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This report discusses a case study on capacity planning and facility location at Georgia Pacific a company that has undergone growth. The case study illustrate the importance of growth and its relationship to the environment. The report first start with discussing what capacity planning and control is, then looks at capacity-timing strategy Georgia Pacific used in the case study and the factors that influence this strategy. Then looks at major factors that it used to make its capacity expansion decision and what other factors might the company have considered. The report then further explain the technique Georgia Pacific used to make its facility location decision and what other facility factors might the company have considered. Also the report looks at how environmental considerations affect capacity planning and facility location at Georgia Pacific and lastly in my own opinion explain if Georgia pacific has made the correct capacity planning and facility location. Finally the report concludes with Georgia pacific production style, the manner in which the company operates as a team, its environmental consideration and decision making process.
Definition on capacity planning
In operations management, capacity is referred as an amount of the input resources available to produce relative output over period of time ( www.managementstudyguide.com ).
Strategic capacity planning is important in an organisation mainly because it facilitate the organisation to meet its future requirement of the company. Planning also guarantees operation cost are kept at a minimum level without affecting the quality, it also guarantee that organisation remain viable to attain its long-term plan for expansion. Lagging, level checked course work for , long term, short, term
Capacity planning and timing strategy
Long range capacity planning and control primarily depends on a range of factors. At the case study some of the factors Georgia-Pacific used to carry out its capacity planning were base on changes in market condition, technology and equipment.
3.1- Market conditions:
The timing of the market and making a decision base on the market gives the organisation a competitive edge as well as an increase in market share. Georgia-Pacific have used these strategy to increased its production capacity base on the changes in the market, as the market grew production was increased so as to meet the demand. ( changes depends on it capacity is can be either lagging,, level or chasing course work)
The change in the technology means organisation, required fewer resource to operate its production at Georgia pacific this means that with the advance technology such as the lasers and computers used in the sawmill will produce more lumber and fewer sawdust hence increase its production ability with only slight equipment changes.
In order to achieve large increases in production capacity and deliver the customers with high quality product, Georgia-Pacific constantly invest in improving the already existing equipment, or set up advance new equipment.
Factors deciding the expansion
The timing in making a decision to expand a business is vital, as you need to carefully study the fiscal benefits of such expansion such as assessing having the cash for the investment to cater for the new equipment or facilities and as well as the additional inventory,. At Georgia-Pacific the various factors considered for example in deciding whether to buy and expand the sawmill in Florida are market condition, raw materials, environment, economics labor and equipment.
4.1- Market conditions:
The condition of the market is a major factor to consider in making decision to expand business. Excellent market condition such as growth and population provide an edge over competitors, for example Georgia pacific considered to buy Florida sawmill because Florida has an excellent market condition such as speedy growth of population and boom in home construction, and due to this strategic position of Florida gave Georgia-Pacific an edge.
4.2- Raw materials
The availability of the required raw materials are very important factor to consider in capacity expansion in the case study since Georgia pacific depends on natural resource it considered Florida site because it own forest in the area that also had other position of privately owned timber.
That the other major factors to consider in making decision for a business capacity expansion is legislation and government policies regarding the environment, at the case study Georgia Pacific considered this factor and assessed the environmental regulation for example Florida and find out that Florida has more strict environmental regulations that make it hard to build a new plant than to acquire an existing plant.
Economic is another a major factor to considers when planning for capacity expansion as this affect the economic viability of the organization. Georgia pacific has considered this factor by analysing the return on investment when acquiring facilities and found out that acquiring and expanding was much easier and economically viable than building new facilities.
The availability of labor both skill and unskilled is essential when considering making a decision for capacity expansion. As for Georgia pacific the nearby facility mean that the sawmill could draw some trained personnel.
As for a long term capacity expansion the availability of equipment to carry the operation is a major factor to consider. In the case study Georgia pacific uses advance equipment such the computer In the paper mill assist to trim the paper roll into smaller for less waste and the laser at itâ€™s sawmill to produce more lumber. Also the already existing sawmill had the essential required equipment and facilities such a functioning road system, a nearby rail road spur, and electricity facilities.
What other factors might the company have considered
Other factors include
Facilities location decision
The decision on where to locate facilities is the most important factors in capacity planning and its where the success of the company depends. Facility location involves organisation seeking to locate, relocate or expand their operation, the decision process encompasses the identification, analysis and evaluation of a selection among alternative,(citation)
At the case study Georgia Pacific facility location mostly involves long term commitment of resources and therefore the decision on where to locate facilities are mainly affected by several factors such as, capacity, economic, technology as well as political, and social.
However in the case study Georgia pacific corp. the main focus of consideration are raw material, market condition, labor force, government regulation and policies and finally energy utilities
6-1- Market condition.
Anlaysing the condition of the market is very important factor in facility location decision. Georgia pacific asses the market condition by surveying so as know the demand and place the product close to the location. An excellent example is the OSB plant at skipper (case study).
6.2- Raw materials.
The availability of raw material is also important fact at facility location decision. Georgia pacific review the availability of raw so as to have adequate supply of locally available raw materials at a low price.
6.3- Government regulation.
Government regulation is important factor in facility location decision. Georgia pacific choose where the state and local government welcome companies by looking at factors where they have relax tax and environmental policies as well as attitude of the local towards industry such as Florida.
The availability of work force both skill and unskilled is another vital factor to consider in facility location decision. In the case study Georgia pacific assess the availability of local work force that can be easily train.
Georgia pacific have considered the availabilities of all utilities necessary such as such as water, electricity and natural gas.
Other factors that Georgia pacific could have also consider could be the availability of less expensive land with a bigger space as well as land with quality and efficiency facilities such as such as roads, telecommunications and energy systems Also there other crucial factor that George pacific could consider could be the cost of transportation in terms moving the product as well as the supply cost. For example proximity to supplier can be excellent for JIT production as it improves performance of deliveries and reduces inventory as well as reducing cost.
Site development cost
Availability of electrical power, water and service
Adequacy of highway and rail system
In general environmental consideration has a big influence in capacity planning and facility location. Since Georgia pacific depends on timber as a natural resource, It is paramount that itâ€™s environmental friendly,
Georgia pacific therefore asses the environmental influence on their decision to expand existing facilities or the new facility for example buying the existing sawmill in Florida was much more easier than building new ones because of strict environmental policies in
In preventing pollution Georgia pacific has committed itself to locate materials close to site to reduce transportation pollution, burn under the right metrological to reduce the risk of wild fire and lastly Georgia pacific has treatment facilities for waste water for all its plant.
Georgia pacific has also commits itself to effectively use manufacturing waste and its by product, to produce about 60% of its energy requirement in all its plant.
Opinion on Georgia Pacific
It is believe that Georgia Pacific has made the correct capacity planning and facility location decision
Base on the following reasons
First Georgia pacific worked as team and asses possible increase in capacity by soliciting proposal and obtaining information on major factors such as market demand, raw material, technology, equipment and labor (case study) and make sound decision base on these factors
Second Georgia pacific main emphasis was the market condition and the raw materials mainly because they focus the product demand and when ever demand increases Georgia pacific respond with buying and acquisition
Third since Georgia pacific depends on timber as a natural resource they have carefully selected location for facilities expansion were environmental policies were less stringent such as the sawmill in Florida.
Finally Georgia had commitment in reducing pollution of transportation as well recycling its waste and used partly for energy and due to the above reasons its believed that Georgia pacific has made the correct choices in executing a well plan capacity planning and facility location.
Capacity planning is important factor in an organisation mainly because it facilitate the organisation to meet its future requirement of the company
In the case study Georgia Pacific capacity planning is a long term and the emphasis is on growth and so capacity increase and acquisition is a way of life. The increase in capacity are mainly assess depending on factors such as market demand, raw material, technology equipment and labor. Environmental consideration in selecting facilitiy location for capacity expansion in terms pollution is vital.
All the above factors listed on this report are very crucial when making capacity decisions and if assed and implemented correctly ensures economic viability of the organization.