Facilities Location, Layout and Planning

FACILITY PLANNINGFACILITY PLANNING• The placement of facility – customers,

suppliers, other links in the supply chain

• Resources• Strategy – 99cents Only example• Access to customers• Government impacts

Objectives of Facility LayoutObjectives of Facility Layout

Minimize material handling costsMinimize material handling costs Utilize space efficientlyUtilize space efficiently Utilize labor efficientlyUtilize labor efficiently Eliminate bottlenecksEliminate bottlenecks Facilitate communication and interaction Facilitate communication and interaction

between workers, between workers and between workers, between workers and their supervisors, or between workers and their supervisors, or between workers and customerscustomers

Reduce manufacturing cycle time or Reduce manufacturing cycle time or customer service timecustomer service time

Objectives of Facility LayoutObjectives of Facility Layout

Eliminate waste or redundant movementEliminate waste or redundant movement Facilitate the entry, exit, and placement of Facilitate the entry, exit, and placement of

material, products, or peoplematerial, products, or people Incorporate safety and security measuresIncorporate safety and security measures Promote product and service qualityPromote product and service quality Encourage proper maintenance activitiesEncourage proper maintenance activities Provide a visual control of operations or Provide a visual control of operations or

activitiesactivities Provide flexibility to adapt to changing Provide flexibility to adapt to changing

conditionsconditions Increase capacityIncrease capacity

Questions on Layout Questions on Layout PlanningPlanning

• How should the facility be laid out?• Does my layout cause unnecessary

movement/excess travel time?• Does my work flow in a logical

manner?• Does size dictate layout or does

layout/product flow dictate the size?

Process LayoutProcess Layout Machines grouped by process they performMachines grouped by process they perform

Product LayoutProduct Layout Linear arrangement of workstations to Linear arrangement of workstations to

produce a specific productproduce a specific product Fixed Position LayoutFixed Position Layout

Used in projects where the product cannot Used in projects where the product cannot be movedbe moved

Basic Types of LayoutsBasic Types of Layouts

Manufacturing Process LayoutManufacturing Process Layout

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L M

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G

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A A AReceiving andShipping Assembly

Painting Department

Lathe DepartmentMilling

Department Drilling Department

Grinding Department

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A Product LayoutA Product Layout

InIn

OutOut

Fixed-Position LayoutsFixed-Position LayoutsTypical of projectsEquipment, workers, materials, other

resources brought to the siteHighly skilled laborOften low fixed Typically high variable costs

Designing Process LayoutsDesigning Process Layouts

Minimize material handling costs Block Diagramming

Minimize nonadjacent loads Use when quantitative data

is available Relationship Diagramming

Based on location preference between areas Use when quantitative data is not available

Block DiagrammingBlock Diagramming Create load summary chartCreate load summary chart Calculate composite (two way) Calculate composite (two way)

movementsmovements Develop trial layouts minimizing number Develop trial layouts minimizing number

of nonadjacent loadsof nonadjacent loads

ExampleExample

Relationship DiagrammingRelationship Diagramming(Murther’s Grid)(Murther’s Grid)

Used when quantitative data is not available

Muther’s grid displays preferences

Denote location preferences with weighted lines

Relationship Diagramming Relationship Diagramming ExampleExample

ProductionProduction

OfficesOffices

StockroomStockroom

Shipping and Shipping and receivingreceiving

Locker roomLocker room

ToolroomToolroom


AA AA

AA OO

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OOOO

OO

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OfficesOffices

StockroomStockroom



ToolroomToolroom

A Absolutely necessaryE Especially importantIImportantO OkayUUnimportantXUndesirable


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OfficesOffices

StockroomStockroom



ToolroomToolroom

1 Absolutely necessary2 Especially important3 Important4 Okay5Unimportant6Undesirable

Facility Location Facility Location ModelsModels

Types Of FacilitiesTypes Of FacilitiesHeavy manufacturing

Auto plants, steel mills, chemical plantsLight industry

Small components mfg, assemblyWarehouse & distribution centers

Retail & service

Factors in Heavy Manufacturing Factors in Heavy Manufacturing LocationLocation

Construction costsLand costs

Raw material and finished goods shipment modes

Proximity to raw materialsUtilities

Labor availability

Factors in Light Industry Factors in Light Industry LocationLocation

Construction costsConstruction costsLand costsLand costs

Easily accessible Easily accessible geographic regiongeographic region

Education & training capabilitiesEducation & training capabilities

Factors in Warehouse Factors in Warehouse LocationLocation

Transportation costsProximity to markets (Customers)

Service Location Service Location ConsiderationsConsiderations

• Labor• Cost of Living • Real Estate• Construction• Government Incentives• Examples – Amoco, Mass St, Tattoo

Parlors, Walgreen’s

Global Location FactorsGlobal Location Factors Government stability Government regulations Political and economic

systems Economic stability and

growth Exchange rates Culture Climate Export import regulations,

duties and tariffs

Raw material availability Number and proximity of

suppliers Transportation and

distribution system Labor cost and education Available technology Commercial travel Technical expertise Cross-border trade

regulations Group trade agreements

Regional Location FactorsRegional Location Factors Community

government Local business

regulations Government services Business climate Community services Taxes

Availability of sites Financial Services Community

inducements Proximity of suppliers Education system

Site Location FactorsSite Location FactorsCustomer baseConstruction/

leasing costLand costSite sizeTransportationUtilities

Zoning restrictionsTrafficSafety/securityCompetitionArea business

climate Income level

Location IncentivesLocation IncentivesTax credits Wal-Mart in Wyandotte

Relaxed government regulation Job training

Infrastructure improvementMoney

Locate facility at center of geographic area Based on weight and distance traveled

Establish grid-map of area Identify coordinates and weights shipped

for each location

Center-of-Gravity TechniqueCenter-of-Gravity Technique

Facility SummaryFacility Summary• Why is it important?• Location analysis • Location Criteria – global, local,

regional - education• Location and Strategy• Location and Customers• Layout planning

Project ManagementProject Managementand Operationsand Operations

Project Project ManagementManagement

First Essay on Project Management:1697 – “An Essay Upon Projects”

1959 HBR Article – “The Project Manager”

Air Force Manual 1964

Project ManagementProject ManagementIn today’s global marketplace, complexity and speed are certainties. In such an environment, a good axiom for project management is, Do It, Do It Right, Do It Right Now. Creating clear direction, efficiency, timely response, and quality outcomes requires project managers who are agile -- adept at change. The associated disciplinary areas are clearly spelled out in the following PMI definition.

“Project management is the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project. Project management is comprised of five Project Management Process Groups – Initiating Processes, Planning Processes, Executing Processes, Monitoring and Controlling Processes, and Closing Processes.

Source: Project Management Institute - http://www.pmi.org/info/PP_AboutProfessionOverview.asp?nav=0501

http://www.pmi.org/info/PP_AboutProfessionOverview.asp?nav=0501

Elements of Project Elements of Project ManagementManagement

Project teamProject team Individuals from different departments within Individuals from different departments within

companycompany Matrix organizationMatrix organization

Team structure with members from different Team structure with members from different functional areas depending on skills neededfunctional areas depending on skills needed

Project manager - Leader of project teamProject manager - Leader of project team Project Charter – high level description of what is Project Charter – high level description of what is

to be accomplished in a project and delegates to be accomplished in a project and delegates authority to project manager to implement authority to project manager to implement actions to complete projectactions to complete project

Project PlanningProject PlanningStatement of workStatement of work

Written description of goals, work & Written description of goals, work & time frame of projecttime frame of project

Activities require labor, resources & Activities require labor, resources & timetime

Precedence relationship shows Precedence relationship shows sequential relationship of project sequential relationship of project activitiesactivities

Elements of Elements of Project PlanningProject Planning

Define project objective(s)Define project objective(s) Identify activitiesIdentify activitiesEstablish precedence relationshipsEstablish precedence relationshipsMake time estimatesMake time estimatesDetermine project completion timeDetermine project completion timeCompare project schedule objectivesCompare project schedule objectivesDetermine resource requirements to Determine resource requirements to

meet objectivemeet objective

Work Breakdown Work Breakdown StructureStructure

Hierarchical organization of work to be Hierarchical organization of work to be done on a projectdone on a project

Project broken down into modulesProject broken down into modulesModules subdivided into Modules subdivided into

subcomponents, activities, and taskssubcomponents, activities, and tasks Identifies individual tasks, workloads, Identifies individual tasks, workloads,

and resource requirementsand resource requirements

Project ControlProject ControlAll activities identified and includedAll activities identified and includedCompleted in proper sequenceCompleted in proper sequenceResource needs identifiedResource needs identifiedSchedule adjustedSchedule adjustedMaintain schedule and Maintain schedule and

budgetbudgetComplete on timeComplete on time

A Gantt ChartA Gantt Chart Popular tool for project schedulingPopular tool for project scheduling Graph with bar for representing the time for Graph with bar for representing the time for

each taskeach task Provides visual display of project scheduleProvides visual display of project schedule Also shows slack for activitiesAlso shows slack for activities

Amount of time activity can be Amount of time activity can be delayed without delaying projectdelayed without delaying project

Around since 1914

Gantt ChartsGantt Charts

Gantt charts were employed on major infrastructure projects including the Hoover Dam and Interstate highway system and still are an important tool in project management.

Gantt described two principles for his charts:

1. measure activities by the amount of time needed to complete them

2. the space on the chart can be used the represent the amount of the activity that should have been done in that time.

A Gantt ChartA Gantt Chart| | | | |

Activity

Design house and obtain financing

Lay foundation

Order and receive materials

Build house

Select paint

Select carpet

Finish work

00 22 44 66 88 1010MonthMonth

MonthMonth11 33 55 77 99

Figure 6.2Figure 6.2

Example of Gantt Chart Example of Gantt Chart Problem Problem

CPM/PERTCPM/PERTCritical Path Method (CPM)Critical Path Method (CPM)

DuPont & Remington-Rand (1956)DuPont & Remington-Rand (1956) Deterministic task timesDeterministic task times

Project Eval. & Review Technique Project Eval. & Review Technique (PERT)(PERT)

US Navy, LockheedUS Navy, Lockheed Multiple task time estimatesMultiple task time estimates

PERT/CPMPERT/CPMProgram Evaluation and Review Technique (PERT): developed in conjunction with the development of the Polaris missile program for submarines – developed by the US Navy with Lockheed as the lead contractor

Critical Path Method (CPM): developed through a joint venture between the DuPont Corporation and the Remington Rand Corporation – the original purpose was to monitor and evaluate plant maintenance management projects.

Project Network for a HouseProject Network for a House

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Lay Lay foundationfoundation

Design house Design house and obtain and obtain financingfinancing

Order and Order and receive receive materialsmaterials

DummyDummy

Finish Finish workwork

Select Select carpetcarpet

Select Select paintpaint

Build Build househouse

Figure 6.4Figure 6.4

Critical PathCritical Path A path is a sequence of connected A path is a sequence of connected

activities running from start to end activities running from start to end node in networknode in network

The critical path is the The critical path is the path with the longest path with the longest duration in the networkduration in the network

Project cannot be Project cannot be completed in less than completed in less than the time of the critical the time of the critical pathpath

The Critical The Critical PathPath

A:A: 1-2-3-4-6-71-2-3-4-6-73 + 2 + 0 + 3 + 1 = 93 + 2 + 0 + 3 + 1 = 9 months months

B:B: 1-2-3-4-5-6-71-2-3-4-5-6-73 + 2 + 0 + 1 + 1 + 1 = 83 + 2 + 0 + 1 + 1 + 1 = 8 months months

C:C: 1-2-4-6-71-2-4-6-73 + 1 + 3 + 1 = 83 + 1 + 3 + 1 = 8 months months

D:D: 1-2-4-5-6-71-2-4-5-6-73 + 1 + 1 + 1 + 1 = 73 + 1 + 1 + 1 + 1 = 7 months months

3322 00

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DummyDummy





The Critical The Critical PathPath

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1 1Start at 3 months

Start at 5 months

1

Finish at 9 months

Start at 8 months

Figure 6.6

Activity Start Times

Project CrashingProject Crashing Crashing is reducing project time by Crashing is reducing project time by

expending additional resourcesexpending additional resources Crash time is an amount of time an activity is Crash time is an amount of time an activity is

reducedreduced Crash cost is the cost of reducing the activity Crash cost is the cost of reducing the activity

timetime Goal is to reduce project duration at minimum Goal is to reduce project duration at minimum

costcost

Crashing costs increase as project duration Crashing costs increase as project duration decreasesdecreases

Indirect costs increase as project duration Indirect costs increase as project duration increasesincreases

Reduce project length Reduce project length as long as crashing as long as crashing costs are less than costs are less than indirect costsindirect costs

Time-Cost Relationship Time-Cost Relationship

Life Cycle ManagementLife Cycle Management• Long term view of projects to guide

decision making – solutions that provide life time success vice short term

• Acquisition; development; production; introduction; sustainment; disposal

• Links system costs to big picture; better use of resources; minimize total cost of ownership

Capacity and Capacity and Aggregate Aggregate Planning Planning

Capacity Outputs: Capacity Outputs: ExamplesExamples

Type of Business Input Measures of Capacity

Output Measures of Capacity

Car manufacturer Labor hours Cars per shift

Hospital Available beds Patients per month

Pizza parlor Labor hours Pizzas per day

Retail store Floor space in square feet Revenue per foot

The goal of capacity planning The goal of capacity planning decisionsdecisions

(1) The capacity of the firm to produce the service or good

(2) The processes for providing the service or making the good

(3) The layout or arrangement of the work space

(4) The design of work processes to enhance productivity

CapacityCapacity• The max output that an organization be

capable of producing• Measure a single facility:

– Design vs. Effective capacity– Capacity Utilization: design vs. efficient utilization

• For systems have more than one facility and flows of product– System capacity and bottleneck– Improve system capacity

Determinants of Effective CapacityDeterminants of Effective Capacity• Facilities• Human considerations

– Adding people– Increasing employee motivation

• Operations– Improving operating rate of a machine– Improving quality of raw materials and components

• External forces– Safety regulations

Capacity UtilizationCapacity Utilization

Measures how much of the available capacity is actually being used:

– Always <=1(percentage of usage)– Higher the better– Denominator:

• If effective capacity used: efficient utilization• If design capacity used: design utilization

actual output rateUtilization 100%available capacity

Aggregate PlanningAggregate Planning• The process of planning the quantity and

timing of output over the intermediate range (3-18 months) by adjusting production rate, employment, inventory

• Master Production Schedule: formalizes the production plan and translates it into specific end item requirements over the short to intermediate horizon

Capacity PlanningCapacity Planning• The process of determining the

amount of capacity required to produce in the future. May be at the aggregate or product line level

• Master Production Schedule - anticipated build schedule

• Time horizon must exceed lead times for materials

Capacity PlanningCapacity Planning• Look at lead times, queue times, set up times, run

times, wait times, move times• Resource availability• Material and capacity - should be in synch• driven by dispatch list - listing of manufacturing

orders in priority sequence - ties to layout planning

• load profiles - capacity of each section

the capacity decisions:the capacity decisions:

• When to add capacity• How much capacity to add• Where to add capacity• What type of capacity to

add• When to reduce capacity

Capacity PlanningCapacity Planning• Rough Cut Capacity Planning -

process of converting the master production schedule into requirements for key resources

• capacity requirements plan - time-phased display of present and future capacity required on all resources based on planned and released orders

Capacity PlanningCapacity Planning• Capacity Requirements Planning (CRP)

- process of determining in detail the amount of labor and machine resources required to meet production plan

• RCCP may indicate sufficient capacity but the CRP may indicate insufficient capacity during specific time periods

Theory of ConstraintsTheory of Constraints• Every system has a bottle neck• capacity of the system is constrained

by the capacity of the bottle neck• increasing capacity at other than

bottle neck operations does not increase the overall capacity of the system

Theory of ConstraintsTheory of Constraints• What needs to be changed• What to change to • How to make the change happen

Theory of ConstraintsTheory of Constraints• Identify the constraint• Subordinate • Inertia • Walk the process again• inertia of change can create new

bottle necks

Capacity PlanningCapacity PlanningEstablishes overall level of Establishes overall level of

productive resourcesproductive resourcesAffects lead time Affects lead time

responsiveness, cost & responsiveness, cost & competitivenesscompetitiveness

Determines when and how Determines when and how much to increase capacitymuch to increase capacity

Capacity ExpansionCapacity ExpansionVolume & certainty of anticipated Volume & certainty of anticipated

demanddemandStrategic objectives for growthStrategic objectives for growthCosts of expansion & operationCosts of expansion & operation Incremental or one-step Incremental or one-step

expansionexpansion

Sales and Operations Sales and Operations Planning (S&OP)Planning (S&OP)

• Brings together all plans for business

• performed at least once a month• Internal and external

Adjusting Capacity to Adjusting Capacity to Meet DemandMeet Demand

1.1. Producing at a constant rate and using inventory Producing at a constant rate and using inventory to absorb fluctuations in demand (level to absorb fluctuations in demand (level production)production)

2.2. Hiring and firing workers to match demand (chase Hiring and firing workers to match demand (chase demand)demand)

3.3. Maintaining resources for high demand levelsMaintaining resources for high demand levels4.4. Increase or decrease working hours (overtime Increase or decrease working hours (overtime

and undertime)and undertime)5.5. Subcontracting work to other firmsSubcontracting work to other firms6.6. Using part-time workersUsing part-time workers7.7. Providing the service or product at a later time Providing the service or product at a later time

period (backordering)period (backordering)

Demand ManagementDemand ManagementShift demand into other periodsShift demand into other periods

Incentives, sales promotions, Incentives, sales promotions, advertising campaignsadvertising campaigns

Offer product or services with Offer product or services with countercyclical demand patternscountercyclical demand patterns

Partnering with suppliers to reduce Partnering with suppliers to reduce information distortion along the information distortion along the supply chainsupply chain

Remedies for UnderloadsRemedies for Underloads

1. Acquire more work2. Pull work ahead that is scheduled

for later time periods3. Reduce normal capacity

Remedies for OverloadsRemedies for Overloads

1. Eliminate unnecessary requirements2. Reroute jobs to alternative machines or

work centers3. Split lots between two or more machines4. Increase normal capacity5. Subcontract6. Increase the efficiency of the operation7. Push work back to later time periods8. Revise master schedule

Scheduling as part of the Scheduling as part of the Planning ProcessPlanning Process

• Scheduling is the last step in the planning process?

• It is one of the most challenging areas of operations management.

• Scheduling presents many day-to-day problems for operations managers because of – Changes in customer orders– Equipment breakdowns– Late deliveries from suppliers– A myriad of other disruptions

SchedulingScheduling

Objectives in SchedulingObjectives in Scheduling

Meet customer due dates Minimize job lateness Minimize response time Minimize completion time Minimize time in the system Minimize overtime Maximize machine or labor utilization Minimize idle time Minimize work-in-process inventory Efficiency

Sequencing RulesSequencing Rules

FCFS - first-come, first-served LCFS - last come, first served DDATE - earliest due date CUSTPR - highest customer priority SETUP - similar required setups SLACK - smallest slack CR - critical ratio SPT - shortest processing time LPT - longest processing time

Critical Ratio RuleCritical Ratio Rule

CR considers both time and work remaining

If CR > 1, job ahead of scheduleIf CR < 1, job behind schedule

If CR = 1, job on schedule

time remaining due date - today’s datework remaining remaining processing time

Ties scheduling to Gantt Chart or PERT/CPM

Facilities Location, Layout and Planning

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