# Wala

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Chapter 9: Capacity Planning and Facility Location

Overview

This chapter defines capacity planning and location analysis and explains the steps and factors considered when making these types of decisions. The relationship between capacity planning and location analysis is described. The use of decision support tools for capacity planning and location analysis is described.

Answers to Discussion Questions in Textbook

1. Explain why capacity planning is important to a business.

Having the wrong level of capacity causes negative effects. Too much capacity means that are costs are higher than they should be since we are paying for more land, equipment and a larger building than we need. Not enough capacity negatively affects the level of service provided to our customers.

2. Explain the differences between design capacity and effective capacity.

Design capacity is the maximum output that can be achieved using temporary measures, such as overtime and subcontracting. Effective capacity is the maximum output that can be achieved under normal conditions, including realistic work schedules and regular staff levels. Effective capacity is usually less than design capacity. Effective capacity is what we can achieve over long periods of time, while design capacity can be reached on a short-term basis.

3. How is capacity utilization computed, and what does it tell us?

Capacity utilization is the actual output divided by the capacity times 100%. It tells us what percentage of our capacity is being used.

4. What are the steps in capacity planning?

The steps in capacity planning are to identify the capacity requirements for the present and future, develop capacity alternatives and evaluate capacity alternatives. The capacity alternatives are do nothing, expand large now and expand small now with the option to increase capacity...

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