Facility design involves planning the layout of workspace to streamline production process. It is an important component of a business’s overall operations both in terms of maximizing effectiveness of production process and meeting needs of employees. In facility design, capacity is the maximum output rate of a production or a service facility(Mudrak et al., 2004). On the other hand, economy of scale is the cost advantage that arises with the increased output of a product. It happens because of the inverse relationship between the quantity produced and per-unit fixed cost.
Layout in facility design is an arrangement of different aspects of manufacturing in an appropriate manner in order to achieve desired production results. Cycle time is the period to complete one cycle of operation(Schonberger, 2001). It is defined by a customer and includes total time form the beginning to the end of the process. The time include process time during which a unit is acted upon to bring it closer to an output and delay time during which unit of work is spent waiting to take the next action. FMS stands for Facility Management Services which entails systems that manages a number of facilities management contracts on behalf of clients.
Facility layout should provide an ideal relationship between raw material, equipment and final product at minimal cost under safe and comfortable environment. Objectives such as reduction in movement of workers, promotion of safety of plant and workers should be highly considered. Three types of workflow layouts to choose from are process layout arranged in departments, product layout evident in production line and fixed-position layout experienced when building a large item such as a jumbo jet. Factors such as optimum space, ease of expansion, management policies and organizations objectives should be considered.
The maximum output rate under ideal conditions is experienced in design capacity where a bakery can make 30 custom cakes per day when pushed at holiday time. Effective capacity covers the maximum output rate under normal conditions where the same bakery can make 20 custom cakes per day.The best operating level is the output than results in the lowest average unit cost. Decisions in capacity can be implemented by the amount of capacity cushion, capacity flexibility, size of capacity increment and timing capacity change. Such decisions can be made by following the three steps which are; identifying, developing and evaluating requirements and alternatives.
Economies of scale can arise in several areas within large enterprise and benefits of this concept is obvious in areas such as production and purchasing(Färe& Lovell, 1986). It can also impact areas like finance. Largest companies have lower cost of capital than small firms because they can borrow at lower interest rates. Hence, the economy of scale is cited as a major rationale when two companies announce a merger or takeover.