Facility Planning: Capacity
Capacity Planning
• Interrelated facility planning decisions:
1.
2.
3.
4.
Number of facilities and general type
Capacity
Locations
Layout
• Facility design process dependent upon
objective(s)
Strategic Importance
1. Capital investment (machinery, technology,
land, buildings, etc.)
2. Long-term commitment
3. Relationship between capacity and costs
(operating efficiency)
4. Constrains the short and long-term rate of
output
Capacity Planning Decision Elements
1. Forecasting future capacity needs (amount
and timing)
2. Estimating capacities of present facilities:
Design, Effective (standard), Maximum
practical capacity
3. Identifying and evaluating alternative sources
4. Selecting from among competing alternatives
Measurements of Capacity
1.
2.
3.
4.
5.
Aggregate unit
Utilization = actual output/design capacity
Efficiency = actual output/effective capacity
Throughput time
Process Velocity: similar to throughput time, but
takes into account waste (wait, storage, transfer,
inspect times); measured as throughput time/valueadded time
6. Productivity: how well a firms uses its resources;
measured as output/input
Estimating Capacity
• Difficult, Why?
long time horizon, changing economy, consumer preferences,
technology, demographics, political events, new products,
product obsolescence, competitor actions
• Short-term, intermediate-term, long-term
Capacity Planning Strategies
• Demand leading, Lagging, Matching
• Demand Management
• Simultaneous capacity planning choices
1. Layout structure
2. Focus of facility
3. “Chunks”
4. Diseconomies of scale
Analyzing Capacity Planning Decisions:
Various Techniques
1. Cost-Volume-Profit (Breakeven Analysis)
2. Financial Analysis
a. Payback
b. Present Value
c. Internal Rate of Return
3. Computer Simulation and Waiting Line Analysis
4. Linear Programming
5. Decision Tree Analysis