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Chapter 5, Part A Facility Capacity and Location Overview Facility Planning Long-Range Capacity Planning Facility Location Wrap-Up: What World-Class Companies Do Facility Planning HOW MUCH long range capacity is needed WHEN additional capacity is needed WHERE the production facilities should be located WHAT the layout and characteristics of the facilities should be Facility Planning The capital investment in land, buildings, technology, and machinery is enormous A firm must live with its facility planning decisions for a long time, and these decisions affect: Operating efficiency Economy of scale Ease of scheduling Maintenance costs … Profitability! Long-RangeCapacity Planning Steps in the Capacity Planning Process Estimate the capacity of the present facilities. Forecast the long-range future capacity needs. Identify and analyze sources of capacity to meet these needs. Select from among the alternative sources of capacity. Definitions of Capacity In general, production capacity is the maximum production rate of an organization. Capacity can be difficult to quantify due to … Day-to-day uncertainties such as employee absences, equipment breakdowns, and material-delivery delays Products and services differ in production rates (so product mix is a factor) Different interpretations of maximum capacity Definitions of Capacity The Federal Reserve Board defines sustainable practical capacity as the greatest level of output that a plant can maintain … within the framework of a realistic work schedule taking account of normal downtime assuming sufficient availability of inputs to operate the machinery and equipment in place Measurements of Capacity Output Rate Capacity For a facility having a single product or a few homogeneous products, the unit of measure is straightforward (barrels of beer per month) For a facility having a diverse mix of products, an aggregate unit of capacity must be established using a common unit of output (sales dollars per week) Measurements of Cap