chap05-PROCESS SELECTION AND CAPACITY PLANNING
chap05-PROCESS SELECTION AND CAPACITY PLANNING
chap05-PROCESS SELECTION AND CAPACITY PLANNING
Chapter 5
Process Selection
and Capacity
Planning
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Process Selection and Capacity Planning
• Make or Buy?
– Available capacity
– Quality Consideration
– Cost
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Process Selection and System Design
Figure 5-1 Capacity
planning
Forecasting
Facilities and
Product and Process Equipment
service design selection
Layout
Technological
Technological
change
change Work
design
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Types of Processes
• Continuous Processing
• Repetitive/Assembly
– Semicontinuous
• Intermittent/Batch Processing
• Job Shops
– Small runs
• Projects
– Nonroutine jobs
Batch Heavy
Equipment
Assembly Automobile
Line Assembly
Continuous Sugar
Flow Refinery Dependability
Cost
Flexibility-Quality Dependability-Cost
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Automation
Actual output
Efficiency =
Effective capacity
Actual output
Utilization =
Design capacity
Volume
Growth Decline
0 Time 0 Time
Cyclical Stable
Volume
Volume
0 0
Time Time
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Developing Capacity Alternatives
Minimum
cost
0 Rate of output
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Figure 5-7 Evaluating Alternatives
Minimum cost & optimal operating rate are
functions of size of production unit.
Average cost per unit
Small
plant Medium
plant Large
plant
0 Output rate
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Calculating Processing Requirements
S ta n d a rd
Annual p r o c e s s in g tim e P r o c e s s in g t im e
P ro d u c t Dem and p e r u n it ( h r . ) n e e d e d (h r.)
#1 400 5 .0 2 ,0 0 0
#2 300 8 .0 2 ,4 0 0
#3 700 2 .0 1 ,4 0 0
5 ,8 0 0
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Figure 5-8a
Cost-Volume Relationships
F C
+
Amount ($)
VC C)
=
st t (V
s
co co
t al l e
o i a b
T ar
l v
t a
To
Fixed cost (FC)
0
Q (volume in units)
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Figure 5-8b Cost-Volume Relationships
ue
en
Amount ($)
rev
tal
To
0
Q (volume in units)
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Figure 5-8c Cost-Volume Relationships
u e
e n fi t
Amount ($)
ev ro
r P
al t
t o s
To t a l c
To
0 BEP units
Q (volume in units)©The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Break-Even Problem with Step Fixed Costs
Figure 5-9a
C =
+V
FC
TC
= TC
V C
+
FC 3 machines
T C
C =
V
C + 2 machines
F
1 machine
Quantity
Step fixed costs and variable costs.
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Break-Even Problem with Step Fixed Costs
Figure 5-9b
$
BE
P 3
TC
BEP2
TC
3
TC
2
TR 1
Quantity
Multiple break-even points
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CHAPTER FIVE
PROCESS SELECTION AND CAPACITY PLANNING
Financial Analysis
• Cash Flow - the difference between
cash received from sales and other
sources, and cash outflow for
labor, material, overhead, and
taxes.
• Present Value - the sum, in current
value, of all future cash flows of an
investment proposal.
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