4 Capacity Information Needed Design capacity:Maximum output rate under ideal conditionsA bakery can make 30 custom cakes per day when pushed at holiday timeEffective capacity:Maximum output rate under normal (realistic) conditionsOn the average this bakery can make 20 custom cakes per day
5 Calculating Capacity Utilization Measures how much of the available capacity is actually being used:Measures effectivenessUse either effective or design capacity indenominator
6 Example of Computing Capacity Utilization: In the bakery example, the design capacity is 30 custom cakes per day. Currently the bakery is producing 28 cakes per day. What is the bakery’s capacity utilization relative to both design and effective capacity?The current utilization is only slightly below its design capacity and considerably above its effective capacity
7 Making Capacity Planning Decisions The three-step procedure for making capacity planning decisions are as follows:Step 1: Identify Capacity RequirementsStep 2: Develop Capacity AlternativesStep 3: Evaluate Capacity Alternatives
8 Facility LocationFacility location is the process of identifying the best geographic location for a service or production facility
9 Factors That Affect Location Decisions General factors.Global Region or Country decision.Sub-region or state decision.Community/site decision.
10 General Factors Globalization. Market (customer) proximity Suppliers proximityLabor proximity and productivityCompetitor proximity
11 Global Region or Country Key International LocationsNorth America, Europe, Pacific Rim.Key ConsiderationsPolitical/legal concerns.Cultural issues (including business).Infrastructure: supplies, communication, utilities.International trade issues.Exchange rates.Market access issues.Labor availability, attitudes, productivity, costs.Quality-of-life issues.
12 Sub-region or State Key factors: Government incentives. Corporate desiresProximity to raw materials and customersAttractiveness of region (culture, taxes, climate, etc.)Environmental regulations of state and town.Economic conditions.Costs of key inputs and advertising media.Cost and availability of utilities.Labor availability, costs.
13 Community/Site Factors: Financial incentives. Site size and cost. Transportation options and costs.Utility options and costs.Nearness of services/supplies needed.Legal climate and community receptiveness.Zoning restrictionsEnvironmental concerns.Significant trends:Moving to the suburbs
14 Chapter HighlightsCapacity planning is deciding on the maximum output rate of a facility.Capacity planning and location decisions are often made at the same time because they are inter-related.To choose between capacity planning alternatives managers may use a modeling tool like decision treesKey factors in location analysis include proximity to customers, transportation, source of labor, community attitude, and proximity to supplies.