CAPACITY PLANNING Expertise

What kind of capacity is needed? Quality considerations

How much is needed? Nature of demand
When is it needed? Cost
Design capacity Risk
Effective capacity PROCESS SELECTION
Actual output Deciding on the way production of goods or services
Importance of Capacity Decisions will be organized

Process Strategy
Key aspects of process strategy
Capital intensive – equipment/labor
Process flexibility
Adjust to changes (Design, Volume, Technology)
Process Types
Job shop (Small scale)
Batch (Moderate volume)
Strategy Formulation Repetitive/assembly line (High volumes of
Capacity strategy for long-term demand standardized goods or services)
Demand patterns Continuous (Very high volumes of non-discrete
Growth rate and variability goods)
Facilities (Cost of building and operating) Automation
Technological changes (Rate and direction of Machinery that has sensing and control devices that
technology changes) enables it to operate
Behavior of competitors Fixed automation
Availability of capital and other inputs Programmable automation
Key Decisions of Capacity Planning Computer-aided design and manufacturing systems
Amount of capacity needed (CAD/CAM)
Timing of changes Numerically controlled (NC) machines
Need to maintain balance Robot
Extent of flexibility of facilities Manufacturing cell
(Capacity cushion – extra demand intended to Flexible manufacturing systems(FMS)
offset uncertainty) Computer-integrated manufacturing (CIM)
Steps for Capacity Planning
Estimate future capacity requirements
Evaluate existing capacity
Identify alternatives
Conduct financial analysis
Assess key qualitative issues
Select one alternative
Implement alternative chosen
Monitor results
Make or Buy
Available capacity
LOCATION PLANNING Comparison of Service and Manufacturing
Need for Location Decisions Considerations
Marketing Strategy Manufacturing/Distribution
Cost of Doing Business (relocation)  Cost Focus
Growth (high demand)  Transportation modes/costs
Depletion of Resources  Energy availability, costs
Nature of Location Decisions  Labor cost/availability/skills
Strategic Importance  Building/leasing costs
 Long term commitment/costs Service/Retail
 Impact on investments, revenues, and  Revenue focus
operations  Demographics: age, income, etc
 Supply chains  Population
Objectives  Competition
 Profit potential  Traffic volume/patterns
 No single location may be better than  Customer access/parking
others Evaluating Locations
 Identify several locations from which to Cost-Profit-Volume Analysis
choose  Determine fixed and variable costs
Options  Plot total costs
 Expand existing facilities  Determine lowest total costs
 Add new facilities
 Move
Making Location Decisions
Decide on the criteria
Identify the important factors
Develop location alternatives
Evaluate the alternatives
Make selection
Location Decision Factors
Regional Factors
 Location of raw materials
 Location of markets
 Labor factors
 Climate and taxes
Community Considerations
 Quality of life Evaluating Locations
 Services Transportation Model
 Attitudes Decision based on movement costs of raw materials
 Taxes or finished goods
 Environmental regulations Factor Rating
 Utilities Decision based on quantitative and qualitative
 Developer support inputs
Site Related Factors Center of Gravity Method
 Land Decision based on minimum distribution costs
 Transportation
 Environmental
 Legal
Multiple Plant Strategies
 Product plant strategy
 Market area plant strategy
 Process plant strategy