Chapter 9: Capacity Planning and Facility Location

Vocabulary flashcards covering capacity planning, facility location strategies, decision-making tools, and formulas based on Chapter 9 of the Operations Management textbook.

Capacity

The maximum output rate of a facility.

Capacity Planning

The process of establishing the output rate that can be achieved at a facility.

Design Capacity

Maximum output rate under ideal conditions, such as a bakery pushed to its limit during a holiday.

Effective Capacity

Maximum output rate under normal or realistic conditions; it is usually lower than design capacity.

Capacity Utilization

A percentage measure that indicates how much of the available capacity (either design or effective) is actually being used.

Best Operating Level

The output level that results in the lowest average unit cost.

Economies of Scale

A condition where the cost per unit of output drops as the volume of output increases, often due to spreading fixed costs over more units.

Diseconomies of Scale

A condition where the cost per unit rises as volume increases, often caused by congestion and scheduling complexity.

Focused Factories

Small, specialized facilities with limited objectives.

Plant within a Plant (PWP)

The practice of segmenting larger operations into smaller operating units with focused objectives.

Subcontractor Networks

A trend of outsourcing non-core items to free up internal capacity for primary tasks.

Capacity Cushions

Planned additional capacity used to provide flexibility for future demand.

Decision Points

Points in time when decisions are made in a decision tree, represented by squares called nodes.

Decision Alternatives

The branches or arrows leaving a decision point node in a decision tree.

Chance Events

Events that could affect a decision, represented by branches or arrows leaving circular nodes in a decision tree.

Expected Value (EV)

A weighted average of chance events, calculated as the probability of occurrence multiplied by the chance event outcome.

Facility Location

The process of identifying the best geographic location for a service or production facility.

Globalization

The process of locating facilities around the world to gain advantages like access to foreign markets or cheaper labor.

Factor Rating Method

A procedure used to evaluate multiple alternative locations based on a number of selected qualitative and quantitative factors.

Load-Distance Model

A procedure for evaluating location alternatives based on mathematical distance calculations between sites.

Center of Gravity Approach

A method used to find potential locations that may give a lower load-distance score by testing sites at the center of a target geographic area.

Break-Even Analysis

A technique used to compute the amount of goods that must be sold ($Q = F / (p - c)$) just to cover fixed and variable costs.

Transportation Method

An algorithm used to evaluate the cost impact of adding potential location sites to a network of existing facilities.