ch05 - Chapter 5 Capacity and Location Planning Chapter 5:...

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Chapter 5: Capacity and Location Planning 1 Chapter 5 Capacity and Location Planning
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Chapter 5: Capacity and Location Planning 2 Examples
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Chapter 5: Capacity and Location Planning 3 Burger King Highly variable demand During lunch hour, demand can increase from 40 to 800 hamburgers/hour Limited in ability to used inventory Facilities designed for flexible capacity During off peak times drive through staffed by one worker
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Chapter 5: Capacity and Location Planning 4 Burger King continued During lunch hour drive through staffed by up to five workers who divide up the duties Second window can be used for customer with special orders Average transaction time reduced from 45 to 30 seconds Sales during peak periods increased 50%
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Chapter 5: Capacity and Location Planning 5 Burger King continued Payroll costs as large as food costs Need to keep costs low but at same time meet highly variable demand BK-50 restaurant is 35% smaller and costs 27% less to build, but can handle 40% more sales with less labor
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Chapter 5: Capacity and Location Planning 6 Semiconductor Industry Learning from the steel industry Both industries require large and expensive factories 1980s steel industry started to abandon economies of scale justification and built minimills Chipmakers are now constructing smaller and more automated wafer fabs
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Chapter 5: Capacity and Location Planning 7 Semiconductor Industry continued Short life cycles make it difficult to recoup $2 billion it will cost to build wafer fab in 1998 Payback time is 22-30 month to conventional wafer fab versus 10 months for minifab Processing time can be reduced from 60- 90 days to 7 days.
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Chapter 5: Capacity and Location Planning 8 Mercedes-Benz Early 1990s investigated feasibility of producing luxury sports utility vehicle Project team established to find location for new plant Team charged with finding plant outside of Germany Team initially narrowed search to North America
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Chapter 5: Capacity and Location Planning 9 Mercedes-Benz continued Team determined that North America location would minimize combined labor, shipping, and components cost Plans indicated production volume of 65,000 vehicles per year and a breakeven volume of 40,000 vehicles Sites further narrowed to sites within US Close to primary market
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Chapter 5: Capacity and Location Planning 10 Mercedes-Benz continued Minimize penalties associated with currency fluctuations 100 sites in 35 state identified Primary concern was transportation cost Since half production was for export, focused on sites close to seaports, rail lines, and major highways
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Chapter 5: Capacity and Location Planning 11 Mercedes-Benz continued Worker age and mix of skills also considered Sites narrowed to sites in NC, SC, and AL These sites relatively equal in terms of business climate, education level, transportation, and long-term costs AL chosen due to perception of high dedication to the project
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ch05 - Chapter 5 Capacity and Location Planning Chapter 5:...

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