MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 1
Facility Planning Helps Determine:
Long-range production capacity required
Where the production facilities s/b located
Layout and characteristics of the facility
For most enterprises capacity and location plans are perhaps the most
important strategic decisions made because of:
Capital investment needed for land, buildings, equipment, and
technology
Operating efficiencies are dependent upon capacities
Transportation costs
Capacity planning decisions involve:
Estimating the capacities of facilities
Forecasting long-range capacity needs for all products and services
Identifying and analyzing sources of capacity to meet future needs
Selecting from alternative sources of capacity
MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 2
Production Capacity definition: The maximum production rate of an enterprise.
Capacity Considerations:
| | Day-to-day variations in absenteeism, equipment break-downs (downtime), quality defects, and delivery delays combine to make output rates uncertain |
Production rates of different products and services are not the same
Product mix must be taken into account. What is this?
| | Do we plan for one or multiple shifts? Standard 8 hour shifts or other? Five or seven days? Overtime? Seasonality? Temporary workers? Outsourcing? |
What is “8760” (24 hours x 365 days)
Notes:
“What is our capacity?” is a very difficult question to answer, yet every Manager
faces this question, almost daily.
Time is the great equalizer for all managers. All have the same amount of time,
no more, no less. It’s what is done inside those hours that makes for an efficient,
effective, and profitable enterprise.
MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 3
Thinking Time: Our facility recently installed a new, fully-integrated production
line that is “rated”, by our engineers (on paper), to produce 40 cases of product
per minute (CPM).
What is the capacity of this new production line in CPM?
If you were responsible for accurate production scheduling, would you use
40 cases per minute?
If you were responsible for purchasing raw materials, would you use 40
cases per minute?
Output Rate Capacities are straightforward
Cases per minute
Autos per hour
Gallons per second
Points per game
Input Rate Capacity:
| |
Airlines use available seat-miles Hospitals use number of available beds Auto rentals use number of vehicles |
Capacity Utilization Percentage: relates output measures to capacity (inputs)
available. Above 85% is very good.
E.g. Actual automobiles produced per quarter divided by the capacity (outputs over
inputs).
MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 4
Forecasting Demand
Forecasting demand for production capacity involves four (5) steps.
Total market demand is estimated (for all producers in your market)
Market share (our % of total demand) is estimated
Total market demand is multiplied by our share (%) to get our demand
Inventory levels are established
Demand is translated into production capacity requirements
Thinking Time: Why must we consider the total industry’s capacity when making
capacity plans for our new start-up enterprise?
The best operating level: Annual volume of output that results in the least
average cost per unit of output.
There are no “best locations”; however, there are usually several “good locations.”
Have you ever wondered why?
| |
Many auto manufacturers are in Detroit Hi-tech computer R&D firms are in Northern CA |
| PC and memory chip manufacturers are in Dallas | |
| |
Mass-merchandise mail-order houses are in Chicago Small convenience stores are on every corner |
What is your best guess for each of the above?
MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 5
One type of enterprise is close to its raw materials while another is located near
its customers. Why?
Why would enterprises locate next door to their competitor? (Auto parts retailers,
dollar stores/Wal*Mart, gas stations, fast food, mall retailers, bars)
The location of warehouses and/or distribution centers (DC) may be the most
straightforward location decision. Dominant factors are those affecting
transportation costs.
Each location decision is unique because each operation is unique.
Layout of Facility
Facility Layout involves planning for the location of stuff inside the facility for
maximum efficiency and effectiveness.
Machines, utilities, workstations, maintenance dept., rest rooms, lunchroom,
training room, water fountains, first-aid station, fire extinguishers, worker flow
in/around/out, emergency exits, high security areas, material storage/flow,
offices, walls, aisles, computer
Thinking Time: If you were laying out a production facility, where would you locate:
| |
Maintenance Department Supervisors’ Offices Employee Restrooms |
| Cafeteria | |
| | Training Room |
| | Drinking Fountains |
Why did you give your answer for each of the above items?
MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 6
The central focus of manufacturing layouts is to minimize:
Cost of processing
Transporting and storing of all materials
Safety hazards
A Materials Handling system is the entire network of transportation within the
operation.
| |
Receiving docks and putting away in-bound stuff Move in-process stuff to/from processing points Move finished goods to warehouse Transfer stored products to vehicles for delivery to customers |
“Rolling stock (trucks, trailers, carts, conveyors, AGVS) s/b kept rolling and
fully loaded.” dki
Process vs. Product Layout
A production facility producing a variety of custom products, in relatively small
batches, will use a process layout.
Product layouts, often called assembly lines, were originally designed to
accommodate only a few product designs.
Assignment: Look up “SMED” and be prepared to define the term
Line Balancing: Matching the rated speed/capacity of every piece of equipment in
the production line – goal is to reduce bottlenecks
MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 7
Thinking Time: What layout methods are used @ UCA? Be specific.
Service Facility Layouts
Different services require different layouts.
Thinking Time: How do the various fast food outlets vary in their layouts for
customer service? How about for the preparation of food?
For most service businesses, one characteristic makes at least part of their
operations different from most manufacturing operations:
To provide for the encounter between the customer and the service.
Layouts are very important and all around us in our everyday lives.
Ever wonder:
Why does McDonald’s locate the French fryer to the customers’ left?
| | Why does United Parcel Services use GPS technology to avoid left hand turns? |
Why do top rows of keyboards begin with “QWERTY”?
Why do armadillos cross the road?
MGMT 3344 OSCM
Reading 3 – Capacity, Location, Layout
DKI rev Jul 2016 8
Thinking Time: How would you adjust your JIT manufacturing labor force to
compensate a forecasted 20% reduction in product demand for the next 90 days?
Prepare to list two or more options. Be very specific.
The right to vote is perhaps the greatest freedom we have been
given.
Are you registered to vote? If not, do so before the next election.
If you don’t vote, you no right to bitch about the election
outcomes.
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