Chapter-IV

Capacity is the maximum load that can be handled by a facility during a given period

Load can be expressed in terms of no. of inputs or outputs

When a company produces many products or services, measuring capacity in terms of output may not be suitable, here they can measure capacity in terms of input

i.e. amount of plastic processed per day

Need for Facility

Capacity Planning

To find the optimal capacity

of the facility

To keep the initial

investment as low as possible

Investment in facility capacity are long-term and can not be reversed easily

To satisfy the future demand

of products without any shortages

To find the optimal capacity of the facility, so that sum of cost of under –capacity and over-capacity is minimum

To keep initial investment in the facility as low as possible to achieve lower break even volume

Investment in facility capacity are long term and can not be revised easily

To satisfy the future demand of products without any shortages

There are three types of capacity

Design capacity: this is the capacity designed for the facility

Depends upon the number and capacity of machines and equipment, labor

It represents the maximum rate of output that can be achieved under ideal conditions

Effective capacity: when a company produces different types of products , it will not be feasible to achieve design capacity

So effective capacity can be achieved

It is the maximum rate of output which can be achieved under above constraints

Effective capacity is lower than design capacity

Actual capacity: It is the maximum output rate which is actually achieved under the constraints of machine breakdowns, labor inefficiencies and absenteeism, defective products etc.

Actual capacity can be equal to or less than effective capacity

Efficiency = Actual output

Effective capacity

Capacity utilization = Actual output

Design capacity

For utilization design capacity is constant therefore utilization can be increased only by increasing the actual output

Actual capacity can not be increased beyond effective capacity as it is the maximum unit of actual capacity

So for increasing the utilization , capacity has also to be increased

Ways of Increasing effective capacity

Proper process quality control

Good training, motivation, less

absenteeism

Coordination with suppliers

Properly following the

environmental norms

Making products and services as

uniform as possible

Proper facility location, layout

and internal working

conditions

Proper quality control so that there are lesser defective items requiring rework

Good training, high motivation, less absenteeism, and turnover on the part of workers

Good co ordination with the suppliers for a continue flow of supply

Properly following environmental norms resulting in infrequent inspection

Making products and services as uniform as possible

Proper facility location, layout, working conditions

Marketing department plays a major role in providing demand forecasting based on which both long term as well as short term capacity planning can be done.

Four types of general trends are possible in demand forecasting Growth

Decline

Cyclical

Stable

Growth trend in demand forecasting is an indicator of capacity expansion requirements

Provisions should be made for capacity expansion in future

E.g. area of the factory premises should be kept enough large when the plant is built, keeping in view the future expansion possible.

The decline trend of a product indicates that in future, the company will have to think of utilizing the existing capacity in the processing of some new products

The cyclic demand trend of a product requires the company to produce some other product which has an opposite cyclical demand, so that the crests of the demand pattern of one product can be balanced by the troughs of the demand pattern of the other product

For given capacity of a plant, the average unit cost of production decreases as the output rate increases

It happens as we know that the fixed cost remains constant through changes in the volume of output

When a large number of units of the product are produced, the fixed cost get divided uniformly in large number of units

So the average cost per unit of the product gets decreased

When the rate of output is increased beyond a particular limit, the average unit cost starts rising, because of more frequent equipment breakdowns, fatigue, scheduling problems, etc.

This limit of output rate is optimum output rate, for which the average unit cost of the product is the minimum

There is a relationship between optimum output rate, minimum average unit cot and the capacity of the plant

Plant with small design capacity , the optimum output is the lowest, and minimum average unit cost of the product is the highest compared to medium sized and large-sized plants

Thus while determining the capacity of a new facility, three important factors have to be kept in mind: demand forecast, available capital, and minimum average unit cost

The large and significantly idle industrial base available in the US prior to World War II provided the foundation for America’s worldwide economic dominance following this global conflict

The industrial capacity of the US, formerly dedicated to the war effort, was used for the production of consumer goods and industrial equipment to meet pending demands not only at home, but also abroad

The capacity was still so high relative to the demand at prevailing prices that many industries accumulated excessive inventories during the 1950s

This scenario changed in the 1960s and 1970s, at the growing industrial output of countries recovering from the destruction of war slackened the demand for American imports and contributed to growing inventories in the US during this period

An example of rising inventories and excess industrial capacity is the American steel industry

On the other hand, in the late 1940s, Japan had a worldwide reputation for cheap and shoddy goods The economic planners in Japan in Japan knew that a

healthy and thriving economy depended on manufacturing for export

A lesson can be taken by the organizations from this discussion in strategizing the capacity of a new facility so as to meet the future demand

The capacity should be kept at the minimum expected demand level and provisions should be made to introduce some flexibility in the facility in order to meet higher demands than the maximum capacity of the facility

It is a technique used to analyze decision situations that are sequential in nature

In this technique a diagram is made to represent the various decision option and their outcomes

The diagram resembles a tree with various branches coming out from the main stem and therefore it is called a decision tree

Here small rectangles are used to represent the points of decision nodes

Choice is to be made for the best decision option from a set of options branching out from the decision node

Small circles are used to represent the points of outcomes or events as a result of choosing a decision option

The circles are called event or outcome nodes

Outcomes are not under control of the decision maker and any one can occur according to the probabilities assigned to them

Decision tree is analyzed for the best decision sequence by the rollback technique

Here the later part of the decision tree are analyzed first and then those in the earlier part

It is the physical location of the various departments/ units of the facility within the premises of the facility

Departments may be located based on some considerations such as less walking distance, logical sequence of the procedure, or any special requirements of the product

There are four types of basic layouts: product, process, fixed-position, and cellular layout

Flow Shop or Assembly Line Work Flow

Raw materials

or customer

Finished

itemStation

2

Station

3

Station

4

Material

and/or

labor

Station

1

Material

and/or

labor

Material

and/or

labor

Material

and/or

labor

It is suitable when a product is having standard features is to be produced in large volume

The production process involves repetitive tasks to be performed for items arranged in sequence

Specialized machines and equipment are arranged one after another in the order of sequence required in the process

This production line is called assembly line

The assembly line has moving platform or conveyer which moves at a regular interval of time

The basic structure of products to be manufactured in the raw form are placed on the conveyer at equal distance from each other

Across the conveyer there are work stations with required machines, equipment, components, components, tools, and workers to perform the assembling tasks on the basic structure of the product

Easier material handling & less inventory costs

Less supervision & labor training costs

High output rate that results into low cost of item per unit

High efficiency of labor& equipment

No need of routing or scheduling once the line is operational

Monotonous repetitive tasks lead to frustration for workers

Breakdown of a machine or high absenteeism of workers leads to halt

Inflexible to design changes in product or process

Maintenance cost is fairly high

U-shaped assembly line is useful particularly when there is a single worker in the line taking care of all the work stations

The U shape of the line reduces the walking distance of the worker by almost half

The U-shaped line is being successfully used by Matusushita Electric Co. of Japan by using a single worker in such line

Advantage: more compact, increased communication

facilitating team work, minimize the material handling

The closeness of the work station allows workers to help a fellow worker catch up, especially one working on the station just opposite

This increases teamwork among workers

At the same time, many work stations close to each other may result in conversations, noise etc., resulting in distraction from work

The U-shaped line reduces material handling as the entry and exit points of the material on the line are nearby

A trolley which brings the raw material for the line may take back the finished goods in a single round

The assembly line can be efficient only when tasks are assigned to different workstations in such a way that, as far as possible, the total processing times at the workstations are equal

This is so because the conveyor moves at regular intervals of time and, therefore, the time available for each workstation to complete its set of assigned tasks is the same

This is achieved by line balancing

The time for which a basic structure of the product is available before a work station is called the cycle time In fact, it is the time after which the conveyor moves

Cycle time is defined as the time period after which completed units come off the assembly line

Note that completed units will be available after each movement of the conveyor, as the basic structure being worked up on at the last work station will become a completed unit in that time

Let us try to understand the steps in assembly line balancing by an example

Step- 1- Find the bottleneck operation and the minimum cycle time

Step-2 – Find the theoretical minimum number of workstations required for the assignment of tasks

Step-3 – Apply a heuristic to assign tasks to work stations

Step-4 – Find the efficiency of the assembly line

In a process layout, general - purpose machines are arranged in no particular sequence, as the processing requirements and sequence are different for the various types of products to be manufactured

These machines include the lathe machine, drilling machine, milling machine, grinding machine, etc., which handle different types of processing requirements

In a production set-up, such a layout is also called a machine shop or job shop

Process Layout - work travels

to dedicated process centers

Milling

Assembly

& Test Grinding

Drilling Plating

A good example of a process layout can be seen at any Maruti Service Station. Here, separate departments with general-purpose machines are assigned for dent corrections, painting, wheel alignment, oil replacement, engine correction, electrical check-up, interiors, washing, cleaning, etc.

Different Maruti cars have different service requirements and are thus taken to different departments according to a schedule decided up on by the service supervisor

Process layout is particularly suitable when different products are produced in lots or batches

This is called intermittent manufacturing

The demand of items is not high enough to warrant continuous manufacturing

Process layout is very commonly found in services set-ups such as banks, hospitals, post-offices, universities, libraries, etc.

There are various advantages and disadvantages of this layout which have been presented on the next graph

Process Layout

Material handling is time-consuming

Work-in-process inventory is usually

high

A low output rate and high cost per

unit

Routing and scheduling is

tedious

High cost of supervision

because of special treatment to every

product being processed

Advantages

Maintenance cost is low

The system is more flexible to design changes

Break down of machines does

not lead to a halt in production

The system promotes

creativity of workers due to variety of tasks

In this layout, the product is very bulky, heavy, large, or has a fixed position For example, the construction of a building, dam, or a plant;

drilling of crude oil; or construction of an airplane, a ship, or a rocket

Thus, machines, equipment, raw materials, workers, etc. have to be taken to the site of the product

The important aspect is the placement of all these things inside or around the product so that no overcrowding takes place

Equipment, raw materials, and worker teams are brought to the site according to a time schedule for better utilization of the space availabel

We have seen that both product and process layouts have their advantages and disadvantages

Product layout is desirable by most organizations, but the low volume and the variety of their products does not warrant it

Therefore, they have no choice but to go in for good old batch processing on process layout

Product layout and process layout represent the two extremes of layout techniques

An intermittent manufacturing of a high variety of products with the advantages of a product layout

Let us take up an example to understand cellular layout

The following figure shows the typical process layout of a factory which has six departments, namely, lathe, foundry, fitting, drilling, welding, and paint

Each of these department has a general purpose machines required for processing products manufactured by the factory

Following graph shows how different products are routed through different departments according to their differing processing requirements

-1111 -1111

2222 - 2222

Ass

emb

ly

3333 - 3333

4444 - 4444

Lathe

Lathe

Mill

Mill

Mill

Mill

Drill

Drill

Drill

Heat

treat

Heat

treat

Heat

treat

Gear

cut

Gear

cut

Grind

Grind

In a cellular layout of the same factory, groups of items with similar processing requirements are identified, and separate manufacturing cells are formed for each group, which contain the required machines in the desired sequence

There is no conveyor or mechanized moving platform in the cells to carry items from one machine to the other, as in the product layout

The identification of similar groups of items is an important aspect of cellular layout and is called group technology

In Group Technology, groups of items can be formed either according to similarities in their design or according to similarities in their manufacturing process

This is a time-consuming and tedious task, which can be accomplished by the following methods

1. Visual inspection method, which is very simple in application but not very accurate

2. Examination of design and production data, which is more complex to implement than visual inspection but much more accurate

3. Analysis of the production flow of items

Before switching over to a cellular layout from a process layout, the production manager must do proper cost and time comparisons to derive the maximum advantages of cellular manufacturing

The assignment model is a heuristic which is used to assign machines to various locations in such a way that the total material-handling cost is the minimum

The various steps in the heuristic can be understood as follows

Step-1 := Find the smallest value in every row and subtract it from each cell value in the corresponding row Similarly, the smallest value in the second row should be

subtracted from each cell value of the second row

Step-2 := Find the smallest value in every column and subtract it from each cell value in the corresponding column Similarly, the smallest value in the second column

should be subtracted from each cell value of the second column

Step-3 := Make horizontal and vertical lines to cover all the zeroes in the table The lines drawn can be all horizontal, all vertical, or a

combination of horizontal and vertical lines in whatever way possible

If the number of lines required to cover all the zeroes in the table is equal to the number of machines or the number of locations, the optimal solution has been obtained

Step- 4 := Select the smallest value out of those not covered by any of the lines Subtract the value from all the values not covered by any

of the lines and add it to those at the intersection of any two lines

Again make horizontal and vertical lines to cover all the zeroes in table

If the number of lines required to cover all the zeroes in the table is equal to the number of machines or the number of locations, the optimal solution has been obtained

Step -5 := A single zero in any row or column is assigned first

In process layouts, two or more layouts can be compared to find out the layout which minimizes the total load-distance value of the various products manufactured

Here, load means the total number of units of different products any department processes

Distance means the distance between any two departments

Let us try to understand this technique called load-distance analysis