Operations Management: An Integrated Approach, 5th Edition

CAPACITY PLANNING AND FACILITY LOCATION WITHIN OM: HOW IT ALL FITS TOGETHER

Decisions about capacity and location are highly dependent on forecasts of demand (Chapter 8). Forecasts determine the size of current and future capacity needs. Incorrect forecasts, where capacity is either over- or underestimated, can have a devastating effect on the capacity decision. Capacity is also affected by operations strategy (Chapter 2), as size of capacity is a key element of organizational structure. For example, the decision whether to expand now or later can be an important strategic choice. The former can preempt competition by enabling the company to be ready to meet demand. The latter can provide flexibility. Other operations decisions that are affected by capacity and location are issues of job design and labor skills (Chapter 11), choice on the mix of labor and technology, as well as choices on technology and automation (Chapter 3).