Facilities are the land, buildings, equipment, and other major physical inputs that substantially determine productivity capacity, require time to alter, and involve significant capital investments. Facilities issues confronting managers focus mainly on expansion and contraction decisions, facilities location, and facilities layout.
Expansion and Contraction Decisions. Typically, the facilities decision process involves four steps:
- First, managers use forecasts to determine the probable future demand for products or services.
- Second, managers compare current capacity with projected future demand. Current capacity is the maximum output rate possible from current operations.
- Third, when there is either insufficient or excess capacity, managers need to generate and then evaluate alternatives.
- Finally, managers carefully consider the risks and decided on a plan that includes the timing of capacity expansion or contraction.
In expanding capacity, top managers generally have three major policy options:
- First, with a capacity-leads-demand policy, a firm tries not to run short.
- Second, with a policy of capacity in approximate equilibrium with demand, and an organization attempts to match as closely as possible to anticipated demand.
- Third, with a capacity-lags-demand policy, an organization tries to maximize capacity utilization.
Facilities Location. The location of plants, warehouses, and service facilities is an important aspect of facilities decisions. Most facilities location problems fall into one of four categories:
- A single-facility location involves a facility that does not need to interact with any other facilities that the organization might have.
- Location for multiple factories and warehouses usually involve strong consideration of distribution costs and effects on total production costs owing to the various interfaces.
- Locations for competitive retail outlets must be oriented toward consideration of the revenue that can be obtained from various locations.
- The location of emergency services often is connected to response time (e.g., police and fire departments must be located where they can provide an acceptable level of service.
Facilities Layout. There are three main types of layouts for facilities:
- A process layout is a production configuration in which the processing components are grouped according to the type of function the they perform.
- A product layout is a production configuration in which the processing components are arranged in a specialized line along which the product or client passes during the production process.
- A fixed-position layout is a production configuration in which the product or client remains in one location and the tools, equipment, and expertise are brought to it, as necessary, to complete the productive process.