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Chapter 7
Capacity and Facilities
1
Lecture Outline
Capacity Planning
Basic Layouts
Designing Process Layouts
Designing Service Layouts
Designing Product Layouts
Hybrid Layouts
Copyright 2011 John Wiley Sons, Inc.
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)
Copyright 2011 John Wiley Sons, Inc.
7-3
Capacity Expansion Strategies
Copyright 2011 John Wiley Sons, Inc.
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
Copyright 2011 John Wiley Sons, Inc.
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
Copyright 2011 John Wiley Sons, Inc.
7-6
Best Operating Level for a Hotel
Copyright 2011 John Wiley Sons, Inc.
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
Copyright 2011 John Wiley Sons, Inc.
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
Copyright 2011 John Wiley Son
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