Location planning,

process selection and

Layout

8-1

Learning Objectives
 List some of the main reasons organizations need
to make location decisions.
 Explain why location decisions are important.
 Discuss the options that are available for location
decisions.
 Describe some of the major factors that affect
location decisions.
 Outline the decision process for making these
kinds of decisions.
 Use the techniques presented to solve typical
problems.
8-2

Learning Objectives
 Explain the strategic importance of process
selection.
 Explain the influence that process selection
has on an organization.
 Describe the basic processing types.
 Discuss automated approaches to
processing.
 Explain the need for management of
technology.
6-3

1
 Learning Objectives
 List some reasons for redesign of layouts.
 Describe the basic layout types.
 List the main advantages and
disadvantages of product layouts and
process layouts.
 Solve simple line-balancing problems.
 Develop simple process layouts.

6-4

Need for Location Decisions

 Marketing Strategy
 Cost of Doing Business
 Growth
 Depletion of Resources

8-5

Nature of Location Decisions

 Strategic Importance of location decisions
 Long term commitment/costs
 Impact on investments, revenues, and operations
 Supply chains
 Objectives of location decisions
 Profit potential
 No single location may be better than others
 Identify several locations from which to choose
 Location Options
 Expand existing facilities
 Add new facilities
 Move

8-6

2
 Making Location Decisions
 Decide on the criteria
 Identify the important factors
 Develop location alternatives
 Evaluate the alternatives
 Identify general region
 Identify a small number of community
alternatives
 Identify site alternatives
 Evaluate and make selection

8-7

Location Decision Factors

Community
Regional Factors Considerations

Multiple Plant Site-related

Strategies Factors

8-8

Regional Factors

 Location of raw materials

 Location of markets
 Labor factors
 Climate and taxes

8-9

3
 Community Considerations

 Quality of life
 Services
 Attitudes
 Taxes
 Environmental regulations
 Utilities
 Developer support

8-10

Site Related Factors

 Land
 Transportation
 Environmental
 Legal

8-11

Multiple Plant Strategies

 Product plant strategy
 Market area plant strategy
 Process plant strategy

8-12

4
 Service and Retail Locations
 Manufacturers – cost focused
 Service and retail – revenue focused
 Traffic volume and convenience most important
 Demographics
 Age
 Income
 Education
 Location, location, location
 Good transportation
 Customer safety
8-13

Trends in Locations

 Foreign producers locating in U.S.

 “Made in USA”
 Currency fluctuations
 Just-in-time manufacturing techniques
 Microfactories
 Information Technology

8-14

Global Locations
 Reasons for globalization
 Benefits
 Disadvantages
 Risks
 Global operations issues

8-15

5
 Evaluating Locations

 Cost-Profit-Volume Analysis
 Determine fixed and variable costs
 Plot total costs
 Determine lowest total costs

8-16

Location Cost-Volume Analysis

 Assumptions
 Fixed costs are constant
 Variable costs are linear
 Output can be closely estimated
 Only one product involved

8-17

Example 1: Cost-Volume Analysis

Fixed and variable costs for

four potential locations
L o c a tio n F ix e d V a r ia b le
C ost C ost
A $2 5 0 ,0 0 0 $11
B 1 0 0 ,0 0 0 30
C 1 5 0 ,0 0 0 20
D 2 0 0 ,0 0 0 35

8-18

6
 Evaluating Locations
 Transportation Model
 Decision based on movement costs of raw
materials or finished goods
 Factor Rating
 Decision based on quantitative and
qualitative inputs
 Center of Gravity Method
 Decision based on minimum distribution
costs

8-19

Process selection and

layout

8-20

Introduction
 Process selection
 Deciding on the way production of goods or
services will be organized
 Major implications
 Capacity planning
 Layout of facilities
 Equipment
 Design of work systems

6-21

7
 Process Selection and
Figure 6.1
System Design
Facilities and
Forecasting Capacity Equipment
Planning

Product and Layout

Service Design

Process
Technological Selection Work
Change Design

6-22

Process Strategy
• Key aspects of process strategy
– Capital intensive – equipment/labor
– Process flexibility
– Technology
– Adjust to changes
– Design

– Volume

– technology

6-23

Technology
 Technology: The application of scientific
discoveries to the development and
improvement of products and services and
operations processes.
 Technology innovation: The discovery and
development of new or improved products,
services, or processes for producing or
providing them.

6-24

8
 Kinds of Technology

 Operations management is primarily

concerned with three kinds of technology:
 Product and service technology
 Process technology
 Information technology
 All three have a major impact on:
 Costs
 Productivity
 Competitiveness

6-25

Technology Competitive
Advantage
 Innovations in
 Products and services
 Cell phones
 PDAs
 Wireless computing
 Processing technology
 Increasing productivity
 Increasing quality
 Lowering costs

6-26

Technology Acquisition
 Technology can have benefits but …
 Technology risks include:
 What technology will and will not do
 Technical issues
 Economic issues
 Initial costs, space, cash flow, maintenance
 Consultants and/or skilled employees
 Integration cost, time resources
 Training, safety, job loss

6-27

9
 Process Selection

 Variety Batch
 How much
 Flexibility
Job Shop Repetitive
 What degree
 Volume
 Expected output Continuous

6-28

Process Types
 Job shop
 Small scale
 Batch
 Moderate volume
 Repetitive/assembly line
 High volumes of standardized goods or
services
 Continuous
 Very high volumes of non-discrete goods

6-29

Product and Service

Figure 6.2 Processes
Process Type
Job Shop Appliance repair Ineffective
Emergency
room
Batch Commercial
baking
Classroom
Lecture
Repetitive Automotive
assembly
Automatic
carwash
Continuous Ineffective Steel Production
Water purification
(flow)

6-30

10
 Product – Process Matrix
Figure 6.2 (cont’d)

Dimension
Job variety Very High Moderate Low Very low
Process Very High Moderate Low Very low
flexibility

Unit cost Very High Moderate Low Very low

Volume of Very High Low High Very low
output

6-31

Product and Process Profiling

 Process selection can involve substantial
investment in
 Equipment
 Layout of facilities
 Product profiling: Linking key product or service
requirements to process capabilities
 Key dimensions
 Range of products or services
 Expected order sizes
 Pricing strategies
 Expected schedule changes
 Order winning requirements
6-32

Automation
 Automation: Machinery that has sensing
and control devices that enables it to
operate
 Fixed automation
 Programmable automation

6-33

11
 Automation
• Computer-aided design and
manufacturing systems (CAD/CAM)
• Numerically controlled (NC) machines
• Robot
• Manufacturing cell
• Flexible manufacturing systems(FMS)
• Computer-integrated manufacturing (CIM)

6-34

Facilities Layout
 Layout: the configuration of
departments, work centers, and
equipment, with particular emphasis on
movement of work (customers or
materials) through the system
 Product layouts
 Process layouts
 Fixed-Position layout
 Combination layouts

6-35

Objective of Layout Design

1. Facilitate attainment of product or service
quality
2. Use workers and space efficiently
3. Avoid bottlenecks
4. Minimize unnecessary material handling
costs
5. Eliminate unnecessary movement of
workers or materials
6. Minimize production time or customer
service time
7. Design for safety 6-36

12
 Importance of Layout
Decisions
 Requires substantial investments of
money and effort
 Involves long-term commitments
 Has significant impact on cost and
efficiency of short-term operations

6-37

The Need for Layout Decisions

Inefficient operations
For Example: Changes in the design
High Cost of products or services
Bottlenecks

Accidents
The introduction of new
products or services

Safety hazards

6-38

The Need for Layout Design

(Cont’d)
Changes in
environmental Changes in volume of
or other legal output or mix of
requirements products

Morale problems
Changes in methods
and equipment

6-39

13
 Basic Layout Types

 Product layouts
 Process layouts
 Fixed-Position layout
 Combination layouts

6-40

Basic Layout Types

 Product layout
 Layout that uses standardized processing
operations to achieve smooth, rapid, high-
volume flow
 Process layout
 Layout that can handle varied processing
requirements
 Fixed Position layout
 Layout in which the product or project
remains stationary, and workers, materials,
and equipment are moved as needed

6-41

Product Layout
Figure 6.4

Raw
Station Station Station Station Finished
materials 1 2 3 4 item
or customer
Material Material Material Material
and/or and/or and/or and/or
labor labor labor labor

Used for Repetitive or Continuous Processing

6-42

14
 A U-Shaped Production Line
Figure 6.6

In 1 2 3 4

Workers

Out 10 9 8 7

6-43

Process Layout
Figure 6.7
Process Layout
(functional)
Dept. A Dept. C Dept. E

Dept. B Dept. D Dept. F

Used for Intermittent processing

Job Shop or Batch Processes

6-44

Product Layout
Figure 6.7 (cont’d)
Product Layout
(sequential)

Work Work Work

Station 1 Station 2 Station 3

Used for Repetitive Processing

Repetitive or Continuous Processes

6-45

15
 Fixed Position Layouts
 Fixed Position Layout: Layout in which the
product or project remains stationary, and
workers, materials, and equipment are
moved as needed.
 Nature of the product dictates this type of
layout
 Weight
 Size
 Bulk
 Large construction projects
6-46

Cellular Layouts

 Cellular Production
 Layout in which machines are grouped into
a cell that can process items that have
similar processing requirements
 Group Technology
 The grouping into part families of items with
similar design or manufacturing
characteristics

6-47

Service Layouts
 Warehouse and storage layouts
 Retail layouts
 Office layouts
 Service layouts must be aesthetically
pleasing as well as functional

6-48

16
 Design Product Layouts: Line
Balancing

Line Balancing is the process of assigning

tasks to workstations in such a way that
the workstations have approximately
equal time requirements.

6-49

Cycle Time

Cycle time is the maximum time

allowed at each workstation to
complete its set of tasks on a unit.

6-50

Determine Maximum Output

OT
Output rate =
CT

OT  operating time per day

D = Desired output rate

OT
CT = cycle time =
D
6-51

17
 Determine the Minimum Number
of Workstations Required

(  t)
N =
CT

 t = sum of task time

6-52

Precedence Diagram
Figure 6.11

Precedence diagram: Tool used in line balancing to

display elemental tasks and sequence requirements
0.1 min. 1.0 min.
A Simple Precedence
a b Diagram

c d e
0.7 min. 0.5 min. 0.2 min.

6-53

Example 1: Assembly Line

Balancing
 Arrange tasks shown in Figure 6.10
into three workstations.
 Use a cycle time of 1.0 minute
 Assign tasks in order of the most number
of followers

6-54

18
 Calculate Percent Idle Time

Idle time per cycle

Percent idle time =
(N)(CT)

Efficiency = 1 – Percent idle time

6-55

Line Balancing Rules

Some Heuristic (intuitive) Rules:

 Assign tasks in order of most following

tasks.
 Count the number of tasks that follow
 Assign tasks in order of greatest
positional weight.
 Positional weight is the sum of each task’s
time and the times of all following tasks.

6-56

Example 2

0.2 0.2 0.3

a b e

0.8 0.6
c d f g h
1.0 0.4 0.3

6-57

19
 Solution to Example 2

Station 1 Station 2 Station 3 Station 4

a b e
f g h
c d

6-58

Bottleneck Workstation

30/hr. 30/hr. 30/hr. 30/hr.

1 min. 1 min. 2 min. 1 min.

Bottleneck

6-59

Parallel Workstations

30/hr. 2 min. 30/hr.

60/hr. 60/hr.
1 min. 1 min. 1 min.
30/hr.
2 min. 30/hr.

Parallel Workstations

6-60

20
 Designing Process Layouts
Information Requirements:
1. List of departments
2. Projection of work flows
3. Distance between locations
4. Amount of money to be invested
5. List of special considerations
6. Location of key utilities

6-61

Example 3: Interdepartmental Work

Flows
Figure 6.13 for Assigned Departments

30

170 10
1 3 2
0

A B C

6-62

21