The document discusses facility capacity planning. It defines design capacity, effective capacity, and actual capacity, noting that effective capacity is always less than design capacity and actual capacity can be equal to or less than effective capacity. It also discusses ways to increase effective capacity, such as proper facility layout and quality control. The document outlines factors to consider for optimal capacity determination and different types of facility layouts.

2. To keep the initial
investment in the
facility as low as
possible to achieve
lesser break-even
volume
Need for Facility Capacity Planning
To satisfy the
future demand
of products
without any
shortages
To find the optimal
capacity of the facility
so that the total of
costs of under-
capacity and over-
capacity is the
minimum
Investments in
facility capacity are
long-term and
cannot be reversed
easily over the
period of time
Need for Facility
Capacity Planning

3.  Design capacity represents the maximum rate of
output that can be achieved under ideal conditions.
 Effective capacity is the maximum rate of output
which can be practically achieved under the
constraints of time consumed in set-ups, oiling &
cleaning, defective items, etc. Effective capacity is
always lesser than the design capacity.

4.  Actual capacity is the maximum output rate
which is actually achieved under the
constraints of machine breakdowns, labor
inefficiencies & absenteeism, defective
products, late deliveries of materials by the
supplier, and so on. Actual capacity can be
equal to or less than the effective capacity.

5. © Oxford University Press
2007. All rights reserved. 5
Ways of Increasing Effective Capacity
Ways of
Increasing
Effective
Capacity
Proper facility
location, layout,
and internal
working conditions
By making products
& services as uniform
as possible in design
so that number of
set-ups required are
less (batch sizes will
be large)
Proper process quality control
so that there are less
defective items requiring
rework
Good training, high
motivation, less absenteeism
& high turnover on part of
workers
Good coordination with suppliers
for timely & defect-free supplies
and proper scheduling of products
on machines
By properly following the
environmental and pollution norms,
which results in lesser inspections by
government enforcement agencies
and, thus, lesser disruption of
production activities

6. 6
Trends in Demand Forecasts
Time
Time
Time
Time
Demand
forecast
Demand
forecast
Demand
forecast
Demand
forecast
Growth
trend
Decline
trend
Cyclical
trend
Stable
trend
Demand
forecast
Product A
Product B
Products A & B

7. Optimal Capacity Determination
Output rate
Average cost
per unit of the
product
Optimal output rate
0
Output rate
0
Average cost
per unit of the
product
Small-sized
Plant
Medium-
sized Plant
Large-sized
Plant
Part a
Part b

8.  Minimize investment in Equipment
 Minimize overall production time
 Utilize existing space most effectively
 Minimize material handling cost
 Provide employee convenience and comfort
 Maintain flexibility of arrangement &
Operation
 Facilitate Manufacturing Process
 Facilitate Organizational Structure

9.  Materials
 Product
 Worker
 Machinery
 Types of Industry
 Location
 Managerial Policies

10.  The work centers or departments are grouped
together according to their functional type.
 For example, work centers for welding,
painting, Lathe Machine
 Example: Hospitals

11.  The arrangement of facility so that work
centers or equipments are in a line to afford a
specili9zed sequence of tasks.
 For Example, Production of Granite Tiles:
◦ R.M, Cutting, Edging, Rough polish, Final Polish,
Finished Goods

12.  The product stays in one location, Tools &
equipments are brought to it as needed.
 For Example,
◦ Construction of Airplanes, Ships, Dams

13.  Product & Process both layout are used for
plant layout.
 For Example,
◦ Manufacturing of refrigerator
◦ Car manufacturing

14.  Machines are better utilized, fewer machines
are required.
 Comparatively low investment in machine is
required.
 Flexibility in terms of task allocation to
machines exists.
 Diversity of task offers more interesting and
satisfying occupation for the operator.

15.  Material handling cost will be high
 Production planning and control systems are
more involved.
 Higher grades of skills(of employee are
required.
 Large amount of in-process inventory will
result
 Throughput time is longer
 Space and capital are tied up by work in
process.

16.  Flow of product will be smooth in flow lines
 In-process inventory is less.
 Material handling cost is minimum
 Operators need not be skilled
 Less space is occupied by work in transit and
for temporary storage.
 Throughput time is less
 Simple production planning and control
systems are possible

17.  A breakdown of one machine in a product
line may cause stoppage of production
process.
 A change in product design may require
alterations in the layout.
 Comparatively high investment in equipment
is required
 The line output is decided by the bottleneck
machine

18.  Manual Methods
◦ Travel Chart
◦ Systematic Layout Planning (SLP)
 Computerized Methods
◦ Construction Type Algorithms
 Automated Layout design Program
 Computerized relationship layout planning
◦ Improvement type algorithms
 Computerized relative allocation of facilities technique