Unit 5: Process Design, Capacity Planning, and Location Analysis - Module:6-7-8

Which type of operation would most likely benefit by using a regional facility strategy?

A Subway franchise restaurant.

Which type of operation would most likely benefit by using a product facility strategy?

A computer chip manufacturer.

Lag Strategy

A more conservative approach to capacity planning. his strategy entails adding capacity only after an organization is running at full capacity or is beyond due to increase in demand.

A delivery-only pizza parlor provides a combination of a good (the pizza) and a service (the delivery). Which aspect of capacity decisions are not a consideration for capacity planning for this business?

Adequate space for the customer in the service delivery system.

Adjustment Strategy

As consumer demand or major changes to product or system architecture occurs, is used to add or reduce capacity in small or large amounts.

Why might the location of competitors be an important factor in making a location decision for service operations?

Because having competitors in the immediate area might negatively impact sales.

What is the primary focus of the theory of constraints (TOC)?

Bottlenecks

HIstorically, different manufacturing systems have been employed to improve productivity.How can companies attain economies of scope?

By diversifying their product line using the same equipment.

________ is a measure used to determine how much capacity is actually used on an average basis.

Capacity utilization - capacity utilization is a metric, or measure, used to determine how much capacity is actually being used on an average basis.

Which term refers to the maximum rate of production?

Capacity, which is the maximum rate of production, is a measure of an organization's ability to provide customers with the demanded services or goods in the amount requested and in a timely manner.

The type of process a company uses depends on the product being manufactured.

Continuous Flow Process - Checks are processed in a continuous flow. Batch Processing - Pain medicines are processed using a batch strategy.

What quantitative factors might influence service location decisions?

Costs associated with facility construction, productions, overhead, transportation to and from the facility, and state and local government incentives

The maximum output a system could achieve in ideal conditions is

Design capacity

Which term is defined as the maximum achievable output of a process or system?

Design capacity

___ requires flexibility within the organization and suggests building volume to cover fixed costs by producing a variety of products on the same equipment.

Economies of scope

A system rarely achieves maximum output. A more likely estimate of system output is

Effective capacity

_____is defined as the maximum capacity given equipment changeovers and scheduled downtime of the production schedule.

Effective capacity is the maximum capacity given the product mix, equipment changeovers, and scheduled downtime of the production schedule.

Review the Beck Manufacturing example. Which of the following is an action which needs to be taken, in order to accomplish Step 3 of the TOC 5-step thinking process?

Ensure each department understands how much to produce to ensure Final Assembly stays busy all the time.

The following considerations are important when integrating qualitative factors to evaluate location alternatives.

Factoring relevance and weight with respect to each potential site

A large regional bank is considering two locations for its new call center. One, a mid-sized city, features inexpensive real estate and low taxes but rates low in national "quality of life" surveys. The other, a large metropolitan area, features a highly educated, sophisticated workforce and easy access to a large airport but its cost of living rates are in the top 5%, nationally. True or false? A responsible site selection process will focus on cost factors but may ignore less tangible issues like quality of life and access to transportation.

False Both quantitative (such as cost) and qualitative (such as access to transportation) factors should be analyzed because, when integrated, they can influence service location decisions.

Concord Enterprises has implemented a product facility strategy, which means that each of its manufacturing plants has a specified marketing area and manufactures a complete line of products for that area.

False Concord has implemented a regional facility strategy not a product facility strategy. A regional facility strategy requires that each production facility has a defined marketing area and each facility produces a complete line of products for that area.

The evaluation of quantitative factors is always more important than of qualitative factors when making service location decisions.

False Even though qualitative factors do not usually have measurable, direct effects, they do need to be carefully considered and integrated with quantitative factors when making service location decisions.

Qualitative factors, including potential costs and revenues, must be organized for each site in a way that allows them to be easily compared when making service location decisions.

False Potential costs and revenues are considered quantitative costs. Potential costs and revenues, however, must be organized for each site in a way that allows them to be easily compared when making service location decisions.

Qualitative factors do not usually have measurable, direct effects, so they do not need to be compared when evaluating location alternatives.

False Qualitative factors do not usually have measurable direct effects, but they are important to integrate with quantitative factors when making location decisions.

When evaluating location alternatives, a service firm considers qualitative factors, such as labor and transportation costs, and quantitative factors, such as quality of life and cultural activities.

False Quantitative factors like labor and transportation costs can be measured, while qualitative factors like culture and quality of life are important but less easy to measure.

A product-oriented layout is characterized by demand for a variety of products that have different production requirements.

False - A process-oriented layout, rather than product-oriented, is characterized by the production of many different products with the same equipment and low volume of any individual product. Each product has different production requirements that place different demands on the equipment.

Economy of scale requires flexibility within the organization and suggests building volume to cover fixed costs by producing a variety of products on the same equipment.

False - Economy of scope requires flexibility within the organization to produce a variety of products.

A factory which makes Nike sneakers is most likely to use a process layout.

False - Nike sneakers sell in high volumes, and although there are slight variations between models, sneakers are similar products. A product layout fits best.

Once effective capacity is determined, it does not change unless new capacity is added.

False - in general, capacity is not fixed. Effective capacity is a realistic estimate of what a system could produce given planned downtime, which is influenced by the number of employees on vacation, new hires who are learning their jobs, and machines undergoing annual and planned maintenance.

Which of the following is a quantitative factor that influences location decisions for manufacturing firms?

Government incentives

According to the Theory of Constraints 5-step thinking process, which of the following actions would be a waste of an organization's resources?

Having all workers in all departments produce as much as possible.

Match Strategy

In response to changing demands in the market, a more moderate strategy that adds capacity in small amounts

Which of the following is often a key aspect in capacity planning for services, unlike capacity planning for goods?

Inventory cannot be built ahead for most services.

Which qualitative factors are considered when making manufacturing location decisions?

Labor climate, quality of life, proximity to customers and markets, proximity to suppliers and resources.

Which quantitative factors are considered when making manufacturing location decisions?

Labor costs, materials costs, transportation, utilities, taxes, real estate and construction costs and government incentives

Which quantitative factors usually impact manufacturing and service operations equally as they make location decisions?

Labors costs, taxes, real estate costs, construction costs, and government incentives.

Both continuous flow and assembly line processes use dedicated facilities to produce large volumes of goods with few, if any, product differences.

True

Capacity utilization is a metric that helps operations managers determine the average amount of capacity used.

True

Design capacity is the maximum achievable output of a system under ideal conditions for a short period of time.

True

For a firm that wants to develop a competitive advantage as a low-cost leader, flow-oriented processes are appropriate.

True

The units of output for a service business are likely to be expressed in output per unit time.

True

When might a product facility strategy be appropriate for an organization?

When the production process is complex and hard to control or when a firm does not want to duplicate expensive equipment so they produce in one facility.

Assembly line operations are best used in certain production situations. Which of the following types of businesses is best suited to an assembly line operation?

a fast-food restaurant

Capacity utilization and efficiency have

actual output in common.

For a firm that wants to develop a competitive advantage as a low-cost leader by producing large volumes of similar products, a(n)

assembly line process would be best.

Economies of scale deal with utilizing the fixed costs of production. Companies must _______ to minimize fixed costs.

build sales volume

Batch processing is often used to produce different models of the same fundamental product. Although it adds efficiency, batch processing still requires

changeover time

Economies of scale occur when fixed costs are better utilized. HIgh volume operations best optimize economies of scale using

continuous flow

If a business has customers that use a service facility in person, being close to customers is a very important factor because

customers often place a high value on their time, therefore, convenience is essentials

The manufacturer plans to produce 400 doors per day. On average, it tends to actually produce 380 to 390 doors. In ideal conditions, the manufacturer can produce 500 doors per day. 400 doors per day is the manufacturer's _______.

effective capacity

Process selection involves completing tasks efficiently. The decision regarding which type of support material to use in a building is a

engineering issue - The type of building material used is an engineering decision.

The first step in the theory of constraints (TOC) process is to ________ system constraints.

identify

Productivity is dependent on the efficient use of resources. Leverage can best be described as

increasing the output from the employees

A regional facility strategy

is used when customer convenience and access are important, or when outbound transportation costs are very high.

On an ongoing basis, when production processes are stable, effective capacity will be _______ design capacity.

less than

A regional facility strategy would be used when each product facility produces for a defined marketing area and ships

locally

Flexible manufacturing systems are a process option. Flexible manufacturing systems produce

low cost products

A product facility strategy

means that one facility is responsible for producing and shipping throughout the world. A product facility strategy is appropriate when the production process is complex and hard to control, or it can be used when a firm does not want to duplicate expensive equipment, facilities, and highly trained personnel. In this case, one facility is responsible for producing.

Project planning involves unique requirements for each new project. One noticeable characteristic of projects is the

need to be flexible

The Acme Manufacturing Company is operating at a maximum rate of production and meeting the demand of its customer base. Acme is

operating at capacity

In the shipping center example, the

packaging department the bottleneck.

Economies of scale and scope are dependent on sales volume. According to your module text, which of the following has a direct impact on a company's sales volume:

producing higher quality products

According to the ________, a firm has one manufacturing location that produces a single product that is shipped throughout the world.

product facility strategy

Because of changing regulatory requirements, Al's customers who manufacture commercial vehicles have asked him to produce a very different type of steering gear for next model year's trucks. Al needs to determine whether his equipment is flexible enough to enable an increased

product mix.

A ______ layout is characterized by high consumer demand for similar goods that have few variations.

product-oriented

Transportation costs, government incentives, and local wage rates are

quantitative factors that influence manufacturing location decisions.

Effective capacity is based upon what a manufacturer can produce in realistic

realistic conditions.

When a firm implements a _____ strategy, each of its manufacturing plants has a specified marketing area and manufactures a complete line of products for that area.

regional facility

Al is most likely to express the production rate, or output, of his facility in Hint, displayed below

Total steering gears per day

According to the theory of Theory of Constraints, "throughput" describes the state where output is as close to the system capacity as possible.

True

Although qualitative factors lack measurable, direct effects, they can be included in service location decisions if managers focus on the most relevant factors and give each factor a weight.

True

Review the Beck Manufacturing example. Assume that as part of Step 4, the decision was made to purchase another machine for Final Assembly. Final Assembly now has the capacity to produce 400 steering gears per hour. Step 5 of the TOC 5-step thinking process suggests which of the following actions?

Review the process, resource, and demand constraints and find the next bottleneck.

When describing the output of a service business such as a hairdresser, we are more likely to explain output using "number of customers served" because this type of service business uses a

Process layout

________ involves determining the most appropriate method of completing a task based on technical issues and scale issues.

Process selection

Which of the following involves a firm having one manufacturing location to produce one product and shipping the product around the country or world?

Product facility strategy - A product facility strategy means that one facility is responsible for producing one product or product line and shipping that product throughout the country and the world.

Al Beck, president of Beck Manufacturing, is working on capacity planning for his facility, which produces steering gears for auto manufacturers. The operation produces large numbers of nearly identical products. Beck Manufacturing is most likely using a

Product layout is used for high volumes of the same or similar products.