Common decisions to make for the manufacturing facility planning are regarding location, size, layout and specialization or focus of the manufacturing facility. Manufacturing facility planning is founded on the long-term strategic plan for the company which delineates the product lines to be manufactured in each time period of the plan. For several organizations, long-term capacity and facility location plans are the most significant strategic decisions. These decisions are very important because, first, the capital investment in machinery, technology, land, and buildings for manufacturing and services is massive. When an organization has invested huge amounts of money into a facility, it lives with the decision for a long period. These kind of decisions thus receive serious research and are made at the company’s top level. Next, the long-term strategies are embodied in a company’s facility plans. The concerns as what product lines should be produced, where they’ll be sold, and what technologies will be used indicate the strategic plans of the company, and these issues are also fixed at the firm’t top level. Next, the operating efficiency of operations relies upon the capacity of the facilities. Maintenance costs, ease of scheduling, and economy of scale are some of the variables impacted by the capacity of facilities. Lastly, the capacity of facilities becomes a constraint on many other decisions. How much of a product can be economically manufactured in a specific period of time is a constraining factor in short-term production planning.
The decision of size has a strong connection to the capacity issue. Even though industry typically considers an increased size advantageous from the point of view of economies of scale, some authors have pointed out that there are dis-economies of scale. For this reason, there exists a range between a smallest and biggest size of the manufacturing facilities that is appropriate, however having too large or too small can lead to either dis-economies of, or a lack of economies of scale. It is challenging to discover this range, and the possibly optimum size found somewhere along this range.
The facility location decision concerns where you should place a group of factories, or how to design a factory network. For global corporations there are several possible factors behind positioning facilities in a number of countries like the lowering of taxes, better customer support, decline in currency exchange risks, and lower costs.
The focus, or specialization, decision demands making manufacturing an integral part of a company’s competitive edge. The focus decision is typically related to product or process focus. For value networks with several facilities, however, they add to two more: the possibilities to concentrate on production volumes and geographic region, making the focus decision much more complicated.