📦Operations Management Unit 4 – Capacity Planning and Facility Design

Key Concepts and Definitions

• Capacity planning involves determining the production capacity needed by an organization to meet changing demands for its products
• Capacity the maximum amount of work that an organization is capable of completing in a given period of time
• Utilization the extent to which an organization's capacity is being used in a given period
• Efficiency a metric that measures the performance of a process, expressed as the ratio of useful output to total input
• Bottleneck a point of congestion in a production system that occurs when workloads arrive at a point more quickly than that point can handle them
• Lead time the total time a customer must wait to receive a product after placing an order
• Takt time the maximum amount of time in which a product needs to be produced in order to satisfy customer demand

Importance of Capacity Planning

• Ensures that an organization can satisfy its customers' demands in a timely manner
• Prevents bottlenecks and delays in production or service delivery
• Helps optimize resource utilization and minimize waste
• Enables an organization to adapt to changes in demand
  • Seasonal fluctuations (holiday shopping season)
  • Market trends (shift towards online shopping)
• Supports long-term strategic planning and decision making
• Reduces the risk of capacity-related issues
  • Stockouts
  • Excessive inventory
  • Overworked employees
• Contributes to improved efficiency and profitability

Capacity Planning Strategies

• Lead strategy adding capacity in anticipation of an increase in demand
• Lag strategy adding capacity only after an organization is running at full capacity or beyond due to increased demand
• Match strategy adding or reducing capacity incrementally in response to changing demand in the market
• Adjustment strategies for modifying capacity
  • Utilizing overtime
  • Adding shifts
  • Outsourcing production
  • Hiring temporary workers
• Factors influencing the choice of strategy
  • Demand predictability
  • Capacity flexibility
  • Cost considerations
  • Risk tolerance

Facility Location Decisions

• Proximity to suppliers, customers, and other key stakeholders
• Access to transportation networks (highways, ports, airports)
• Availability and cost of labor
• Local regulations and tax incentives
• Environmental factors (climate, natural disaster risk)
• Potential for future expansion
• Political stability and economic conditions
• Alignment with overall business strategy

Facility Layout Design

• Process layout arranging resources around processes, suitable for low-volume, high-variety production
• Product layout arranging resources in a line, suitable for high-volume, low-variety production
• Cellular layout combining the benefits of process and product layouts, suitable for medium-volume, medium-variety production
• Fixed-position layout resources are brought to a fixed location, suitable for large, complex projects (aircraft assembly)
• Factors influencing layout decisions
  • Material flow
  • Equipment utilization
  • Flexibility for future changes
  • Ergonomics and safety
• Systematic Layout Planning (SLP) a step-by-step approach to designing facility layouts

Tools and Techniques for Capacity Analysis

• Capacity planning software for demand forecasting and capacity optimization
• Simulation modeling to analyze complex systems and test "what-if" scenarios
• Queuing theory to predict waiting times and identify bottlenecks
• Break-even analysis to determine the production volume needed to cover costs
• Process mapping to visualize and optimize workflows
• Time studies and work sampling to measure and improve process efficiency
• Capacity Requirements Planning (CRP) to determine the capacity needed to meet production targets

Practical Applications and Case Studies

• Manufacturing capacity planning for a consumer electronics company
  • Balancing production capacity with seasonal demand fluctuations
  • Implementing a flexible workforce strategy
• Service industry capacity planning for a call center
  • Forecasting call volumes and staffing requirements
  • Optimizing shift schedules to minimize wait times
• Healthcare capacity planning for a hospital
  • Managing bed capacity and patient flow
  • Allocating resources to handle emergency surges (COVID-19 pandemic)
• Retail capacity planning for an e-commerce fulfillment center
  • Designing a facility layout to maximize order processing efficiency
  • Implementing automation technologies to increase throughput

Challenges and Future Trends

• Increasing supply chain complexity and uncertainty
• Rapid technological advancements (Industry 4.0, IoT, AI)
• Shifting consumer preferences and demand patterns
• Globalization and geopolitical risks
• Sustainability and environmental concerns
• Need for agility and resilience in the face of disruptions
  • Natural disasters
  • Pandemics
  • Economic crises
• Balancing cost, flexibility, and customer service in capacity planning decisions
• Importance of continuous improvement and data-driven decision making