06, Capability Planning and Facility Location


6.1 The importance of capability and location decision
Capability planning and facilities locating are important strategic decisions for any organization satisfying production, delivery and cost etc.
6.2 Measuring Capacity
Capacity is the rate at which output can be produced by an operating unit. It is expressed in terms of the number of units of output produced per unit time, such as the number of automobiles that can be assembled per year or the number of students who can be taught per semester.  The design capacity is the maximum rate at which the process can operate on a continual basis under ideal conditions. In the short term, output rates above the design capacity can be achieved by incresing the speeds of machines, working overtime, or temporarily deferring maintenance though it is not cost effective usually due to machine wear and work fatigue. The effective capacity is the rate of production that can be achieved for extended periods under normal conditions, taking into account the product mix, maintenance, scheduling methods, employee training, and rest periods.
Capacity utilization=actual output/design capacity
Caacity efficiency=actual output/effective capacity
Overall equipment effectiveness (OEE) is a popular measurement of capacity utilization.
OEE=output time/solar time.
6.3 Capacity strategy
The primary purpose of capacity planning is to match the company's production capability with customer demand in the most profitable way. The capacity strategy should consider the facilities cost, but also the effects of capacity shortages and responsiveness. The seasonal products resulted capacity utilization loss can be reduced by producing similar but countercyclic products.
6.4 Capacity planning and evaluation methods
Forecasting demand and capacity requirements.
Dynamic capacity and experience effects.
Break-even analysis.