Capacity Planning
Facility Planning
Facility planning answers:
How much long-range capacity is needed
When more capacity is needed
Where facilities should be located
(location)
How facilities should be arranged (layout)
Develop
Alternative
Plans
Quantitative
Factors
(e.g., Cost)
Compute
Rated
Capacity
Evaluate
Capacity
Plans
Qualitative
Factors
(e.g., Skills)
Compute
Needed
Capacity
Select Best
Capacity
Plan
Implement
Best Plan
Effective
capacity:
Utilization:
Utilization
Measure of planned or actual capacity
usage of a facility, work center, or
machine
Actual Output
Utilization =
Design Capacity
Planned hours to be used
=
Total hours available
Efficiency
Measure of how well a facility or
machine is performing when used
Actual
output
Efficiency =
Effective Capacity
Actual
output
in
units
=
Standard output in units
Average actual time
=
Standard time
Breakeven Analysis
Technique for evaluating process &
equipment alternatives
Objective: Find the point (currency or units)
at which total cost equals total revenue
Assumptions
Revenue & costs are related linearly to volume
All information is known with certainty
No time value of money
Breakeven Analysis
Fixed costs:
costs costs that continue even if no
units are produced: depreciation, taxes,
debt, mortgage payments
Variable costs:
costs costs that vary with the
volume of units produced: labor, materials,
portion of utilities
Breakeven Chart
Cost in Currency
Breakeven point
Total cost = Total revenue
Loss
Fixed cost
Volume (units/period)
Breakeven Volume
Fixed
Cost
BEV =
Selling Price Variable Cost
Breakeven Sales
Fixed
Cost
BES =
1 (Variable Cost/Selling Price)
F
(i 1)
F
(i 1)
Year
1
2
3
4
5
6
7
8
9
5%
0.952
0.907
0.864
0.823
0.784
0.746
0.711
0.677
0.645
6%
0.943
0.890
0.840
0.792
0.747
0.705
0.665
0.627
0.592
7%
0.935
0.873
0.816
0.763
0.713
0.666
0.623
0.582
0.544
8%
0.857
0.857
0.794
0.735
0.681
0.630
0.583
0.540
0.500