Facility Location and Layout

FACILITY LOCATION AND LAYOUT

SOUMENDRA ROYFACULTY MEMBERINC ASANSOL

Soumendra Roy INC Asansol

Competitive Imperatives Impacting Location

The need to produce close to the customer due to time-based competition, trade agreements, and shipping costs.

The need to locate near the appropriate labor pool to take advantage of low wage costs and/or high technical skills

Location of a facility will fix the production technology and cost structure.

Location depends on the size and nature of business.


FACTORS AFFECTING THE LOCATION DECISIONS Proximity to Customers

Business Climate Total Costs Infrastructure Quality of Labor Suppliers Free Trade Zones Political Risk Government Barriers Trading Blocs Environmental Regulation Host Community Competitive Advantage Other Facilities


Plant Location Methodology: Cost – Profit – Volume or Break – Even Analysis Break – even analysis is a graphical representation

of the relationships among volume of output, costs and revenues.

Costs can be classified into two types: fixed cost and variable costs.

Break – even analysis is one of the tools used for the selection of a location.

Since each and every location will have a different cost structure and sales volume, break – even analysis helps the manager identify the location where the profits are high.


Revenue TCB

TCA

FCA

FCB

Volume of salesVo

Cos

t

Revenue TCB

TCA

FCA

FCB

V1 V2

Cos

t

Volume

If the volume of output is less than Vo, location B is preferred over location A and vice – versa.

Company experiences a sales volume of V2 in location B and sales volume of V1 in location A. Here the higher cost location will result in greater profit and hence preferred over the lower cost location.

} P1

} P2


Plant Location Methodology: Factor Rating Method Example Two refineries sites (A and B) are assigned the following

range of point values and respective points, where the more points the better for the site location.

Fuels in region 0 to 330Power availability and reliability 0 to 200Labor climate 0 to 100Living conditions 0 to 100Transportation 0 to 50Water supply 0 to 10Climate 0 to 50Supplies 0 to 60Tax policies and laws 0 to 20

Major factors for site location Pt. Range SitesA B123150 54 24

45 4

8 5 5

156100

639650 5 4

5020 Best Site is B

Total pts. 418 544


Plant Location Methodology: Transportation Method of Linear Programming

Transportation method of linear programming seeks to minimize costs of shipping n units to m destinations or its seeks to maximize profit of shipping n units to m destinations


Plant Location Methodology: Centroid Method The Centroid method is used for locating single

facilities that considers existing facilities, the distances between them, and the volumes of goods to be shipped between them

This methodology involves formulas used to compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above


Plant Location Methodology: Centroid Method Formulas

Plant Location Methodology: Centroid Method Formulas

C = d V

V x

ix i

i

C =

d VVyiy i

i

Where:Cx = X coordinate of centroidCy = X coordinate of centroiddix = X coordinate of the ith locationdiy = Y coordinate of the ith locationVi = volume of goods moved to or from ith location


Plant Location Methodology: Example of Centroid Method

Centroid method example Several automobile showrooms are located

according to the following grid which represents coordinate locations for each showroom

X

Y

A(100,200)

D(250,580)

Q(790,900)

(0,0)

S howro om No o f Z-Mob ile s s o ld pe r month

A 1250

D 1900

Q 2300

Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month?


Plant Location Methodology: Example of Centroid Method (Continued): Determining Existing Facility Coordinates To begin, you must identify the existing facilities on a two-dimensional plane or grid and determine their coordinates.

X

Y

A(100,200)

D(250,580)

Q(790,900)

(0,0)

You must also have the volume information on the business activity at the existing facilities.

S ho wroom No o f Z-Mo b ile s s o ld pe r mo nth

A 1250

D 1900

Q 2300


Plant Location Methodology: Example of Centroid Method (Continued): Determining the Coordinates of the New FacilityYou then compute the new coordinates using the formulas:

C = 100(1250) + 250(1900) + 790(2300)

1250 + 1900 + 2300 =

2,417,0005,450

= x 443.49

627.89 = 5,450

3,422,000 = 2300 + 1900 + 1250

900(2300) + 580(1900) + 200(1250) = Cy

S howro om No o f Z-Mob ile s s o ld p e r mo nth

A 1250

D 1900

Q 2300X

Y

A(100,200)

D(250,580)

Q(790,900)

(0,0)

You then take the coordinates and place them on the map:


ANALYTICAL DELPHI METHOD Analytical Delphi Method helps managers take complex

multi-location decisions. This method requires the participation of a coordinating

panel, a forecasting panel and a strategic panel. The forecasting team’s functions include forecasting future

trends in the physical and social environment that can affect the organization.

The strategic team identifies the long-term strategic goals and objectives of the organization.

The coordinating team, which can consist of external consultants or company employees, develops the questionnaire and coordinates the Delphi process.


FACILITY LAYOUTOBJECTIVES

Facility Layout and Basic Formats Process Layout Layout Planning Assembly Line balancing Service Layout


Facility Layout - Defined Facility layout can be defined as the process by which

the placement of departments, workgroups within departments, workstations, machines, and stock-holding points within a facility are determined

This process requires the following inputs: Specification of objectives of the system in terms of output and

flexibility Estimation of product or service demand on the system Processing requirements in terms of number of operations and

amount of flow between departments and work centers Space requirements for the elements in the layout Space availability within the facility itself


CRITERIA FOR A GOOD LAYOUT MAXIMUM FLEXIBILITY MAXIMUM COORDINATION MAXIMUM VISIBILITY MAXIMUM ACCESSIBILITY MINIMUM DISTANCE MINIMUM HANDLING MINIMUM DISCOMFORT INHERENT SAFETY EFFICIENT PROCESS FLOW IDENTIFICATION


Process Layout (also called job-shop or functional layout)

Product Layout (also called flow-shop layout)

Group Technology (Cellular) Layout Fixed-Position Layout Hybrid Layouts

Basic Production Layout Formats


Process Layout: Interdepartmental Flow Given

The flow (number of moves) to and from all departments

The cost of moving from one department to another

The existing or planned physical layout of the plant

Determine The “best” locations for each department, where

best means maximizing flow, which minimizing costs


Process Layout: CRAFT Approach It is a heuristic program; it uses a simple

rule of thumb in making evaluations: "Compare two departments at a time and

exchange them if it reduces the total cost of the layout."

It does not guarantee an optimal solution

CRAFT assumes the existence of variable path material handling equipment such as forklift trucks


Process Layout: Systematic Layout Planning Numerical flow of items between departments

Can be impractical to obtain Does not account for the qualitative factors that may

be crucial to the placement decision Systematic Layout Planning

Accounts for the importance of having each department located next to every other department

Is also guided by trial and error Switching departments then checking the results of the

“closeness” score


Example of Systematic Layout Planning: Reasons for Closeness

Code

1

2

3

4

5

6

Reason

Type of customer

Ease of supervision

Common personnel

Contact necessary

Share same price

Psychology


Example of Systematic Layout Planning: Importance of Closeness

Value

A

E

I

O

U

X

Closeness Linecode

Numericalweights

Absolutely necessary

Especially important

Important

Ordinary closeness OK

Unimportant

Undesirable

16

8

4

2

0

80


Example of Systematic Layout Planning: Relating Reasons and Importance

From

1. Credit department

2. Toy department

3. Wine department

4. Camera department

5. Candy department

Closeness ratingReason for rating

LetterNumber

To

6I

--U

4A

--U

I A1

Note here that the (1) Credit Dept. and (2) Toy Dept. are given a high rating of 6.

1,6

Note here that the (2) Toy Dept. and the (5) Candy Dept. are given a high rating of 6.

Area(sq. ft.)

100

400

--


Example of Systematic Layout Planning:Initial Relationship Diagram

1

2

4

3

5

U U

E

A

I

The number of lines here represent paths required to be taken in transactions between the departments. The more lines, the more the interaction between departments.

Note here again, Depts. (1) and (2) are linked together, and Depts. (2) and (5) are linked together by multiple lines or required transactions.


Example of Systematic Layout Planning:Initial and Final Layouts

1

2 4

3

5

Initial Layout

Ignoring space andbuilding constraints

2

5 1 43

50 ft

20 ft

Final Layout

Adjusted by squarefootage and buildingsize

Note in the Final Layout that Depts. (1) and (5) are not both placed directly next to Dept. (2).


Assembly Lines Balancing ConceptsQuestion: Suppose you load work into the three work stations below

such that each will take the corresponding number of minutes as shown. What is the cycle time of this line?

Station 1

Minutes per Unit 6

Station 2

7

Station 3

3

Answer: The cycle time of the line is always determined by the work station taking the longest time. In this problem, the cycle time of the line is 7 minutes. There is also going to be idle time at the other two work stations.


Example of Line Balancing You’ve just been assigned the job a setting up an

electric fan assembly line with the following tasks:

Task Time (Mins) Description PredecessorsA 2 Assemble frame NoneB 1 Mount switch AC 3.25 Assemble motor housing NoneD 1.2 Mount motor housing in frame A, CE 0.5 Attach blade DF 1 Assemble and attach safety grill EG 1 Attach cord BH 1.4 Test F, G


Example of Line Balancing: Structuring the Precedence DiagramTask Predecessors

A NoneB AC NoneD A, C

Task Predecessors

E DF EG BH E, G

A B

C D

G

E F

H


Example of Line Balancing: Precedence Diagram

Question: Which process step defines the maximum rate of production?

A

C

B

D E F

GH

2

3.25

1

1.2 .5

11.4

1Answer: Task C is the cycle time of the line and therefore, the maximum rate of production.


Example of Line Balancing: The BottleneckMax Production =

Production time per dayBottleneck time

=420 mins

3.25 mins / unit= 129 units

Task Time (Mins) Description PredecessorsA 2 Assemble frame NoneB 1 Mount switch AC 3.25 Assemble motor housing NoneD 1.2 Mount motor housing in frame A, CE 0.5 Attach blade DF 1 Assemble and attach safety grill EG 1 Attach cord BH 1.4 Test E, G


Example of Line Balancing: Determine Cycle Time Question: Suppose we want to assemble 100 fans per day. What would

our cycle time have to be?

Required Cycle Time, C = Production time per periodRequired output per period

Answer:

C = 420 mins / day100 units / day

= 4.2 mins / unit


Example of Line Balancing: Determine Theoretical Minimum Number of Workstations Question: What is the theoretical minimum

number of workstations for this problem?

Theoretical Min. Number of Workstations, N

N = Sum of task times (T)

Cycle time (C)

t

t

Answer:

N = 11.35 mins / unit

4.2 mins / unit= 2.702, or 3t


Example of Line Balancing: Rules To Follow for Loading Workstations Assign tasks to station 1, then 2, etc. in

sequence. Keep assigning to a workstation ensuring that precedence is maintained and total work is less than or equal to the cycle time. Use the following rules to select tasks for assignment.

Primary: Assign tasks in order of the largest number of following tasks

Secondary (tie-breaking): Assign tasks in order of the longest operating time


A

C

B

D E F

GH

2

3.25

1

1.2 .5

11.4

1

C (4.2-3.25)=.95

Idle = .95

D (4.2-1.2)=3E (3-.5)=2.5F (2.5-1)=1.5H (1.5-1.4)=.1Idle = .1

Task Followers Time (Mins)A 6 2C 4 3.25D 3 1.2B 2 1E 2 0.5F 1 1G 1 1H 0 1.4

A (4.2-2=2.2)B (2.2-1=1.2)G (1.2-1= .2)

Idle= .2

Station 1 Station 2 Station 3

Which station is the bottleneck? What is the effective cycle time?


Example of Line Balancing: Determine the Efficiency of the Assembly Line

(C) timeCycle x (Na) ons workstatiofnumber Actual(T) s task timeof Sum=Efficiency

Efficiency =11.35 mins / unit(3)(4.2mins / unit)

=.901


Group Technology: Benefits

1. Better human relations

2. Improved operator expertise

3. Less in-process inventory and material handling

4. Faster production setup


Group Technology:Transition from Process Layout1. Grouping parts into families that follow a

common sequence of steps

2. Identifying dominant flow patterns of parts families as a basis for location or relocation of processes

3. Physically grouping machines and processes into cells


Fixed Position Layout Question: What are our primary

considerations for a fixed position layout?

Answer: Arranging materials and equipment concentrically around the production point in their order of use.


Retail Service Layout Goal--maximize net profit per square foot

of floor space

Servicescapes Ambient Conditions Spatial Layout and Functionality Signs, Symbols, and Artifacts

Facility Location and Layout

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