(A)Capacity planning is the process of determining the production capacity needed by an organization to

meet changing demands for its products.[1] In the context of capacity planning, design capacity is the maximum
amount of work that an organization is capable of completing in a given period. Effective capacity is the
maximum amount of work that an organization is capable of completing in a given period due to constraints
such as quality problems, delays, material handling, etc.
The phrase is also used in business computing and information technology as a synonym for capacity
management. IT capacity planning involves estimating the storage, computer hardware, software and
connection infrastructure resources required over some future period of time. A common concern of enterprises
is whether the required resources are in place to handle an increase in users or number of interactions.
[2]

Capacity management is concerned about adding central processing units (CPUs), memory and storage to

and a physical or virtual server. This has been the traditional and vertical way of scaling up web applications,
however IT capacity planning has been developed with the goal of forecasting the requirements for this vertical
scaling approach.
A discrepancy between the capacity of an organization and the demands of its customers results in inefficiency,
either in under-utilized resources or unfulfilled customers. The goal of capacity planning is to minimize this
discrepancy. Demand for an organization's capacity varies based on changes in production output, such as
increasing or decreasing the production quantity of an existing product, or producing new products. Better
utilization of existing capacity can be accomplished through improvements in overall equipment
effectiveness (OEE). Capacity can be increased through introducing new techniques, equipment and materials,
increasing the number of workers or machines, increasing the number of shifts, or acquiring additional
production facilities.
The broad classes of capacity planning are lead strategy, lag strategy, match strategy, and adjustment strategy.

Lead strategy is adding capacity in anticipation of an increase in demand. Lead strategy is

an aggressive strategy with the goal of luring customers away from the company's competitors by
improving the service level and reducing lead time. It is also a strategy aimed at reducing stock out costs.
A large capacity does not necessarily imply high inventory levels, but it can imply in higher cycle
stock costs. Excess capacity can also be rented to other companies.

Advantage of lead strategy: First, it ensures that the organization has adequate capacity to meet all demand,
even during periods of high growth. This is especially important when the availability of a product or service is
crucial, as in the case of emergency care or hot new product. For many new products, being late to market can
mean the difference between success and failure. Another advantage of a lead capacity strategy is that it can
be used to preempt competitors who might be planning to expand their own capacity. Being the first in an area
to open a large grocery or home improvement store gives a retailer a define edge. Finally many businesses find
that overbuilding in anticipation of increased usage is cheaper and less disruptive than constantly making small
increases in capacity. Of course, a lead capacity strategy can be very risky, particularly if demand is
unpredictable or technology is evolving rapidly.

Lag strategy refers to adding capacity only after the organization is running at full capacity or beyond
due to increase in demand (North Carolina State University, 2006). This is a more conservative strategy
and opposite of a lead capacity strategy. It decreases the risk of waste, but it may result in the loss of
possible customers either by stock out or low service levels. Three clear advantages of this strategy are a
reduced risk of overbuilding, greater productivity due to higher utilization levels, and the ability to put off
large investments as long as possible. Organizations that follow this strategy often provide mature, costsensitive products or services.

Match strategy is adding capacity in small amounts in response to changing demand in the market.
This is a more moderate strategy.

Adjustment strategy is adding or reducing capacity in small or large amounts due to consumer's
demand, or, due to major changes to product or system architecture.

(b) If the organization can configure the right location for the manufacturing facility,
it will have sufficient access to the customers, workers, transportation, etc. For
commercial success, and competitive advantage following are the critical factors:

Customer Proximity: Facility locations are selected closer to the customer as to

reduce transportation cost and decrease time in reaching the customer.

Business Area: Presence of other similar manufacturing units around makes

business area conducive for facility establishment.

Availability of Skill Labor: Education, experience and skill of available labor are
another important, which determines facility location.

Free Trade Zone/Agreement: Free-trade zones promote the establishment of

manufacturing facility by providing incentives in custom duties and levies. On
another hand free trade agreement is among countries providing an incentive to
establish business, in particular, country.

Suppliers: Continuous and quality supply of the raw materials is another critical
factor in determining the location of manufacturing facility.

Environmental Policy: In current globalized world pollution, control is very important;

therefore understanding of environmental policy for the facility location is another
critical factor.

( c)
LAYOUT
In manufacturing, facility layout consists of configuring the plant site with lines,
buildings, major facilities, work areas, aisles, and other pertinent features such as
department boundaries. While facility layout for services may be similar to that for
manufacturing, it also may be somewhat differentas is the case with offices,
retailers, and warehouses. Because of its relative permanence, facility layout
probably is one of the most crucial elements affecting efficiency. An efficient layout
can reduce unnecessary material handling, help to keep costs low, and maintain
product flow through the facility.

Firms in the upper left-hand corner of the product-process matrix have a process
structure known as a jumbled flow or a disconnected or intermittent line flow.
Upper-left firms generally have a process layout. Firms in the lower right-hand
corner of the product-process matrix can have a line or continuous flow. Firms in the
lower-right part of the matrix generally have a product layout. Other types of
layouts include fixed-position, combination, cellular, and certain types of service
layouts.

PROCESS LAYOUT
Process layouts are found primarily in job shops, or firms that produce customized,
low-volume products that may require different processing requirements and
sequences of operations. Process layouts are facility configurations in which
operations of a similar nature or function are grouped together. As such, they
occasionally are referred to as functional layouts. Their purpose is to process goods
or provide services that involve a variety of processing requirements. A
manufacturing example would be a machine shop. A machine shop generally has
separate departments where general-purpose machines are grouped together by
function (e.g., milling, grinding, drilling, hydraulic presses, and lathes). Therefore,
facilities that are configured according to individual functions or processes have a
process layout. This type of layout gives the firm the flexibility needed to handle a

variety of routes and process requirements. Services that utilize process layouts
include hospitals, banks, auto repair, libraries, and universities.

Improving process layouts involves the minimization of transportation cost,

distance, or time. To accomplish this some firms use what is known as a Muther
grid, where subjective information is summarized on a grid displaying various
combinations of department, work group, or machine pairs. Each combination (pair),
represented by an intersection on the grid, is assigned a letter indicating the
importance of the closeness of the two (A = absolutely necessary; E = very
important; I = important; O = ordinary importance; U = unimportant; X =
undesirable). Importance generally is based on the shared use of facilities,
equipment, workers or records, work flow, communication requirements, or safety
requirements. The departments and other elements are then assigned to clusters in
order of importance.

Advantages of process layouts include:

Flexibility. The firm has the ability to handle a variety of processing requirements.
Cost. Sometimes, the general-purpose equipment utilized may be less costly to
purchase and less costly and easier to maintain than specialized equipment.
Motivation. Employees in this type of layout will probably be able to perform a
variety of tasks on multiple machines, as opposed to the boredom of performing a
repetitive task on an assembly line. A process layout also allows the employer to
use some type of individual incentive system.
System protection. Since there are multiple machines available, process layouts are
not particularly vulnerable to equipment failures.
Disadvantages of process layouts include:

Utilization. Equipment utilization rates in process layout are frequently very low,
because machine usage is dependent upon a variety of output requirements.
Cost. If batch processing is used, in-process inventory costs could be high. Lower
volume means higher per-unit costs. More specialized attention is necessary for
both products and customers. Setups are more frequent, hence higher setup costs.
Material handling is slower and more inefficient. The span of supervision is small
due to job complexities (routing, setups, etc.), so supervisory costs are higher.

Additionally, in this type of layout accounting, inventory control, and purchasing

usually are highly involved.
Confusion. Constantly changing schedules and routings make juggling process
requirements more difficult.
PRODUCT LAYOUT
Product layouts are found in flow shops (repetitive assembly and process or
continuous flow industries). Flow shops produce high-volume, highly standardized
products that require highly standardized, repetitive processes. In a product layout,
resources are arranged sequentially, based on the routing of the products. In theory,
this sequential layout allows the entire process to be laid out in a straight line,
which at times may be totally dedicated to the production of only one product or
product version. The flow of the line can then be subdivided so that labor and
equipment are utilized smoothly throughout the operation.

Two types of lines are used in product layouts: paced and unpaced. Paced lines can
use some sort of conveyor that moves output along at a continuous rate so that
workers can perform operations on the product as it goes by. For longer operating
times, the worker may have to walk alongside the work as it moves until he or she
is finished and can walk back to the workstation to begin working on another part
(this essentially is how automobile manufacturing works).

On an unpaced line, workers build up queues between workstations to allow a

variable work pace. However, this type of line does not work well with large, bulky
products because too much storage space may be required. Also, it is difficult to
balance an extreme variety of output rates without significant idle time. A technique
known as assembly-line balancing can be used to group the individual tasks
performed into workstations so that there will be a reasonable balance of work
among the workstations.

Product layout efficiency is often enhanced through the use of line balancing. Line
balancing is the assignment of tasks to workstations in such a way that
workstations have approximately equal time requirements. This minimizes the
amount of time that some workstations are idle, due to waiting on parts from an
upstream process or to avoid building up an inventory queue in front of a
downstream process.

Advantages of product layouts include:

Output. Product layouts can generate a large volume of products in a short time.
Cost. Unit cost is low as a result of the high volume. Labor specialization results in
reduced training time and cost. A wider span of supervision also reduces labor
costs. Accounting, purchasing, and inventory control are routine. Because routing is
fixed, less attention is required.
Utilization. There is a high degree of labor and equipment utilization.
Disadvantages of product layouts include:

Motivation. The system's inherent division of labor can result in dull, repetitive jobs
that can prove to be quite stressful. Also, assembly-line layouts make it very hard to
administer individual incentive plans.
Flexibility. Product layouts are inflexible and cannot easily respond to required
system changesespecially changes in product or process design.
System protection. The system is at risk from equipment breakdown, absenteeism,
and downtime due to preventive maintenance.
FIXED-POSITION LAYOUT
A fixed-position layout is appropriate for a product that is too large or too heavy to
move. For example, battleships are not produced on an assembly line. For services,
other reasons may dictate the fixed position (e.g., a hospital operating room where
doctors, nurses, and medical equipment are brought to the patient). Other fixedposition layout examples include construction (e.g., buildings, dams, and electric or
nuclear power plants), shipbuilding, aircraft, aerospace, farming, drilling for oil,
home repair, and automated car washes. In order to make this work, required
resources must be portable so that they can be taken to the job for "on the spot"
performance.

Due to the nature of the product, the user has little choice in the use of a fixedposition layout. Disadvantages include:

Space. For many fixed-position layouts, the work area may be crowded so that little
storage space is available. This also can cause material handling problems.

Administration. Oftentimes, the administrative burden is higher for fixed-position

layouts. The span of control can be narrow, and coordination difficult.
COMBINATION LAYOUTS
Many situations call for a mixture of the three main layout types. These mixtures
are commonly called combination or hybrid layouts. For example, one firm may
utilize a process layout for the majority of its process along with an assembly in one
area. Alternatively, a firm may utilize a fixed-position layout for the assembly of its
final product, but use assembly lines to produce the components and subassemblies
that make up the final product (e.g., aircraft).

CELLULAR LAYOUT
Cellular manufacturing is a type of layout where machines are grouped according to
the process requirements for a set of similar items (part families) that require
similar processing. These groups are called cells. Therefore, a cellular layout is an
equipment layout configured to support cellular manufacturing.

Processes are grouped into cells using a technique known as group technology (GT).
Group technology involves identifying parts with similar design characteristics (size,
shape, and function) and similar process characteristics (type of processing
required, available machinery that performs this type of process, and processing
sequence).

Workers in cellular layouts are cross-trained so that they can operate all the
equipment within the cell and take responsibility for its output. Sometimes the cells
feed into an assembly line that produces the final product. In some cases a cell is
formed by dedicating certain equipment to the production of a family of parts
without actually moving the equipment into a physical cell (these are called virtual
or nominal cells). In this way, the firm avoids the burden of rearranging its current
layout. However, physical cells are more common.

An automated version of cellular manufacturing is the flexible manufacturing

system (FMS). With an FMS, a computer controls the transfer of parts to the various
processes, enabling manufacturers to achieve some of the benefits of product
layouts while maintaining the flexibility of small batch production.

Some of the advantages of cellular manufacturing include:

Cost. Cellular manufacturing provides for faster processing time, less material
handling, less work-in-process inventory, and reduced setup time, all of which
reduce costs.
Flexibility. Cellular manufacturing allows for the production of small batches, which
provides some degree of increased flexibility. This aspect is greatly enhanced with
FMSs.
Motivation. Since workers are cross-trained to run every machine in the cell,
boredom is less of a factor. Also, since workers are responsible for their cells' output,
more autonomy and job ownership is present.
OTHER LAYOUTS
In addition to the aforementioned layouts, there are others that are more
appropriate for use in service organizations. These include warehouse/storage
layouts, retail layouts, and office layouts.

With warehouse/storage layouts, order frequency is a key factor. Items that are
ordered frequently should be placed close together near the entrance of the facility,
while those ordered less frequently remain in the rear of the facility. Pareto analysis
is an excellent method for determining which items to place near the entrance.
Since 20 percent of the items typically represent 80 percent of the items ordered, it
is not difficult to determine which 20 percent to place in the most convenient
location. In this way, order picking is made more efficient.

While layout design is much simpler for small retail establishments (shoe repair, dry
cleaner, etc.), retail stores, unlike manufacturers, must take into consideration the
presence of customers and the accompanying opportunities to influence sales and
customer attitudes. For example, supermarkets place dairy products near the rear
of the store so that customers who run into the store for a quick gallon of milk must
travel through other sections of the store. This increases the chance of the
customer seeing an item of interest and making an impulse buy. Additionally,
expensive items such as meat are often placed so that the customer will see them
frequently (e.g., pass them at the end of each aisle). Retail chains are able to take
advantage of standardized layouts, which give the customer more familiarity with
the store when shopping in a new location.

Office layouts must be configured so that the physical transfer of information

(paperwork) is optimized. Communication also can be enhanced through the use of
low-rise partitions and glass walls.

A number of changes taking in place in manufacturing have had a direct effect on

facility layout. One apparent manufacturing trend is to build smaller and more
compact facilities with more automation and robotics. In these situations, machines
need to be placed closer to each other in order to reduce material handling. Another
trend is an increase in automated material handling systems, including automated
storage and retrieval systems (AS/AR) and automated guided vehicles (AGVs). There
also is movement toward the use of U-shaped lines, which allow workers, material
handlers, and supervisors to see the entire line easily and travel efficiently between
workstations. So that the view is not obstructed, fewer walls and partitions are
incorporated into the layout. Finally, thanks to lean manufacturing and just-in-time
production, less space is needed for inventory storage throughout the layout.