Chapter 9 Flashcards
Capacity
The maximum output rate that can be achieved by a facility.
Capacity planning
The process of establishing the output rate that can be achieved by a facility
Design capacity
The maximum output rate that can be achieved by a facility under ideal conditions
Effective capacity
The maximum output rate that can be sustained under normal conditions.
Capacity utilization
Percentage measure of how well available capacity is being used.
Best operating level
The volume of output that results in the lowest average unit cost.
Economies of scale
A condition in which the average cost of a unit produced is reduced as the amount of output is increased.
Capacity cushion
Additional capacity added to regular capacity requirements to provide greater flexibility.
Decision tree
Modeling tool used to evaluate independent decisions that must be made in sequence.
Location analysis
Techniques for determining location decisions.
Proximity to Sources of Supply
A firms needing to locate close to sources of supply.
Proximity to Customers
Locating near the market the company serves.
Proximity to Source of Labor
Proximity to an ample supply of qualified labor is important in many businesses, especially those that are labor intensive.
Community Considerations
The success of a company at a particular location can be affected by the extent to which it is accepted by the local community.
Many communities welcome new businesses, viewing them as providing sources of tax revenues and opportunities for jobs, and as contributing to the overall
well-being of the community. However, communities do not want businesses that bring pollution, noise, and traffic and that lower the quality of life.
Site Considerations
Site considerations for a particular location include factors such as utility costs, taxes, zoning restrictions, soil conditions, and even climate.
