s 6-12facility & locations layout
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FACILITY LOCATIONS &LAYOUT
Prof. BiranchiPrasad Panda
KSOM, KIIT
University
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DISCUSSIONConcept
Need for Suitable Location
Factors affecting Plant/Facility Location
Location Theories
Location Models
Locational Economics
Plant Lay Out
Classification of layout
Design of Product Layout
Design of Process Layout
Service Layout
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CONCEPTPlant/Facility Location - Where a plant or facility is to
be located ?
Facility Layout - What provisions are required and in
which order ?
These are important strategic-level decisions
Selecting a location or layout is a key-decision
Involves large investment
Difficult to change, once selected
Prerequisite
Long range forecasting
Companys expansion plan and policy
Diversification plan for product
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LOCATION
I. When an organization starts (comes intoexistence,1st time)
Has the direct bearing on financial, employment, distribution
patterns etc.
By closing its old/cost-inefficient operations unit
I. When an existing organization
expands/diversifies/ decentralizes/ shuts-down
..
Relocation involves stoppage of production, cost of shifting etc.
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for 1st time operation or new
organizationsConsider the long-term business/organizational
objectives
Identification of region for locating the operations facility
Along with the considerations marketing, technology, org strengths
& weaknesses, regional resources, business environment, legal-gov
environment, society, geography
Choice of a site within the region
Along with the org strategies for their tangible and intangible costs
Dimensional (quantitative) analysis to select a location
with least cost
By quantifying all the tangible and intangible costs
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Contd.
For example, the relative merits of
two sites:
C1M, C2M+, C3M, . , CzM
Costs associated with site-M on z different cost
elements
C1N, C2N, C3N, . , CzN
Costs associated with site-N on z different cost
elementsThen relative merit of M and N is given by
(C1M/ C1N)W1 x (C1M/ C1N) W2 (CZM/CZN) WZ
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LOCATION CHOICE
expansion/diversification/..
Consider the multi-plant operation strategy additional plants
in the same premises or elsewhere
Manufacturing distinct products
When the resources/ inputs are specialized for different competitive
product-lines
Manufacturing for a specific market area When proximity factor dominates the resources factors
Division of plant on the basis of stage-wise processes
When parts are manufactured in different plants
Emphasis on flexibility
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LOCATION CHOICE
for global operations
Consider the reasons and reaches
Virtual Proximity
With the advance telecommunication technologies
Virtual Factory
With the advance telecom and information
technologies, operating the factory in foreign and
remote locations
Contd.
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Contd.
Tangible reasons
To reach the customer
To avail tax benefits
To avail low-cost/abundant labor, raw material, energy,
water etc.
To avail tariff benefits of mfg. there, instead of exporting
Intangible reasons
For customer service accessibility, personal touch,
better understanding the needs
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FACTORS INFLUENCING(Tangible/Intangible/Strategic)
PLANT / FACILITY LOCATIONGeneral
factors
Controllablefactors
Proximity to markets
Supply of materials
Transportation
facilities
Infrastructure
availability
Labor and wages External economics
Uncontrollable
factors
Government policy
Climatic conditions
Supporting
industries
Community
attitudes
Communityinfrastructure
Specific
factors
For Mfg.
Organizations
Dominant competitive
factors
Secondary factors
For Service
Organization
Dominant competitive
factors
Secondary factors
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FACTORS Contd.
General factors
Controllable factors Proximity to markets for concentrated buyers, for
delicate/susceptible/low-self-life products, for products demanding after-
sales-service, in-time/low-cost supply of goods and service to the
customers, if raw materials are ubiquitous
Supply of materials raw material in right
quality/quantity/time/price/place, transportation at a lower cost,
proximity to source for processing weight-loosing materials
Transportation facilities timely supply of raw materials (to company)
and finished goods (to customers), import/export duties
Infrastructure availability power, water, waste-disposal/treatment,
(air)port/railway
Labor and wages adequate number/skill, prospective community,
productive, conveyance, prevailing wage pattern, cost of living,
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FACTORS Contd.
Specific factors for Serv. Org.
Dominant factors Proximity to customers after sales service, customer contact
Transportation costs & proximity to markets for
warehousing/distribution, inventory, delivery time, sales promotion
Location of competitors competitors location, their reaction to cosnew location, advantage of cluster
Secondary factors level of retail activity, residential density, traffic
flow, site visibility, shoppers impulse, strategies for target market
segment
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LOCATION THEORIESfor finding an optimal (min. cost) location
Alfred Webers Theory of Location of Industries (1909):
Distance travelled by raw/intermediate/finished product materials
Labor movement for transportation and work
Agglomeration (or concentration) of labor; investment in schools and
hospitals; supporting companies for construction, plant and machine
erection, financial services etc.
Degglommeration (loosening of over concentration) of inappropriate
industries, labor, capital, land; diversification; flat processes.
Some models to identify an ideal location
Factor rating method
Weighted factor rating method Load-distance method
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METHOD
The process of selecting a new
facility locationIdentify the important location factors
Rate the factors according to their relative importance
(higher the rating, more the prominence)
Assign each location
Calculate the rating by multiplying the assigned factor tothe basic factor
Find the sum of product for each factor
Select the best location having highest total score
l
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Example Lets assume that a new medical facility, health care, is to belocated in Delhi. The location factors, factor rating and scoresfor two potential sites are shown in the following table. Whichis the best location based on factor rating method?
Sl.No.
LocationFactor
FactorRatin
g
Location -I Location -II
RatingTotal RatingTotal
1 Facility
utilization
8 3 24 5 40
2 Total patientper month
5 4 20 3 15
3 Average time
per emergencytri
6 4 24 5 30
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WEIGHTED FACTOR RATING METHODBoth qualitative and quantitative factors are assigned weights to
select the best choice
Example Lets assume that a new medical facility, healthcare, is to be located in Delhi. The location factors,weights and scores (1= poor, , 5=excellent) for
two potential sites are shown in the following table.What is the weighted score for these sites? Whichis the best location?
Sl.No.
Location Factor Weight Location -I Location -II
Rating Total Rating Total
1 Facility utilization 25 3 75 5 125
2 Total patient per month 25 4 100 3 75
3 Average time peremergency trip
25 3 75 3 75
4 Land and construction costs 15 1 15 2 30
5 Employee preferences 10 5 50 3 30
Total: 315 335
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Location models: LOAD-DISTANCE METHODA mathematical model (calculated in terms of distance/time/cost ofmovement)
Based on proximity factors (min. movement of weighted loads into or out
of the facility)
Example The new health-care facility is targeted to serve seven censustracts in Delhi. The table given below shows the coordinates for the centre of
each census tract, along with the projected populations, measured inthousands. Customers will travel from the seven census tract centers to thenew facility when they need health-care. Two locations being considered forthe new facility are at (5.5, 4.5) and (7, 2) which are the centers of censustracts C and F. Details of seven census tract centers, coordinate distancesalong with the population for each centre are given below. If we use thepopulation as the loads and use rectilinear distance, which location is better in
terms of its total load-distance score?Sl. CensusTract
(X, Y) Population Location (5.5, 4.5) Location (7, 2)
Distance(dx+dy)
Load-distance
Distance(dx+dy)
Load-distance
1 A (2.5, 4.5) 2 3+0=3 6 4.5+2.5=7 14
2 B (2.5, 2.5) 5 3+2=5 25 4.5+0.5=5 25
3 C (5.5, 4.5) 10 0 0 1.5+2.5=4 40
4 D (5,2) 7 0.5+2.5 =3 21 2+0=2 14
5 E (8,5) 10 2.5+0.5=3 30 1+3=4 40
6 F (7,2) 20 1.5+2.5=4 80 0+0=0 0
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CENTRE OF GRAVITY
METHOD Balancing cost and service objectives Takes care of market, volume of transportation, warehousing
etc.
Minimizes the weighted distance between the warehouseand its supply/distribution/sales points.Sl. Census
Tract(X, Y) Population X component of CG Y Component of CG
1 A (2.5, 4.5) 2 2.5x2=5 4.5x2=9
2 B (2.5, 2.5) 5 2.5x5=12.5 2.5x5=12.5
3 C (5.5, 4.5) 10 5.5x10=55 4.5x10=45
4 D (5,2) 7 5x7=35 2x7=14
5 E (8,5) 10 8x10=80 5x10=50
6 F (7,2) 20 7x20=140 2x20=40
7 G (9, 2.5) 14 9x14=126 2.5x14=35
Total: 68 Total: 453.50 Total: 205.50
Overall x-com onent:
6.67 Overall y-com onent:
3.02
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BREAK-EVEN
ANALYSIS Locates a site where total revenue equalstotal cost At break-even point, there is no loss, no
profit
BEA for each location can makeeconomic comparison, identifying for arange of production volume.
At BEP,BEQ = fixed cost / contribution per unit
= fixed cost / (selling price variable cost perunit)
= F / (S - V) units
Fixed costLoss
Variable
cost
Sales
Rev
enue
Profit
Margin ofSafety
BEP
Rs.
No.
Example
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Example Company ABC has a demand of 1,30,000 units of a new product.
Three potential locations X, Y and Z have the cost structures shownbelow. Identify the locations for selected volume of production.
Location X Location Y Location Z
Fixed Costs (Rs.) 1,50,000 3,50,000 9,50,000
Variable Costs (Rs.) 10 8 6
Solution
Solve for the cross-over between X and Y locations10x + 1,50,000 = 8x + 3,50,000
Or 2x = 2,00,000
Or x = 1,00,000 units
Similarly for the cross-over between Y and Zlocations
8x + 3,50,000 = 6x + 9,50,000
XY
Z
2,00,000
3,00,000
1,00,000 Volu
me
Cost
5,00,000
10,00,00
0
15,0
0,000
20,00,00
0
LOCATIONAL
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LOCATIONALECONOMICS
A location is ideal/economic at aleast cost of:
Production
Distribution
Land
Building
Equipment
Labor
Material
with better
Factors X Y Z
1. Total initialinvestment
2. Total expected sales3. Distribution expenses4. Raw material
expenses
5. Power and watersupply expenses6. Wages and salaries7. Other expenses8. Community attitude9. Employee housing
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es gn osystemsDefining the system elements
Defining the interrelationship between the
elements
Selection of elements
P d ti ( )
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Production (process)System Design Process planning
place, people, m/c tools, time cost estimation
Process selection
continuous, batch, job
Process sequence
product, process, job Process technology
manual, automatic, semiautomatic
Process flow design
product, material, people, information, utilities, etc.
Work center (place) design
light, air, temp., noise, speed, vibration, safety - positional/
occupational fatigue, place (posture) of sitting, movement of body
(parts) etc.
Process personnel
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DESIGN OF
LAYOUTS
Moore: Plant layout is a plan of an
optimum arrangement of facilities
including personnel, operating
equipment, storage space, material
handling equipment and all other
supporting services along with the design
of best structure to contain all these
facilities.
Objectives of Plant
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Objectives of PlantLayout
The primary goal of the plant layout is to maximize the profit by
arrangement of all the plant facilities to the best advantage of totalmanufacturing of the product.
The objectives of plant layout are:
1. Streamline the flow of materials through the plant.
2. Facilitate the manufacturing process.
3. Maintain high turnover of in-process inventory.
4. Minimise materials handling and cost.
5. Effective utilisation of men, equipment and space.
6. Make effective utilisation of cubic space.
7. Flexibility of manufacturing operations and arrangements.
8. Provide for employee convenience, safety and comfort.
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TYPES OF
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TYPES OFLAYOUTS
Flow patterns - line/continuous, intermittent/batch,project/job
Types of LayoutsProduct layouts
Process layouts
Position layouts
Combined layouts
Shapes of layout
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PATTERNSline/continuous
intermittent/batch
project/job
O C O
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PRODUCT LAYOUT
High volume production
A dedicated set of facilities
Fixed sequence of operations
Suitable for only one type of product or its minor
modifications
(Assembly) line/continuous
M/c-1
M/c-2
M/c-3
M/c-4
M/c-5
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PROCESS LAYOUT
A small range of variety
Products/ services are repetitive
Large volume on demand, butperiodically
Identical Facilities are put togetherThey function/ process
Similar within the department/section
Intermittent/ Batch
M/c Type 1 M/c Type 2 M/c Type 3 M/c Type 4
M/c Type 5
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-LAYOUT
Limited capacity, but of general purpose
machines/equipments/facilities.
Limited people, but highly skilled
Wide variety of unique (non-repetitive)
products
Hi her de ree of customization
Job shop
Job at one place (a project)
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LAYOUTJob at one place (a project)
Resources arrive Costly/ Scarce Resources
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LAYOUTSLine layout with sub-assemblies
Combination of line and function
layout
Advantage of both types
Every cell represented by a
Group/ process/ functional layout
Suitable for flexible batch
production
High degree of standardization
Cellular layouts
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SHAPEOFLAYOUT
O-type
U or C-type
SS-type
I-type
L-type
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VERTICALLAYOUT
Use of vertical
space
Use of gravity
Ease of material
handling
ZSingle-storied Vertical
Layout
Multi-storied Vertical Layout
1st Floor
Gr.Floor
2ndFloor
ZZ
LINE BALANCING
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LINE BALANCINGAssembly-line balancing often has implications for layout.
This would occur when, for balance purposes, workstation size
or the number used would have to be physically modified.
The steps in balancing an assembly line (productlayout) are:1. Specify the sequential relationships among tasks
using a precedence diagram.
2. Determine the required workstation cycle time C,using the formula
C = Production time per day / Required output per day (in units)
3. Determine the theoretical minimum number of workstations (Nt) required to satisfythe workstation cycle time constraint using the formula
Nt = Sum of task times (T) / Cycle time (C)
4. Select a primary rule by which tasks are to be assigned to workstations, and asecondary rule to break ties.
5. Assign tasks, one at a time, to the first workstation until the sum of the task times isequal to the workstation cycle time, or no other tasks are feasible because of time or
Exampl
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pe:
F
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Earlier the efficiency was: 195/ (11task points x 50 slowest process) = 0.3545 =35.45%
DESIGN OF PROCESS LAYOUT
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DESIGN OF PROCESS LAYOUT
1. List and describe each functional work centre.2. Obtain a drawing and description of the facilitybeing designed.3. Identify and estimate the amount of materialand personnel flow among work
centers4. Use structured analytical methods to obtain a
good general layout.5. Evaluate and modify the layout, incorporating
details such as machineorientation, storage area location, and
equipment access.
Other physical facilities are:
Assignment
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AssignmentSelect a suitable location for your business.
A region
A site within the region
Do a dimensional analysis for the selection
Identify and apply a particular or a combination of
location model to finalize the location
Build a virtual factory model
List the factors influencing the location and/orlayout
General factors
Controllable
Uncontrollable