Begin your post with the label: Unit 4: Facility Design.
Research the following topics related to Facility Design:
- Economy of Scale
- Cycle time
Unit 4: Facility Design
Capacity refers to the maximum output rate or level of a facility or organization. It indicates the maximum units that can be optimally produced given the available resource. Capacity planning is often conducted in order to determine the optimal output rate in a certain facility. Capacity can be divided in two categories namely: design capacity and effective capacity. Design capacity shows the output rate in ideal conditions while the effective capacity shows the maximum output rates under normal or realistic conditions.
Economy of Scale
This refers to the cost advantages that organizations may gain as they increase in size or as their scale of production increases. In most cases, the cost per unit of goods produced falls as the scale increases. The reason for this is that the organization’s fixed costs remain relatively the same with additional units of output. Economies of scale can lead to development of natural monopolies. In natural monopolies, the average costs decline within certain output ranges. The marginal costs in such cases are lower than the average costs. Marginal cost pricing would thus mean that other firms would make losses and hence the need for subsidies in order to beat competition (Dollery & Wallis, 2001).
Cycle time refers to the total time taken to complete a particular process. Cycle time covers the entire duration that the product was being processed to a finished good (Mayer, 2010). Cycle time is inclusive of the entire process time as well as delay time. Lengthy cycle times may be detrimental to the operations of the business. Long cycle times are associated with high costs, increased instability, and disorientation in customers. On the other hand, short cycle times can be a way of improving the quality of service, innovativeness, and a cost improvement strategy. Organizations can achieve fast cycle times by creating multifunctional teams and ensuring the organizational structure supports the teams’ functioning.
Dollery, B., & Wallis, J. L. (2001). The political economy of the local government. Edward Elgar Publishing.
Mayer, C. (2010). Fast cycle time: how to align purpose, strategy, and structure for speed. New York, NY: Simon and Schuster.
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