6.1 facility location and facility layout (1)

8/10/2019 6.1 Facility Location and Facility Layout (1)

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Facility Location and FacilityLayout

Strategic Importance Supply-chain management is critical Facility locationintrinsically related to SCM Examples:

FedEx: While opening a hub for Asia in Philippines1995

it had to evaluate several sites Linking its American (Memphis) and European (Paris) Hubs BTW, the facility was closed and the new hub since 2009 is

in Guangzhou, Southern China Mercedes first overseas plant in Vance, Alabama

Evaluated 170 sites in 30 states and 2 countries Hard Rock Caf location in Moscow in 2002

Took 3 years of advance planning

Russian Food Supply Chain

Facility Location

Global Nature of Location Decision Objective: Maximize the benefit of location

to a firm Marketing Strategy: New Markets Global Growth: New Markets and supply chain

considerations Cost of Doing Business: Attractive alternatives to

relocate business elsewhere


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Location Options

Expand existing facility

Add new location while retaining existinglocation

Close existing operation and move to anew location

Location Decision Factors

Country Factors

Site-related FactorsRegional Factors

Community Considerations

Site Selection Factors (Country andRegion)

Government stability Government regulations Political and economic systems Economic stability Exchange rates Culture Climate Export and import regulations,duties and fees

Raw material availability Number and proximity of suppliers Transportation system Labor pool and cost Available technology Commercial travel Technical expertise

Labor (availability, cost and unions) Proximity of customers Number of customers Construction/leasing costs Land costs Modes and quality of transportation Transportation costs

Government regulations Environmental regulations Raw material availability Commercial travel Climate Utilities

Region

Country


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Site Selection Factors -(Community andSite)

Community government Local business regulations Environmental regulations Government services Business climate Community services Transportation system Proximity of customers Concentration of customers

Taxes Construction/leasing costs Land cost Availability of sites Financial Services Labor pool Community inducements Proximity of suppliers

Community

Customer base Construction/leasing cost Land cost Site size Transportation Utilities

Zoning restrictions Traffic Safety/security Competition Area business climate Income level

Site

Some Facts: Location Decisions Globalization: A two way street for Americans Labor costs and productivity issues Worker skills: e.g. call centers and CPA jobs to India. Government Incentives: Alabama gave $169K per job in

tax incentives to Mercedes in 1993 Sunbelt is growing Attitudes with respect to: pollution, zoning, intellectual

property, unionism, turnover, absenteeism, punctuality,bribe, ethics, etc.

Proximity Markets Suppliers Competition (clustering)

Evaluating Locations

Factor Rating (The Scoring Model) Decision based on quantitative and qualitative

inputs

Center of Gravity Method Decision based on minimum distribution costs

Transportation Model Decision based on movement costs of raw

materials or finished goods


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Location Factor Rating

Labor pool and climateProximity to suppliersWage ratesCommunity environmentProximity to customersShipping modesAir service

.30

.20

.15

.15

.10

.05

.05

80100

6075658550

65919580909265

90757280956590

Location Factor Weight Site 1 Site 2 Site 3

Scores (0 to 100)

More

Location Factor Rating(Weighted Scores)

Labor pool and climateProximity to suppliersWage ratesCommunity environmentProximity to customersShipping modesAir service

Total Score

24.0020.00

9.0011.256.504.252.50

77.50

19.5018.2014.2512.00

9.004.603.25

80.80

27.0015.0010.8012.00

9.503.254.50

82.05

Location Factor Site 1 Site 2 Site 3

Weighted Scores

Center of Gravity Technique

y 2

y

y1

y 3

x1 x2 x3 x

1 (x 1, y 1), W 1

2 (x 2, y 2), W 2

3 (x 3, y 3), W 3where,

x , y = coordinates of the new facilityat center of gravity

x i , y i = coordinates of existing facility i W i = annual weight shipped fromfacility i

n

W i

i = 1

x i W i i = 1

n

x =

n

W i

i = 1

y i W i i = 1

n

y =


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Ex: Locate a warehouse to serve thefollowing four cities with given demand

Location Demand (Millions) Coordinates(Weights)

___________________________________ __

Dallas 1 (8,3)LA 3 (0,4)New York 3 (14,8)Chicago 2 (10,7)

Transportation Method

Ex: W.A.T., Inc - Currently maintainsplants in Atlanta and Tulsa to supply tomajor distribution centers in Los Angelesand New York City. Because of anexpanding demand, WAT Inc. has decidedto open a new plant and has narrowed thechoice to one of the two cities--NewOrleans and Houston. Use the following

to arrive at a solution.

Production & Shipping Cost/Unit Capacity--------------------------------------------

From \ To LA NY----------------------------------------------------------------------------------Atlanta 14 11 600Tulsa 9 12 900Houston* 10 7 500*New Orleans* 9 11 500*----------------------------------------------------------------------------------Demand 800 1200

* Proposed sites


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Least Cost Cell Allocation Quick and dirty way to find a reasonably

good (but not necessarily an optimal)

solution . For cost minimization problems,1. Identify least cost cell and allocated the

maximum feasible quantity to that cell.2. Cross out rows and columns that have

exhausted demand/capacity.3. In case of tie between cells with least

cost, select the cell that canaccommodate the maximum quantity.

Total Cost =

Total Cost =


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Facility Layout

The Need for Layout DecisionsInefficient operationsFor Example:

High CostBottlenecks

Changes in the designof products or services

The introduction of newproducts or services

Accidents

Safety hazards

The Need for Layout Designs(Contd)

Changes inenvironmentalor other legal

requirements

Changes in volume ofoutput or mix of

products

Changes in methodsand equipment

Morale problems


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Layout: Definition

Physical Arrangement Of Resources

Needed To Produce Goods And Services(Machines, raw materials, personnel, wip,finished goods, material handling systems,etc.)

Objectives: Better Material Movement Reduced Bottlenecks Avoid Machine Interference Boost Morale Safety Support Flexibility Efficient Utilization Of Space Etc.Facility Layout and Material Handling system should be

designed concurrently

MATERIAL HANDLING SYSTEM

DEFINITION: The entire network oftransportation in the facility. Receives Material,

Stores, Moves Between Processes,

Deposits Products For Shipping . EXAMPLES:

Conveyors, cranes, elevators, motorizedtrucks, automated guided vehicles, etc.


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A Process Layout

L

L

L

L

L

L

L

L

L

L M

M

M

M

D

D

D

D

D

D

D

D

G

G

G

G

G

G

P

P

A A AReceiving andShipping Assembly

Painting Department

Lathe DepartmentMilling

Department Drilling Department

GrindingDepartment

PRODUCT LAYOUT PROCESS LAYOUT

A Comparison of Product and Process Layouts

1. Description Sequential arrangement Functional groupingof machines of machines

2. Type of Process Continuous, Intermittent, job shop,mass production, batch production,mainly assembly mainly fabrication

3. Product Standardized Varied,made to stock made to order

4. Demand Stable Fluctuating5. Volume High Low6. Equipment Special purpose General purpose7. Workers Limited skills Varied skills8. Inventory Low in-process, High in-process,

high finished goods low finished goods9. Storage space Small Large10.Material handling Fixed path Variable path

(conveyor) (forklift)more

A Comparison of Product and Process Layouts,continued

11. Aisles Narrow Wide12.Scheduling Part of balancing Dynamic13.Layout decision Line balancing Machine location14.Goal Equalize work at Minimize material

each station handling cost15.Advantage Efficiency Flexibility

PRODUCT LAYOUT PROCESS LAYOUT


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PRODUCT LAYOUT

Machines are arranged in the sequence of

operations needed for production. (e.g.Assembly lines) ASSEMBLY LINE BALANCING: aim is

to assign all tasks to a series ofworkstations so that each workstation issynchronized and idle time is minimized.

TERMS:

CYCLE TIME: Time between unitscoming off the end of an assembly line.(Cycle time is the maximum time allowed at eachworkstation to complete its set of tasks on a unit.)

TASKS: Small element of work thatcannot be conveniently fragmentedfurther.

TASK TIME: Time needed to completeone unit of task by a well trained worker.

STEPS IN LINE BALANCING

1. Draw precedence diagram 2. Find cycle time (c)

C = PRODUCTION TIME/DAYOUTPUT UNITS/DAY

3. Find NT (Theoretical Minimum NumberOf Workstations)

NT = SUM OF TASK TIMES (T)CYLCE TIME (C)


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STEPS IN LINE BALANCING (Contd.)

4. Select and use assignment heuristic.

1. THE LARGEST-OPERATION-TIME(Assign tasks in the order of longestoperation time first).

2. THE LARGEST-NUMBER-OF-FOLLOWING-TASKS

Assign tasks in the order of largest number offollowing tasks.

5. Determine efficiencies 6. Rebalance (if desired and necessary)

Example-1

Making dry-boarderaser requires thefollowing tasks.How will meet yourproduction goal ofproducing 60erasers per hour.

Task Task Description

Time(seconds)

APrint and CutLabels 30

BCut high-densityfoam 55

C Cut felt piece 25

DGlue all piecetogether 60

E Box for shipping 30

Station Task Task Time Time Left Tasks Ready Efficiency


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EXAMPLE-2 Given in the following table are the steps necessary for

final assembly of an electronic organ. Suppose thatthe production goal is 200 organs per 8-hour shift.Determine

1) longest cycle time. 2) minimum number of stations (theoretical), 3) task assignments to workstations, 4) efficiencies of each work station and overall

efficiency. (Use the longest-operations-time-firstheuristic, break any tie using the largest-number-of-following-task heuristic)

Homework : Repeat the problem using rule #2(break ties using rule #1)



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Example 3

Refer to Problem-2. Suppose the

production goal has been changed to 400organs per 8-hour shift. How will it affect:

the cycle time? Number of station?

Do you see any problem? How will deal with the situation?


Example 4 Repeat the problem 2 using rule #2

(break ties using rule #1)


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A

B

C

D

E

F

G

H

I J

K

Task

# offollowingTask

A 6

B 7C 1

D 4

E 4

F 4

G 3

H 3

I 2

J 1

K 0


Process Layout

Block Diagramming Objective is to minimize material handling

costs Departments with

High interaction--should be located closely Low interaction--could be located away from each

other

Departments with high interactions with manydepartment should be centrally located


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Locate 6 Departments in an office spacethat is arranged in a 2X3 grid:

A Executive Office B Stress Laboratory C Group Dynamics Lab D Research Writing lab E Marketing Office F Word processing/ Mail Room

Example: Given the following Locate the 6 departments (A-F)in a 2 X 3 grid.


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Scoring

Dept Pairs Distance===========================Adjacent 0Separated by 1 dept 1Separated by 2 dept. 2------

Process Layout (Second Technique)

Systematic Layout Planning (SLP) Often, qualitative factors (rather than

numerical flow between departments) are

more relevant in a process layout Steps

1. Develop relationship chart 2. Develop initial relation diagram 3. Develop initial layout (ignore space and building

constraints) 4. Develop final layout.


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Example

Layout a Department Store with 5

Departments 1. Credit Department 2. Toy Department 3. Wine Department 4. Camera Department 5. Candy Department

Closeness Values

Relationship Chart

6.1 facility location and facility layout (1)

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