1. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 7 C h a p t e r F ACILITY L OCATION, C APACITY AND L AYOUT Chapter Outline Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 7-1 Locating Manufacturing Facilities Locating Service Operations Capacity Decisions Facility Layout

2. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 7 C h a p t e r F ACILITY L OCATION, C APACITY AND L AYOUT Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 7-2 Chapter Objectives Identify the various factors that must be considered in selecting a location for a manufacturing or service operation. Introduce a framework for evaluating alternative site locations. Present alternative strategies for increasing capacity.

3. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 7 C h a p t e r F ACILITY L OCATION, C APACITY AND L AYOUT Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 7-3 Chapter Objectives continued Identify the different types of facility layouts in manufacturing and service operations. Define the steps required in balancing an assembly line.

4. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Locating Manufacturing Facilities (Qualitative Factors) Local Infrastructure Worker Education and Skills Product Content Requirements Political/Economic Stability 7-4

5. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Locating Manufacturing Facilities (Quantitative Factors) Labor Costs Distribution Costs Facility Costs Exchange Rates 7-5

6. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Plant Location Methods Quantitative: · Center of gravity method Qualitative: · factor-rating systems 7-6

7. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 E XHIBIT 7.6 Comparing Capacity and Demand in a Service Operation Demand Time Maximum capacity Optimal capacity Customers turned away Poor service Idle capacity 7-7

8. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 E XHIBIT 7.7 Economies of Scale Average unit cost Volume (units) Economies of scale Diseconomies of scaleA B C D VAVA VBVB VCVC VDVD 7-8

9. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 E XHIBIT 7.8A Proactive Capacity Strategy Volume (units) Time Demand Plant Capacity Excess/idle capacity 7-9

10. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 E XHIBIT 7.8B Neutral Capacity Strategy Volume (units) Time Demand Plant Capacity 7-10

11. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 E XHIBIT 7.8C Reactive Capacity Strategy Volume (units) Time Demand Plant Capacity Unfilled demand 7-11

12. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Types of Facility Layouts Process layout Product layout Group technology layout Fixed-position layout 7-12

13. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Process Layout Assembly PaintingPlating MachiningWelding 7-13

14. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Product Layout Product A Product B Product C Step 1 Step 2 Step 3 Step 4 7-14

15. Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 E XHIBIT 7. 17 Precedence Graph for Model J Wagon A E D C B G F H I J K 12 911 45 50 15 12 8 9 7-15