1. Facility Planning: Capacity

2. Capacity Planning Interrelated facility planning decisions: 1.Number of facilities and general type 2.Capacity 3.Locations 4.Layout Facility design process dependent upon objective(s)

3. 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

4. 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

5. Measurements of Capacity 1.Aggregate unit 2.Utilization = actual output/design capacity 3.Efficiency = actual output/effective capacity 4.Throughput time 5.Process Velocity: similar to throughput time, but takes into account waste (wait, storage, transfer, inspect times); measured as throughput time/value- added time 6.Productivity: how well a firms uses its resources; measured as output/input

6. 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

7. 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

8. 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