Chapter 5 by 11nq4xSi

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									Chapter 5


     Capacity and Location Planning




            Chapter 5: Capacity and Location Planning   1
Examples




           Chapter 5: Capacity and Location Planning   2
    Burger King
   Highly variable demand
   During lunch hour, demand can increase
    from 40 to 800 hamburgers/hour
   Limited in ability to used inventory
   Facilities designed for flexible capacity
   During off peak times drive through
    staffed by one worker

                  Chapter 5: Capacity and Location Planning   3
    Burger King continued
   During lunch hour drive through staffed
    by up to five workers who divide up the
    duties
   Second window can be used for
    customer with special orders
   Average transaction time reduced from
    45 to 30 seconds
   Sales during peak periods increased
    50%
                  Chapter 5: Capacity and Location Planning   4
    Burger King continued
   Payroll costs as large as food costs
   Need to keep costs low but at same time
    meet highly variable demand
   BK-50 restaurant is 35% smaller and
    costs 27% less to build, but can handle
    40% more sales with less labor


                 Chapter 5: Capacity and Location Planning   5
    Semiconductor Industry
   Learning from the steel industry
   Both industries require large and
    expensive factories
   1980s steel industry started to abandon
    economies of scale justification and built
    minimills
   Chipmakers are now constructing smaller
    and more automated wafer fabs
                  Chapter 5: Capacity and Location Planning   6
    Semiconductor Industry continued
   Short life cycles make it difficult to recoup
    $2 billion it will cost to build wafer fab in
    1998
   Payback time is 22-30 month to
    conventional wafer fab versus 10 months
    for minifab
   Processing time can be reduced from 60-
    90 days to 7 days.
                   Chapter 5: Capacity and Location Planning   7
    Mercedes-Benz
   Early 1990s investigated feasibility of
    producing luxury sports utility vehicle
   Project team established to find location
    for new plant
   Team charged with finding plant outside
    of Germany
   Team initially narrowed search to North
    America
                  Chapter 5: Capacity and Location Planning   8
    Mercedes-Benz continued
   Team determined that North America
    location would minimize combined labor,
    shipping, and components cost
   Plans indicated production volume of
    65,000 vehicles per year and a
    breakeven volume of 40,000 vehicles
   Sites further narrowed to sites within US
   Close to primary market
                  Chapter 5: Capacity and Location Planning   9
    Mercedes-Benz continued
   Minimize penalties associated with
    currency fluctuations
   100 sites in 35 state identified
   Primary concern was transportation cost
   Since half production was for export,
    focused on sites close to seaports, rail
    lines, and major highways

                 Chapter 5: Capacity and Location Planning   10
    Mercedes-Benz continued
   Worker age and mix of skills also
    considered
   Sites narrowed to sites in NC, SC, and AL
   These sites relatively equal in terms of
    business climate, education level,
    transportation, and long-term costs
   AL chosen due to perception of high
    dedication to the project
                 Chapter 5: Capacity and Location Planning   11
    Geographic Information Systems
   View and analyze data on digital maps
   Retail store in WI analyzed sales data on
    a map
   The map demonstrated that each store
    drew majority of sales from 20 mile
    radius
   Map highlighted area where only 15% of
    potential customers had visited one of its
    stores        Chapter 5: Capacity and Location Planning   12
    Sport Obermeyer
   Highly volatile demand
   Combined costs of stockouts and markdowns
    can exceed manufacturing costs
   Determine which items can and cannot be
    predicted well
   Products that can be predicted produced
    furthest in advance
   Increased its sales of fashion skiwear 50% to
    100% over 3 year period in 1990s
                   Chapter 5: Capacity and Location Planning   13
    Insights
   Capacity planning applies to both
    manufacturing and service organizations
   Capacity options can be categorized as
    short-term or long-term
       Changing staffing level is short-term
       Building new minifab is long-term



                     Chapter 5: Capacity and Location Planning   14
    Insights continued
   Semiconductor industry illustrates the
    enormous cost often associated with
    expanding capacity
   Shorter product life cycles add further
    complications
   Volatile demand can further complicate
    capacity planning

                  Chapter 5: Capacity and Location Planning   15
    Introduction
   Capacity needs determined on the basis
    of forecast of demand.
   In addition to determining capacity
    needed, the location of the capacity must
    also be determined.
   Mercedes-Benz example illustrates that
    location decisions are often made in
    stages.
                  Chapter 5: Capacity and Location Planning   16
    Sport Obermeyer
   Highly volatile demand
   Combined costs of stockouts and markdowns
    can exceed manufacturing costs
   Determine which items can and cannot be
    predicted well
   Products that can be predicted produced
    furthest in advance
   Increased its sales of fashion skiwear 50% to
    100% over 3 year period in 1990s
                   Chapter 5: Capacity and Location Planning   17
Forecasting Purposes and
Methods




         Chapter 5: Capacity and Location Planning   18
    Primary Uses of Forecasting
   To determine if sufficient demand exists
   To determine long-term capacity needs
   To determine midterm fluctuations in demand
    so that short-sighted decisions are not made
    that hurt company in long-run
   To determine short-term fluctuations in
    demand for production planning, workforce
    scheduling, and materials planning

                   Chapter 5: Capacity and Location Planning   19
    Forecasting Methods
   Informal (intuitive)
   Formal
       Quantitative
       Qualitative




                       Chapter 5: Capacity and Location Planning   20
Forecasting Methods




          Chapter 5: Capacity and Location Planning   21
    Qualitative Methods
   Life cycle
   Surveys
   Delphi
   Historical analogy
   Expert opinion
   Consumer panels
   Test marketing
                Chapter 5: Capacity and Location Planning   22
    Quantitative Methods
   Causal
       Input-output
       Econometric
       Box-Jenkins
   Autoprojection
       Multiplicative
       Exponential smoothing
       Moving average
                       Chapter 5: Capacity and Location Planning   23
    Choosing a Forecasting Method
   Availability of representative data
   Time and money limitations
   Accuracy needed




                  Chapter 5: Capacity and Location Planning   24
Long-Term Capacity/Location
Planning




         Chapter 5: Capacity and Location Planning   25
    Terminology
   Maximum rate of output of the
    transformation system over some
    specified duration
   Capacity issues applicable to all
    organizations
   Often services cannot inventory output
   Bottlenecks
   Yield (or revenue) management
                 Chapter 5: Capacity and Location Planning   26
    Long-term Capacity Planning
   Unit cost as function of facility size
   Economies of scale
   Economies of scope




                   Chapter 5: Capacity and Location Planning   27
Envelope of Lowest Unit Output Costs with
Facility Size




              Chapter 5: Capacity and Location Planning   28
    Demand and Life Cycles for Multiple
    Outputs

   Demand Seasonality
   Output Life Cycles




                Chapter 5: Capacity and Location Planning   29
Anti-cyclic Product Sales




           Chapter 5: Capacity and Location Planning   30
Forecast of Required Organizational
Capacity from Multiple Life Cycles




              Chapter 5: Capacity and Location Planning   31
Timing of Capacity Increments




            Chapter 5: Capacity and Location Planning   32
Location Planning Strategies




          Chapter 5: Capacity and Location Planning   33
    Capabilities and the Location
    Decision

   Often driven too much by short-term
    considerations
       wage rates
       exchange rates
   Better approach is to consider how
    location impacts development of long-
    term capabilities

                    Chapter 5: Capacity and Location Planning   34
    Six Step Process
   Identify sources of value
   Identify capabilities needed
   Assess implications of location decision
    on development of capabilities
   Identify potential locations
   Evaluate locations
   Develop strategy for building network of
    locations
                  Chapter 5: Capacity and Location Planning   35
    Stage 1: Regional-International
   Minimize transportation costs and
    provide acceptable service
   Proper supply of labor
   Wage rates
   Unions (right-to-work laws)
   Regional taxes, regulations, trade
    barriers
   Political stability
                  Chapter 5: Capacity and Location Planning   36
    Stage 2: Community
   Availability of acceptable sites
   Local government attitudes
   Regulations, zoning, taxes, labor supply
   Tax Incentives
   Community’s attitude
   Amenities


                  Chapter 5: Capacity and Location Planning   37
Breakeven Location Model




          Chapter 5: Capacity and Location Planning   38
    Stage 3: Site
   Size
   Adjoining land
   Zoning
   Drainage
   Soil
   Availability of water, sewers, utilities
   Development costs
                   Chapter 5: Capacity and Location Planning   39
Weighted Score Model

  Wi = importance of factor i
  Si = score of location being
     evaluated on
       factor i
  i = an index for the factors



             Chapter 5: Capacity and Location Planning   40
    Locating Pure Service Organizations

   Recipient to Facility
       facility utilization
       travel distance per citizen
       travel distance per visit
   Facility to Recipient




                      Chapter 5: Capacity and Location Planning   41
Short Term Capacity Planning




          Chapter 5: Capacity and Location Planning   42
Bottlenecks in Sequential
Operations




           Chapter 5: Capacity and Location Planning   43
Efficiency and Output Increase when
Machines are Being Added




              Chapter 5: Capacity and Location Planning   44
Product and Service Flows




          Chapter 5: Capacity and Location Planning   45
Process Flow Map for a Service




            Chapter 5: Capacity and Location Planning   46
    Implementing the Theory of
    Constraints

   Identify the system’s constraints
   Exploit the constraint
   Subordinate all else to the constraint
   Elevate the constraint
   If constraint is no longer a bottleneck,
    find the next constraint and repeat the
    steps.

                  Chapter 5: Capacity and Location Planning   47
    Relationship between Capacity and
    Scheduling

   Capacity is oriented toward the
    acquisition of productive resources
   Scheduling related to the timing of the
    use of resources




                  Chapter 5: Capacity and Location Planning   48
Gantt Charts for Capacity Planning and
Scheduling (Infeasible)




             Chapter 5: Capacity and Location Planning   49
Gantt Charts for Capacity Planning
and Scheduling (Feasible)




           Chapter 5: Capacity and Location Planning   50
    Short-Term Capacity Alternatives
   Increase resources
   Improve resource use
   Modify the output
   Modify the demand
   Do not meet demand



                Chapter 5: Capacity and Location Planning   51
    Increase Resources
   Overtime
   Add shifts
   Employ part-time workers
   Use floating workers
   Subcontract



                 Chapter 5: Capacity and Location Planning   52
    Improve Resource Use
   Overlap or stagger shifts
   Schedule appointments
   Inventory output
   Backlog demand




                  Chapter 5: Capacity and Location Planning   53
    Modify the Output
   Standardize the output
   Have recipient do part of the work
   Transform service operations into
    inventoriable product operations
   Cut back on quality



                  Chapter 5: Capacity and Location Planning   54
    Demand Options
   Modify the Demand
       change the price
       change the promotion
   Do Not Meet Demand




                    Chapter 5: Capacity and Location Planning   55
    Capacity Planning for Services
   Large fluctuations in demand
   Inventory often not an option
   Problem often is to match staff
    availability with customer demand
   May attempt to shift demand to off-peak
    periods
   Can measure capacity in terms of inputs

                 Chapter 5: Capacity and Location Planning   56
The Learning Curve




         Chapter 5: Capacity and Location Planning   57
    Background
   In airframe manufacturing industry
    observed that each time output doubled,
    labor hour per plane decreased by fixed
    percentage




                 Chapter 5: Capacity and Location Planning   58
Learning Curve Function
                      M = mNr

    M = labor-hours for Nth unit
    m = labor-hours for first unit
    N = number of units produced
    r = exponent of curve
       = log(learning rate)/0.693

            Chapter 5: Capacity and Location Planning   59
Typical Pattern of Learning and
Forgetting




             Chapter 5: Capacity and Location Planning   60
Queuing and the Psychology
of Waiting




         Chapter 5: Capacity and Location Planning   61
    Waiting-Line Analysis
   Mechanism to determine several key
    performance measures of operating
    system.
   Trade-off two costs
       cost of waiting
       cost of service



                     Chapter 5: Capacity and Location Planning   62
Waiting Line Analysis




           Chapter 5: Capacity and Location Planning   63
    Principles of Waiting
   Unoccupied time feels longer than
    occupied time.
   Pre-service waiting feels longer than in-
    service waiting.
   Anxiety makes waiting seem longer.
   Uncertain waiting is longer than known,
    finite waiting.

                  Chapter 5: Capacity and Location Planning   64
Principles of Waiting continued
   Unexplained waiting is longer than
    explained waiting.
   Unfair waiting is longer than fair waiting.
   Solo waiting is longer than group
    waiting.
   The more valuable the service, the
    longer it is worth waiting for.

                 Chapter 5: Capacity and Location Planning   65
Chapter 5: Capacity and Location Planning   66

								
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