C215 - Chapter 9

Question 1

What is capacity planning?

What is it determined by (2) ?

Answer 1

• Capacity planning deals with the maximum output rate that a facility can have

Balancing demand and resources so the company can deliver smoothly and efficiently.

• determined by the size of facilities and equipment.

Question 2

Why is capacity planning important to an organization?

Answer 2

If not planned correctly, an organization may find it either does not have enough output capability to meet customer demands or has too much capacity sitting idle.

Question 3

What is design capacity?

Answer 3

Design capacity is the maximum output rate under ideal conditions, typically higher than effective capacity.

Question 4

What factors can temporarily increase capacity (Design Capacity)

Answer 4

Temporary measures include overtime, overstaffing, maximum use of equipment, and subcontracting.

Question 5

What is effective capacity?

Answer 5

maximum output rate under normal conditions
- lower than design capacity.

Question 6

What is capacity utilization?

Answer 6

how much of the available capacity is actually being used.

Utilization = (actual ouput rate) / (design capacity OR effective capacity) x 100

Question 7

3 Steps in Facility Location Decisions

Answer 7

1. Identify dominant location factors
2. Develop location alternatives
3. Evaluate locations alternatives

Question 8

What is location analysis?

• 2 reasons why its important

Answer 8

Location analysis is the process of identifying the best geographical location for a service or production facility.

• require long-term commitments
• require sizable financial investments

Question 9

What are some factors affecting location decisions (5)?

Answer 9

1. proximity to :supply, customers, labor
   - mitigate quality of goods degrading, perishable food
   - transport costs high if too far
   - Near source (example, Tropicana in Florida)
2. community considerations
   Ex: environmental/cultural considerations; threats to smaller businesses
3. site considerations
   Ex: utility costs, taxes, zoning, soils, climates
4. quality-of-life offered to employees
   Ex: climate, lifestyle, schools, low crime rates
5. other considerations
   Ex: parking, visibility, transportation,room for expansion

Question 10

Location Decision : Procedures and tools

1.Factor Rating Method
2. Load-Distance Model

Answer 10

1. evaluate multiple alternative locations based on selected factors.
   - helps structure opinions relative to factors identified importance
2. procedure for evaluating location alternatives based on distance.
   •Looks at how far goods must travel × how much is being moved.
   •Goal: Choose the location with the smallest total distance × load

Question 11

Location Decision : Procedures and tools:

3. Center of Gravity Approach
4. Break-even Analysis

Answer 11

3. A method to find the best central location for a facility
   Goal: Place the facility at the “balance point” to minimize transport costs.
   - best central spot for lowest transport cost.
4. technique used to compute the amount of goods required to be sold to just cover costs.
   - best location for fastest profit.

Question 12

Location Decision
Procedures and tools:

5. Transportation Method

Answer 12

• tool to find the least-cost shipping plan between multiple suppliers and customers.
• figure out the cheapest or most efficient way to move goods from several suppliers to several customers)

evaluate the cost impact of adding potential location sites to the network of existing facilities

Question 13

What is break-even analysis?

Answer 13

Break-even analysis is a technique used to compute the amount of goods required to be sold to just cover costs.

Question 14

What is globalization in the context of capacity planning?

Answer 14

Globalization is the process of locating facilities around the world.

Question 15

What are some advantages of globalization?

Answer 15

Advantages include access to foreign markets, avoidance of trade barriers, access to cheaper labor, and proximity to suppliers/manufacturers.

Question 16

What are some disadvantages of globalization?

Answer 16

• political risks
• loss of control of proprietary technology
• inadequate local infrastructure
• high inflation.

Question 17

Capacity Planning and Hospitals

Answer 17

• high fluctuations in demands and high cost of insufficient capacity

1. Beds/Space available : too little and patients wait too long, too many and space is waster
2. Nurses/Drs scheduled to work : too little can be deadly, too many results in highly paid professionals for nothing

Question 18

3 Ways of Measuring Capacity

Answer 18

1. Design Capacity
2. Effective Capacity
3. Capacity Utilization

Question 19

3 Steps of Capacity Planning

Answer 19

•Identify capacity needs.
•Develop capacity alternatives.
•Evaluate capacity alternatives.

• Measure Demand → Measure Capacity → Match & Adjust

Forecast demand → Check capacity → Balance them.

Question 20

Capacity Planning : Identifying Capacity Requirements

Answer 20

• Identify levels of capacity needed now and in the future
• identify gap between available capacity and future requirements
• Forecasting capacity, capacity cushions

Question 21

Capacity Planning : Developing Capacity Alternatives

Answer 21

Alternatives that will help meet capacity in the future
Options:
1.do nothing
2.expand large now (may include capacity cushion)
3.expand small now with option to add later

Question 22

Capacity Planning : Evaluating Capacity Alternatives

Answer 22

Use decision support aids to evaluate decisions and select best alternative to meet future requirements

Question 23

Decision Trees

Answer 23

Modeling tool used to evaluate independent decisions that must be made in sequence

Question 24

Decision Tree Analysis Components
1. Decision Points
2. Decision Alternatives
3. Chance Events
4. Outcomes

Answer 24

1.Squares : points in time where decisions are made

2. Branches: options you can take from decision point
3. Circle : things that may happen but are not in your control,events that could affect decision
4. Outcomes : possible outcomes

Use EV (weighted average of possible outcomes) = probability of outcome x chance event

Question 25

Location Considerations For 1. Services 2. Profits vs non-profits 3. Manufacturing

Answer 25

1. Services : locating near customers 2. Profit making : locate near markets they serve Non-profit : locate near major benefactors 3. Manufacturing : sources of transportation, suppliers, and abundant resources such as labor.