CFD Handout

OPERATIONS MANAGEMENT
Chapter 7
Capacity
&
Facilities Design
Alexander Solodkin
Learning Objectives
• Evaluate different strategies for capacity expansion
• Explain the concepts of economies of scale, best operating
level, and cycle time
• Describe the advantages and disadvantages of different
types of layouts in both manufacturing and service settings
• Visualize work flow and utilize algorithmic problem solving
to lay out a facility
• Create and evaluate hybrid layouts and hybrid solutions to
problems
• Prepare for exam
Copyright ©2017 John Wiley & Sons, Inc. 7-2

Overview of Capacity Design Principles
• Successful capacity design is shaped by the
following principles:
• Achieve profit goals, sustainability, and manageability.
• Balance competing resources, conflicting constraints,
and diverse constituencies.
• Involve management and the workforce in the design of
products and processes.
• Successful design requires understanding the
application of these principles at three levels:
• local
• network
• global
Adapted from: APICS Instructor Kit. (January 2015), CPIM: Execution and Control of Operations. ECO 7-6 7-3
Local Design Principles
• Meet customer lead-time expectations.
• Meet product design and quality requirements.
• Meet product variety and flexibility requirements.
• Meet quantity and capacity requirements.
• Consider buying rather than making components.
Adapted from: APICS Instructor Kit. (January 2015), CPIM: Execution and Control of Operations. ECO 7-7 7-4
Other Design Principles and Tradeoffs
• Decoupling point
• the point in the process at which customer demand
meets supplier inventory
• Make-to-Stock (MTS) – finished goods
• Make-to-Order (MTO) – raw material inventory
• Assemble-to-Order (ATO) - subassemblies
• Technology and equipment choices
• Intermittent processes – flexible machines and workers
• Repetitive / mass / continuous production processes –
highly specialized equipment / heavy capital investment
• Job design
Adapted from: APICS Instructor Kit. (January 2015), CPIM: Execution and Control of Operations. ECO 7-10
7-5
Capacity Planning
• Capacity
• maximum capability to produce
• Capacity planning
• establishes overall level of productive resources for a
firm
• Capacity expansion strategy in relation to steady
growth in demand
• lead
• lag
• average

Capacity Planning Issues
• Advantages and disadvantages of large- and
small-scale operations and facilities
• Timing of changes in capacity: lead or lag
strategies
Adapted from: APICS Instructor Kit. (January 2015), CPIM: Strategic Management of Resources. SMR 5-14
7-7
Basic Capacity Planning Tradeoff
• Basic tradeoff is between
- high utilization and low average costs of large-scale
operations and facilities
- customer service and market responsiveness of many
small-scale production operations and facilities.
• Tradeoff resolution is based on the performance
objective that best fits the competitive strategy.
7-8
Large-Scale Operations
Advantages Disadvantages
 Economies of scale  Less flexibility of
equipment, workers
 Average cost per unit
decreases as utilization  Worker skill requirements
increases are potentially not as
challenging as in small-
 Good fit for high-volume,
scale operations
low-variety products
 Diseconomies of scale
 Flexibility to adjust
volumes
7-9
Small-Scale Operations
Advantages Disadvantages
 Locate near local  Average production cost
knowledge networks per unit is higher than for
large-scale operations
 Respond faster to regional
needs and trends
 Agile and more
entrepreneurial
management
7-10
Alternatives for Adding Capacity
New large-scale facilities New small-scale facilities
 High overcapacity until  Less overcapacity as demand
demand catches up with catches up with capacity
capacity
 Possible lower initial unit costs
 Initial higher unit costs
7-11
Capacity Addition Comparison
Excess
capacity Demand
Capacity expansion plan based on three 400-units-per-week plants

1,200
800
400
Capacity expansion plan based on one 1,200-units-per-week plant

1,200
Year 1 Year 2 Year 3
Based on: Operations Strategy, Slack and Lewis, 3rd ed. 7-12
Capacity Expansion Strategies
Copyright ©2017 John Wiley & Sons, Inc.

7-13
Lead and Lag Capacity
X = has relative advantage in terms of the characteristic
Characteristics Lead strategy Lag strategy

Low risk of temporary capacity insufficiency X
High plant utilization percent X
Cushion against pessimistic forecast error X
Delayed capital spending X
Low risk of permanent overcapacity X
Low unit cost of production X
Customer satisfaction X
Revenue maximization potential X
Flexibility to meet unexpected demand X
Smoothing of inventory levels X
7-14
Capacity Expansion
• Capacity increase depends on
• volume and certainty of anticipated demand
• strategic objectives
• costs of expansion and operation
• Best operating level
• % of capacity utilization that minimizes unit costs
• Capacity cushion
• % of capacity held in reserve for unexpected
occurrences

Economies of Scale
• Unit cost decreases as output volume increases
• 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
• Diseconomies of scale
• higher levels of output cost more per unit to produce
• Complexity increase
• Lower utilization

Best Operating Level for a Hotel

Facility Layout
• arrangement of activities, processes,

departments, workstations, storage areas, aisles,
and common areas within an existing or
proposed facility
• that ensures a smooth flow of work, material, people,
and information through the system
Source: Roberta S. Russell, Bernard W. Taylor (2017) Operations and Supply Chain Management, 9th Edition, Wiley, Hoboken, N.J. p 258
7-18
Objectives of Facility Layout
• Minimize material-handling costs
• Utilize space and labor efficiently
• Eliminate bottlenecks and wasted or redundant movement
• Facilitate communication and interaction
• Reduce manufacturing cycle time and customer service time
• Facilitate entry, exit, and placement of material, products, and people
• Incorporate safety and security measures
• Promote product and service quality
• Encourage proper maintenance activities
• Provide a visual control of activities and flexibility to adapt to changing
conditions
• Increase capacity

Basic Layouts
• Process (Functional) layouts
• group similar activities together according to process
or function they perform
• Service shops, Job shops, Batch production
• Product layouts (Assembly lines)
• arrange activities in line according to sequence of
operations for a particular product or service
• Mass production / Repetitive operations
• Fixed-position layouts
• are used for projects in which product cannot be
moved
• Individual projects

A Process Layout in Services
Women’s
Shoes Housewares
lingerie
Women’s Cosmetics Children’s

dresses and jewelry department
Women’s Entry and Men’s

sportswear display area department

A Process Layout in Manufacturing

Process and Layout Choices
High = Manufacturing environment
Process
layouts
cell
fixed position Production
functional processes
product batch
ETO mass/continuous
intermittent
Variety
repetitive
project
VL MTO
Customer lead time ATO

M
Very long (VL)
Long (L) S
Medium (M)
MTS
Short (S) VS
Very short (VS)
Low High
Volume
7-23
Process Layouts
Based around High
process resources Fixed position
layout
Functional
layout
Cell layout
Process Product
layout layout
Variety
Based around
Products and services
Volume High
Adaptation from APICS Instructor Kit. (January 2015), CPIM: Strategic Management of Resources. SMR 3-24
Layout Selection
Service
Manufacturing
Potential layout types process
process type
types
Fixed-position layout
Project Fixed position layout
Functional layout Professional
Functional layout
service
Cell layout
Functional layout
Jobbing
Cell layout
Functional layout Functional layout

Batch Service shop
Cell layout Cell layout
Cell layout
Repetitive
Product layout
Cell layout
Mass/ Mass service
Product layout Product layout
continuous
Layout Characteristics
Layout types
Characteristics Fixed position Functional Cell Product
Unit cost High Medium Medium Low
Work in process High High Medium Low
Product mix flexibility High High Medium Low
Variety of tasks for workers High High Medium Low
Plant utilization Low Medium High High
Ease of plant and worker supervision Low Low High High
Cost of plant and equipment Low Low Medium High
Ease of scheduling Low Low Medium High
Throughput Low Low High High
cost dependability speed
Worker involvement High
flexibility High
quality High Low
Complexity of flow Low High Medium Low
Need for specialized equipment Low Low Medium High
A Product Layout

Workplace Design
• Supports continuous improvement in
standardized work
• Supports standardized work principles of
economy of motion and workplace ergonomics
• “standardized work” - work that adheres to a
number of core standards
• based on principles of motion economy and ergonomics
• in the case of lean - takt time, work sequence, WIP
• Needs to address
• choice and improvement of layout design to
improve flow
• efficient layout of tools and equipment
7-28
Layout of Tools and Equipment
Principles Techniques
 Economy of motion  Establish home positions for
tools and materials.
 Visibility
 Place tools and material in
 Ergonomics convenient and visible location.
 Adjust location of equipment as
necessary.
 Facilitate horizontal material
movement; avoid vertical.
 Accommodate short and tall
operators.
 Ensure adequate lighting.
 Use color coding
7-29
Four Layouts
M/C M/C
Islands Fork lift Fork lift
Connected M/C M/C

islands
Chute Chute
Connected
islands with M/C M/C
full work
control Signal Signal
Cells M/C M/C M/C

(continuous
flow)
M/C: machine center
Based on: Lean Production Simplified, Dennis, 2nd ed., 2007, Productivity Press 7-30
Designing Process Layouts
• Goal: minimize material handling costs

• Block Diagramming
• minimize nonadjacent loads
• use when quantitative data is available
• Relationship Diagramming
• based on location preference between areas
• use when quantitative data is not available

Block Diagramming
• Unit load • Steps
• quantity in which • create load summary chart
material is normally • gives the average number of
moved unit load transported between
departments over a given
• Nonadjacent load period of time
• distance farther • calculate composite (two
than the next block way) movements and rank
them from most to least
movement
• develop trial layouts
minimizing number of
nonadjacent loads (distance
father than the next block)
Block Diagramming: Example
Load Summary Chart
FROM/TO DEPARTMENT
1 2 3
Department 1 2 3 4 5
1 — 100 50
2 — 200 50
4 5 3 60 — 40 50
4 100 — 60
5 50 —

Nonadjacent Loads
2 3 200 loads
110+40=150
2 4 150 loads
1 3 110 loads 110
1 2 100 loads
4 5 60 loads 100 200
1 2 3
3 5 50 loads
2 5 50 loads 150 50 50
3 4 40 loads 60
4 5
1 4 0 loads
1 5 0 loads Grid 1
40

Nonadjacent Loads: 0
2 3 200 loads
2 4 150 loads
1 3 110 loads
1 2 100 loads
100 150
4 5 60 loads 1 2 4
3 5 50 loads 200 50 40 60
2 5 50 loads 110
50
3 4 40 loads 3 5
1 4 0 loads
1 5 0 loads Grid 2

• Block Diagram
• type of schematic layout diagram that includes space requirements
(a) Initial block diagram (b) Final block diagram
1 4
1 2 4 2
3 5 3 5

Relationship Diagramming
• Schematic diagram that uses

weighted lines to denote
location preference
• Muther’s grid
format for displaying manager
preferences for department
locations

Muther’s Grid

(a) Relationship diagram of original layout
Offices Locker Shipping

room and
receiving
Key: A
E
I
Stockroom Toolroom Production
O
U
X

(b) Relationship diagram of revised layout
Stockroom
Offices Shipping
and
receiving
Locker Key: A
Toolroom Production
room E
I
O
U
X

Computerized Layout Solutions
• CRAFT
• Computerized Relative Allocation of Facilities Technique
• CORELAP
• Computerized Relationship Layout Planning
• PROMODEL and EXTEND
• visual feedback
• allow user to quickly test a variety of scenarios
• Three-D modeling and CAD
• integrated layout analysis
• available in VisFactory and similar software

Designing Service Layouts
• Must be both attractive and functional
• Free flow layouts
• encourage browsing, increase impulse purchasing,
are flexible and visually appealing
• Grid layouts
• encourage customer familiarity, are low cost, easy
to clean and secure, and good for repeat customers
• Loop and Spine layouts
• both increase customer sightlines and exposure to
products, while encouraging customer to circulate
through the entire store

Types of Store Layouts

Designing Product Layouts
• Objective
• Balance the assembly line
• Line balancing
• tries to equalize the amount of work at each
workstation
• Precedence requirements
• physical restrictions on the order in which operations
are performed
• Cycle time
• maximum amount of time a product is allowed to
spend at each workstation

Cycle Time Example
Produce 120 units in an 8-hour day

production time available
Cd = desired units of output
Cd =
Cd =

Cycle Time Example
Produce 120 units in an 8-hour day

production time available
Cd = desired units of output
(8 hours x 60 minutes / hour)

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

Flow Time vs Cycle Time
• Cycle time = max time spent at any station
• 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

Efficiency of Line and Balance Delay
Efficiency Min# of workstations
j j
∑t
i=1
i ∑t
i=1
i
E= nCa
N= 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
j
Balance delay
total idle time of line = nCa -
∑t
i=1
i

Line Balancing Procedure
1. Draw and label a precedence diagram
2. Calculate desired cycle time required for line
3. Calculate theoretical minimum number of workstations
4. Group elements into workstations, recognizing cycle
time and precedence constraints
5. Calculate efficiency of line
6. Determine if theoretical minimum number of
workstations or an acceptable efficiency level has been
reached. If not, go back to step 4.

Line Balancing
Work Element Precedence Time (Min)
A Press out sheet of fruit — 0.1
B Cut into strips A 0.2
C Outline fun shapes A 0.4
D Roll up and package B, C 0.3
0.2
B
0.1 A D 0.3
C
0.4

Line Balancing
Cd =
N=

Line Balancing
40 hours x 60 minutes / hour 2400

Cd = = = 0.4 minute
6,000 units 6000
0.1 + 0.2 + 0.3 + 0.4 1.0

N= = = 2.5  3 workstations
0.4 0.4

Line Balancing
Remaining Remaining
Workstation Element Time Elements
1
2
3
0.2
B
0.3
0.1 A D
C
0.4
Line Balancing
Remaining Remaining
Workstation Element Time Elements
1 A 0.3 B, C
B 0.1 C, D
2 C 0.0 D
3 D 0.1 none
0.2
B Cd = 0.4
0.3 N = 2.5
0.1 A D
C
0.4
Line Balancing
Work Work Work

station 1 station 2 station 3
Cd = 0.4
N = 2.5
A, B C D
0.3 0.4 0.3
minute minute minute
E=

Line Balancing
Work Work Work

station 1 station 2 station 3
Cd = 0.4
N = 2.5
A, B C D
0.3 0.4 0.3
minute minute minute
0.1 + 0.2 + 0.3 + 0.4 1.0

E= = = 0.833 = 83.3%
3(0.4) 1.2

Computerized Line Balancing
• Use heuristics to assign tasks to workstations

• Longest operation time
• Shortest operation time
• Most number of following tasks
• Least number of following tasks
• Ranked positional weight

Hybrid Layouts
• Cellular layouts
• group dissimilar machines into work centers (called cells) that
process families of parts with similar shapes or processing
requirements
• Production flow analysis (PFA)
• reorders part routing matrices to identify families of parts with
similar processing requirements
• Flexible manufacturing system
• automated machining and material handling systems which can
produce an enormous variety of items
• Mixed-model assembly line
• processes more than one product model in one line

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

Group Technology
A family of A family of related

similar parts grocery items

Original Process Layout

Part Routing Matrix

Revised Cellular Layout

Reordered Routing Matrix

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

A Manufacturing Cell with Worker Paths

Automated Manufacturing Cell

Flexible Manufacturing Systems (FMS)
• Consists of
• programmable machine tools
• automated tool changing
• automated material handling system
• controlled by computer network
• Combines flexibility with efficiency
• Layouts differ based on
• variety of parts the system can process
• size of parts processed
• average processing time required for part completion

A Flexible Manufacturing System

Mixed-Model Assembly Lines
• Produce multiple models in any order on one
assembly line
• Factors in mixed model lines
• Line balancing
• U-shaped lines
• Flexible workforce
• Model sequencing

Balancing U-Shaped Lines

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OPERATIONS MANAGEMENT

Copyright ©2017 John Wiley & Sons, Inc. 7-2

Copyright ©2017 John Wiley & Sons, Inc. 7-6

Capacity expansion plan based on three 400-units-per-week plants

Capacity expansion plan based on one 1,200-units-per-week plant

Year 1 Year 2 Year 3

Copyright ©2017 John Wiley & Sons, Inc.

Characteristics Lead strategy Lag strategy

Copyright ©2017 John Wiley & Sons, Inc. 7-15

Copyright ©2017 John Wiley & Sons, Inc. 7-16

Copyright ©2017 John Wiley & Sons, Inc. 7-17

• arrangement of activities, processes,

Copyright ©2017 John Wiley & Sons, Inc. 7-19

Copyright ©2017 John Wiley & Sons, Inc. 7-20

Women’s Cosmetics Children’s

Women’s Entry and Men’s

Copyright ©2017 John Wiley & Sons, Inc. 7-21

Copyright ©2017 John Wiley & Sons, Inc. 7-22

Customer lead time ATO

Functional layout Functional layout

Copyright ©2017 John Wiley & Sons, Inc. 7-27

Connected M/C M/C

Cells M/C M/C M/C

• Goal: minimize material handling costs

Copyright ©2017 John Wiley & Sons, Inc. 7-31

Copyright ©2017 John Wiley & Sons, Inc. 7-33

Copyright ©2017 John Wiley & Sons, Inc. 7-34

Copyright ©2017 John Wiley & Sons, Inc. 7-35

(a) Initial block diagram (b) Final block diagram

Copyright ©2017 John Wiley & Sons, Inc. 7-36

• Schematic diagram that uses

Copyright ©2017 John Wiley & Sons, Inc. 7-37

Copyright ©2017 John Wiley & Sons, Inc. 7-38

Offices Locker Shipping

Copyright ©2017 John Wiley & Sons, Inc. 7-39

Copyright ©2017 John Wiley & Sons, Inc. 7-40

Copyright ©2017 John Wiley & Sons, Inc. 7-41

Copyright ©2017 John Wiley & Sons, Inc. 7-42

Copyright ©2017 John Wiley & Sons, Inc. 7-43

Copyright ©2017 John Wiley & Sons, Inc. 7-44

Produce 120 units in an 8-hour day

Copyright ©2017 John Wiley & Sons, Inc. 7-45

Produce 120 units in an 8-hour day

(8 hours x 60 minutes / hour)

Copyright ©2017 John Wiley & Sons, Inc. 7-46

Flow time = 4 + 4 + 4 = 12 minutes

Copyright ©2017 John Wiley & Sons, Inc. 7-47

Copyright ©2017 John Wiley & Sons, Inc. 7-48

Copyright ©2017 John Wiley & Sons, Inc. 7-49

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40 hours x 60 minutes / hour 2400

0.1 + 0.2 + 0.3 + 0.4 1.0

Copyright ©2017 John Wiley & Sons, Inc. 7-52

Work Work Work

Copyright ©2017 John Wiley & Sons, Inc. 7-55

Work Work Work

0.1 + 0.2 + 0.3 + 0.4 1.0

Copyright ©2017 John Wiley & Sons, Inc. 7-56

• Use heuristics to assign tasks to workstations

Copyright ©2017 John Wiley & Sons, Inc. 7-57

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Copyright ©2017 John Wiley & Sons, Inc. 7-59

A family of A family of related