Facility Location To-day - Customer Satisfaction is the

Ultimate objective of business It has become the survival and sustaining

mantra of business One of the factors for achieving customer

satisfaction is by effective distribution of product or services

At the time when customer wants

Facility Location

Two factors affect distribution of product & Services

Location of Production base

Location of Warehouse/Service facility

The capacity of production base and Warehouse plays an crucial role in satisfying customer needsIt also crucial in arriving at the Profits percentage

Facility Location Capacity of the warehouse or

Production base has direct effect on the cost of product / services

Less Capacity : Choices available1. Spend more money for

alternative arrangements2. Loose business

Facility Locationo If Installed capacity is more- Effects are:1. High overheads2. Unutilized capacity3. Loss of money due to unwanted facility A survey has indicated that transportation

& distribution costs are largest expenses in business

Facility Location

Many industries are incurring 10 to 25 % of sales costs in transportation and distribution

The cost of Product distribution/ services has become increasingly important

But still very few companies are successful in curtailing this

Facility Location How did some of the companies reduced

their product distribution/services cost ? By application of scientific methods By using computer for analyzing their

distribution problems Mathematical modeling Also long range planning facilities

Facility Location

Distribution of Product / Service cost need not be restricted to manufacturing

Many have derived benefits from application of scientific methods

Hospitals, Ambulances, Fire engines, Police Protection, Sewage treatment plants & Nuclear Power plants have derived benefits

Facility Location

An Indian corporation was able to reduce cost of distribution from 9 % to less than 6%

Standard Oil Company of USA was able to save $5 billion by using mathematical model for planning distribution & manufacturing operations

Capacity Planning

Before Studying facility layout we have to understand Capacity Planning

Capacity planning Defined: It is the process of adjusting the capacity

of an organization to do work in response to changing or predicted demands.

Capacity Planning For facility planning & location planning We

need to know the capacity It is determining the capacity of

Production / facility needed in the long range

When additional capacity needed Where the production facility to be located,

its layout and characteristics

Capacity planning

Capacity is the Max rate of production facility of a firm

Expressed as volume of output for a period of time

It indicates the ability of the firm to meet Market demand

Capacity Planning Operations Managers are concerned about

capacity

Since The need sufficient capacity to meet the

market needs Capacity affects efficiency of operations Determines ease or difficulty of scheduling Cost of maintaining facility Capacity requires Investment

Capacity Planning Types of Capacities

FIXED ADJUSTABLE - LABOUR/SHIFT ETC DESIGN/INSTALLED SYSTEM CAPACITY < DESIGN

CAPACITY POTENTIAL CAPACITY IMMEDIATE CAPACITY EFFECTIVE CAPACITY

Capacity Planning

Factors affecting Production Capacity: Absenteeism M/C downtime Maintenance time Vocation Production changeover

Capacity Planning Measurement of capacity: In terms of Output Capacity measure simple for single

specialized products Simple because Capacity = Rate of output/day For a car industry Capacity = No of cars / day

Capacity Planning For job shops Capacity = Labor hours or M/c Hours It is difficult to specify capacity for service

industries Or for organization with diversified products In such cases capacity is specified as INPUT

Capacity Planning Capacity & Size or different Capacity is related to rate or time

Organizations Capacity measure

Steel Tonnes per year

Oil Refinery Barrels / Week

Restaurant People served/day

Airlines Available seat miles/month

Hospital Patients treated per week

University Students enrolled per year

Warehouse Cubic feet in storage space per year

Power Co Megawatts per day

Capacity Planning

For organizations with diverse products:

An aggregate Unit of capacity

is specified i.e Units/day More diversified products

Sales/ day could be measure

of capacity

Capacity Planning

Different capacities Peak - for service industries Normal - for mfg industries

Capacity Planning

Capacity Planning is an integral part of overall production planning of entire industry

The broad classes of capacity planning: lead strategy

lag strategy match strategy

Capacity Planning

3 time horizons of capacity planning Long-range capacity planning Medium-range capacity planning Short-range capacity planning

Capacity Planning

CorporateProdnPlng

AGP

CRP-detailedCapacity

Requirement Planning

Rough CutCapacity

Plng

Long RangeCapacity

Plng

MPS

MRP

PriorityPlanning

Relationship between Capacity & Prodn Plng