = desired cycle time
28
 

___________________________________ 

Line Balancing Procedure ___________________________________ 

1. Draw and label a precedence diagram ___________________________________ 

2. Calculate desired cycle time required for the line
3. Calculate theoretical minimum number of ___________________________________ 
workstations
4. Group elements into workstations, recognizing ___________________________________ 
cycle time and precedence constraints
5. Calculate efficiency of the line ___________________________________ 
6. Determine if the theoretical minimum number of
workstations or an acceptable efficiency level has
been reached. If not, go back to step 4.
___________________________________ 
29
 

___________________________________ 
Line Balancing
___________________________________ 
Example (Problem 7-18)
The Speedy Pizza Palace is revamping its order-
___________________________________ 
processing and pizza-making procedures. The demand for
pizzas is 120 per night (5:00 p.m. to 1:00 a.m.). In order to
deliver fresh pizza fast, six elements must be completed.
___________________________________ 
Work Element Precedence Time (Minutes)
A Receive order --- 2 ___________________________________ 
B Shape dough A 1
C Prepare toppings A 2 ___________________________________ 
D Assemble pizza B,C 3
E Bake pizza D 3
F Deliver pizza E 3
___________________________________ 
30
 
 ___________________________________ 

Step 1: Draw and label a precedence ___________________________________ 

diagram
___________________________________ 
1

B
2 3 3 3 ___________________________________ 
A D E F

___________________________________ 
C Work Element Precedence Time
2 A Receive order --- 2
B Shape dough A 1 ___________________________________ 
C Prepare toppings A 2
D Assemble pizza B,C 3
E Bake pizza D 3
F Deliver pizza E 3
___________________________________ 
31
 

___________________________________ 

Step 2: Calculate the desired cycle ___________________________________ 

time required for the line
___________________________________ 
Desired cycle time
Production time available ___________________________________ 
Cd =
Desired units of output
___________________________________ 
Desired units of output = 120 per night

Production time available = 8 hours X 60= 480 minutes ___________________________________ 

Cd = 480/120= 4 minutes
___________________________________ 
32
 

___________________________________ 

Step 3: Calculate the theoretical ___________________________________ 

minimum number of workstations
___________________________________ 
The theoretic minimum number of workstations
j

∑t i
ti = completion time for element i
___________________________________ 
N = i =1 j = number of work elements
Cd Cd = desired cycle time
___________________________________ 
j

∑t i
2 + 1 + 2 + 3 + 3 + 3 14
N = i =1
= = = 3 .5 → 4 ___________________________________ 
Cd 4 4

___________________________________ 
33
 
 ___________________________________ 

Step 4: Group elements into ___________________________________ 

workstations
Recognize there are cycle time and precedence constraints. ___________________________________ 
1

B ___________________________________ 
2 3 3 3

A D E F
___________________________________ 
C
2 ___________________________________ 

Actual cycle time = 4 minutes

Actual number of workstations =
___________________________________ 
4
34
 

___________________________________ 

Step 5: Calculate the efficiency ___________________________________ 

of the line
j ___________________________________ 
∑t i
Efficiency of the line: E = i =1

nC a ___________________________________ 
ti = completion time for element i
j = number of work elements ___________________________________ 
n = actual number of workstations
Ca = actual cycle time
j
___________________________________ 
∑t i
2 + 1 + 2 + 3 + 3 + 3 14
E= i =1
= = = 87.5% ___________________________________ 
nCa 4× 4 16
35
 

___________________________________ 

Step 6: Check if performance ___________________________________ 

measure(s) are satisfactory or not
___________________________________ 
Actual number of workstations = 4
Efficiency of the line = 87.5% ___________________________________ 
Theoretic number of workstations = 4
___________________________________ 

___________________________________ 

___________________________________ 
36
 
 ___________________________________ 
Which Performance Measure to Use?
___________________________________ 
Number of Workstations or Efficiency?
___________________________________ 
Š Ideally we would like to have the minimum
number of workstations and also the highest ___________________________________ 
efficiency.
___________________________________ 
Š If there is inconsistency between these two
measures, generally go with the minimum
number of workstations. ___________________________________ 

___________________________________ 
37
 

___________________________________ 
Number of Workstations or Efficiency?
___________________________________ 
Example
1 ___________________________________ 
B
2 3 3 3
___________________________________ 
A D E F

C ___________________________________ 
2

Actual cycle time = 3 minutes ___________________________________ 

Actual number of workstations = 5
j

∑t i
2 +1+ 2 + 3 + 3 + 3 14 ___________________________________ 
Efficiency: E= i =1
= = = 93.3%
nCa 5∗3 15 38
 

___________________________________ 
In-Class Exercise
___________________________________ 
Problem 7-17 (p. 283)
The TLB Yogurt Company must be able to make 600 party ___________________________________ 
cakes in a 40 hour week. Use the following information to draw
and label a precedence diagram, compute cycle time, compute ___________________________________ 
the theoretical minimum number of workstations, balance the
assembly line, and calculate its efficiency.
Task Precedence Time (mins) ___________________________________ 
A -- 1
B A 2 ___________________________________ 
C B 2
D A, E 4
E -- 3 ___________________________________ 
F C, D 4 39
 
 ___________________________________ 

Hybrid Layouts ___________________________________ 

___________________________________ 
Š Cellular layouts
„ group dissimilar machines into work centers
(called cells) that process families of parts with ___________________________________ 
similar shapes or processing requirements
Š Flexible manufacturing system
___________________________________ 
„ automated machining and material handling
systems which can produce an enormous variety
of items ___________________________________ 
Š Mixed-model assembly line
„ processes more than one product model in one
line ___________________________________ 
40
 

___________________________________ 

Cellular Layout ___________________________________ 

___________________________________ 
Š Combines the flexibility of a process layout and
the efficiency of a product layout. ___________________________________ 
Š Within one cell, layout of machines resembles
a small assembly line. The layout between
___________________________________ 
cells is a process layout.
Š Cells are arranged in relation to each other so
___________________________________ 
as to minimize material movement.

___________________________________ 
41
 

___________________________________ 

Cellular Layouts ___________________________________ 

___________________________________ 
1. Identify families of parts with similar flow paths
2. Group machines into cells based on part ___________________________________ 
families
3. Arrange cells so material movement is ___________________________________ 
minimized
4. Locate large shared machines at point of use ___________________________________ 

___________________________________ 
42
 
 ___________________________________ 

Parts Families ___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 

___________________________________ 
A family of A family of related
similar parts grocery items ___________________________________ 
43
 

___________________________________ 

Original Process Layout ___________________________________ 

___________________________________ 
Assembly

___________________________________ 
4 6 7 9

5 8 ___________________________________ 
2 10 12
___________________________________ 
1 3 11

A B C Raw materials
___________________________________ 
44
 

___________________________________ 

Revised Cellular Layout ___________________________________ 

___________________________________ 
Assembly

8 10 9 12 ___________________________________ 
11
4 Cell 1 Cell 2 6 Cell 3
___________________________________ 
7
___________________________________ 
2 1 3 5

A B C ___________________________________ 
Raw materials
45
 
 ___________________________________ 
Direction of part movement within cell
A Manufacturing Cell
with Worker Paths HM
Source: J.T. Black, “Cellular Manufacturing
Systems Reduce Setup Time, Make Small Lot
___________________________________ 
Production Economical.” Industrial VM
Engineering (November 1983).

Worker 3
VM ___________________________________ 
L

Paths of three ___________________________________ 

workers moving
within cell
Worker 2
G
Material
movement
___________________________________ 
L

Key: Final

S = Saw
inspection
___________________________________ 
L = Lathe
HM = Horizontal milling machine Finished

VM = Vertical milling machine S Worker 1 part

G = Grinder
In Out ___________________________________ 
46
 

___________________________________ 

Advantages and Disadvantages ___________________________________ 

of Cellular Layouts
Advantages
Š Reduced material
handling and transit time Š Poorly balanced cells
Š Reduced setup time
Š Reduced work-in- process
inventory
Š Better use of human
resources
Š Easier to control
Š Easier to automate
___________________________________ 
Disadvantages
Š Inadequate part families
___________________________________ 
Š Expanded training and
___________________________________ 
scheduling of workers
Š Increased capital
___________________________________ 
investment
___________________________________ 
47

___________________________________ 

Flexible Manufacturing ___________________________________ 

Systems (FMS)
CNC ___________________________________ 
Parts

Computer
___________________________________ 
control
room Terminal

Pallet Finished ___________________________________ 

goods
CNC
Automatic tool
changer
___________________________________ 
Š CNC (computer numerical controlled) are machines that are
controlled by computer software.
Š FMS: CNC machines + automated material handling system (e.g.,
conveyors, AGV, robots) ___________________________________ 
Š FMS can produce an enormous variety of items 48
 
 ___________________________________ 

Mixed Model ___________________________________ 

Assembly Lines
___________________________________ 
Š Produce multiple
models in any order
___________________________________ 
on one assembly line
Š Issues in mixed
model lines ___________________________________ 
ƒ Line balancing
ƒ U-shaped line ___________________________________ 
ƒ Flexible workforce
ƒ Model sequencing ___________________________________ 
49
 

___________________________________ 

Balancing U-Shaped Lines

___________________________________ 
Precedence diagram:

A B C
___________________________________ 
Cycle time = 12 min
D E
___________________________________ 
(a) Balanced for a straight line (b) Balanced for a U-shaped line

A,B C,D E
A,B
___________________________________ 
9 min 12 min 3 min
24 24
Efficiency = = = .6666 = 66.7 %
3(12) 36 C,D ___________________________________ 
E

Efficiency =
24
=
24
= 100 % 12 min 12 min
___________________________________ 
2(12) 24
50
 

___________________________________ 

Facility Location: ___________________________________ 

Factors affecting location
Š Heavy Manufacturing ___________________________________ 
ƒ Land and Construction costs
ƒ Raw material & finished goods shipment modes ___________________________________ 
ƒ Proximity to raw materials, utilities, and labor
Š Light Industry
ƒ Transportation costs – accessible geographic ___________________________________ 
region
ƒ Proximity to markets
ƒ Land costs ___________________________________ 
Š Retail & Service
ƒ Proximity to customers -- Location is everything ___________________________________ 
51
 
 ___________________________________ 

Location Analysis Techniques ___________________________________ 

___________________________________ 
ƒ Location factor rating
___________________________________ 

ƒ Center-of-gravity ___________________________________ 

ƒ Load Distance ___________________________________ 

___________________________________ 
52
 

___________________________________ 

Center-of-Gravity Technique ___________________________________ 

___________________________________ 
Š Locate facility at center of geographic area
Š It considers the existing facilities, the distance ___________________________________ 
between them, and the weights (or volumes)
of goods to be shipped
___________________________________ 
Š This methodology involves formulas used to
compute the coordinates of the two-
dimensional point on a grid-map ___________________________________ 

___________________________________ 
53
 

___________________________________ 

Grid-Map Coordinates ___________________________________ 

y n n
∑ xiWi ∑ yiWi ___________________________________ 
2 (x2, y2), W2 i=1 i=1
y2 x= n y= n
∑ Wi ∑ Wi ___________________________________ 
1 (x1, y1), W1 i=1 i=1
y1
where,

3 (x3, y3), W3
x, y = coordinates of new facility ___________________________________ 
at center of gravity
y3 xi, yi = coordinates of existing
facility i
Wi = annual weight shipped from ___________________________________ 
facility i

x1 x2 x3 x ___________________________________ 
54
 
 ___________________________________ 
Center-of-Gravity Technique:
___________________________________ 
Example
y I-77 I-85 Airport ___________________________________ 
35 x 14 20 30
I-77 y 30 8 14
30 (17k) W 17,000 12,000 9,000 ___________________________________ 
25
Miles

20 ___________________________________ 
Airport
15 (9k)
10 I-85
(12k) ___________________________________ 
5

0 5 10 15 20 25 30 35 x ___________________________________ 
Miles
55
 

___________________________________ 
Center-of-Gravity Technique:
___________________________________ 
Example
___________________________________ 
n
∑ xiWi
i=1 (14)(17000) + (20)(12000) + (30)(9000)
x=
n
= = 19.68 ___________________________________ 
17000 + 12000 + 9000
∑ Wi
i=1
___________________________________ 
n
∑ yiWi
i=1 (30)(17000) + (8)(12000) + (14)(9000) ___________________________________ 
y= = = 19.26
n 17000 + 12000 + 9000
∑ Wi
i=1
___________________________________ 
56
 

___________________________________ 

Center-of-Gravity Technique:
___________________________________ 
Example
y I-77 I-85 Airport ___________________________________ 
35 x 14 20 30
I-77 y 30 8 14
30 (17k) W 17,000 12,000 9,000 ___________________________________ 
25
Center of gravity (19.68, 19.26)
Miles

20 ___________________________________ 
Airport
15 (9k)
10 I-85
(12k) ___________________________________ 
5

0 5 10 15 20 25 30 35 x ___________________________________ 
Miles
57