Introduction to

Capacity and Facilities

1
 Lecture Outline
• Capacity Planning
• Basic Layouts
• Designing Process Layouts
• Designing Service Layouts
• Designing Product Layouts
• Hybrid Layouts

7-2
 Capacity
• Maximum capability to produce
• Capacity planning
• establishes overall level of productive
resources for a firm
• 3 basic strategies for timing of capacity
expansion in relation to steady growth in
demand (lead, lag, and average)

7-3
Capacity Expansion Strategies

7-4
 Capacity
• 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

7-5
 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

7-6
Best Operating Level for a Hotel

7-7
 Objectives of Facility Layout

• Minimize material-handling costs

• Utilize space efficiently
• Utilize labor efficiently
• Eliminate bottlenecks
• Facilitate communication and interaction
• Reduce manufacturing cycle time
• Reduce customer service time
• Eliminate wasted or redundant movement

7-8
 Objectives of Facility Layout

• 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
• Provide flexibility to adapt to changing conditions
• Increase capacity

7-9
 Basic Layouts
• Process layouts
• group similar activities together according to process
or function they perform
• Product layouts
• arrange activities in line according to sequence of
operations for a particular product or service
• Fixed-position layouts
• are used for projects in which product cannot be
moved

7-10
 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

7-11
 Block Diagramming
• Unit load • Steps
• quantity in which • create load summary chart
material is normally • calculate composite (two
moved way) movements
• Nonadjacent load • develop trial layouts
• distance farther minimizing number of
than the next block nonadjacent loads

7-12
 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

7-13
Types of Store Layouts

7-14
 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

7-15
 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.

7-16
Automated Manufacturing Cell

7-17
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

7-18
 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

7-19
 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 % C,D
3(12) 36

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

7-20
 Supplement

Facility Location Models

 Lecture Outline
• Types of Facilities
• Site Selection: Where to Locate
• Global Factors
• Location Analysis Techniques

Supplement 7-22
 Types of Facilities
• Heavy-manufacturing facilities
• large, require a lot of space, and are expensive
• Light-industry facilities
• smaller, cleaner plants and usually less costly
• Retail and service facilities
• smallest and least costly

Supplement 7-23
 Factors in Heavy
Manufacturing Location
• Construction costs
• Land costs
• Raw material & finished goods shipment modes
• Proximity to raw materials
• Utilities
• Means of waste disposal
• Labor availability

Supplement 7-24
 Factors in Light Industry Location
• Land costs
• Transportation costs
• Proximity to markets
• depending on delivery requirements
including frequency of delivery required by
customer

Supplement 7-25
 Factors in Retail Location
• Proximity to customers
• Location is everything

Supplement 7-26
 Site Selection: Where to Locate
• Infrequent but important
• being “in the right place at the
right time”
• Must consider other factors,
especially financial
considerations
• Location decisions made more
often for service operations
than manufacturing facilities
• Location criteria for service
• access to customers
• Location criteria for
manufacturing facility
• nature of labor force
• labor costs
• proximity to suppliers and
markets
• distribution and transportation
costs
• energy availability and cost
• community infrastructure
• quality of life in community
• government regulations and
taxes
Supplement 7-27
 Global Supply Chain Factors
• Government stability • Climate
• Government regulations • Number & proximity of
suppliers
• Political & economic systems
• Transportation & distribution
• Economic stability & growth system
• Exchange rates • Labor cost & education
• Culture • Available technology
• Export/import regulations, • Commercial travel
duties & tariffs • Technical expertise
• Raw material availability • Cross-border trade
regulations
• Group trade agreements

Supplement 7-28
 Location Incentives
• Tax credits
• Relaxed government regulation
• Job training
• Infrastructure improvement
• Money

Supplement 7-29