1

Facility Location
 2

OBJECTIVES
 Issues in Facility Location

 Various Plant Location Methods

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 3

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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 4

Issues in Facility Location

 Proximity to Customers
 Business Climate
 Total Costs
 Infrastructure
 Quality of Labor
 Suppliers
 Other Facilities

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 5

Issues in Facility Location

 Free Trade Zones
 Political Risk
 Government Barriers
 Trading Blocs
 Environmental Regulation
 Host Community
 Competitive Advantage

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 6
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.
Sites
Major factors for site location Pt. Range A B
Fuels in region 0 to 330 123 156
Power availability and reliability 0 to 200 150 100
Labor climate 0 to 100 54 63
Living conditions 0 to 100 24 96
Transportation 0 to 50 45 50
Water supply 0 to 10 4 5
Climate 0 to 50 8 4
Supplies 0 to 60 5 50
Best Site
Tax policies and laws 0 to 20 5 20 isBest
B
Site
is B
Total pts. 418 544
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 7

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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 PLANT LAYOUT
8

A Plant Layout may be defined as the

arrangement of different departments
in the operational area, and then the
arrangement of machinery, equipment
and other facilities in and around the
departments.
A proper layout results in the fastest
production of the best quality with
minimum cost and least stoppages.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 PLANT LAYOUT
9

Factors that influence Layout:

1. Type of Industry / Operation
2. 2. Material (R. M, W. I. P )
3. Finished Product
4. People ( Worker, Customer )
5. 5. Machinery and equipment
6. Location
7. Managerial Policies
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 10

Objectives of a good layout:

1. Provide enough production
Capacity
2. Reduce Material Handling Costs
3. Reduce congestion that impedes
movement of people and material
4. Reduce hazards to personnel and
customers
5. Utilise labour efficiently.
6. Increase employee morale
7. Reduce accidents
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 11

Objectives of a good layout:

8. Utilise available space efficiently

and effectively
9. Provide for volume and product
flexibility
10. Provide ease of supervision
11. Facilitate co-ordination and face-to-face
communication as applicable
12. Provide for employee health & safety
13. Allow ease of maintenance
14. Allow high machine / equipment
utilisation
15. Improve productivity
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 12

Principles of effective layout:

1. Principle of Minimum travel
2. Principle of Sequence
3. Principle of Usage
4. Principle of Compactness
5. Principle of Safety and satisfaction
6. Principle of Flexibility
7. Principle of Minimum investment

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 PLANT LAYOUT 13

Types of Layouts:
1. Process Layout : Same type of machinery are
grouped together in one area. Stress on similar
process in one place.
2.Product Layout: Also called “line” layout.
Machinery are in sequence of the operation
process.
3. Combination Layout: Machinery are laid in
sequence, yet, similar machines are grouped
together.
13
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 14

Types of Layouts:
4. Cellular or Group Layout: Machineries are
grouped in to cells, in process or product layout.
Combination of cells make up the whole unit.

5. Fixed Position Layout: Job does not move.

All equipment and people move to the job. e.g.,
Bridges, Ships, Aircrafts, Buildings.

McGraw-Hill/Irwin 14
© 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 15

Process Layout for a garment factory

Washing and
R. M. Store

dying
Cutting Stitching
F. G. Store

Packing Insp. Finishing

Ironing

Shirt - Jeans - 15
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 16

Product Layout for the garment factory

Cutting Stitching Insp.

R. M. Store

Stitching

Washing/Dying
Cutting

Insp.
Ironing
Packing Insp. Finishing
F. G. Store

Insp.
Packing Insp. Finishing

Shirt - Jeans - 16
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 17

Process Layout vs. Product Layout:

Process Layout Product Layout
Variety of work High Low
Output Low High
Inspection Considerable, in stages Minimum
Material Handling Unit Mat. Handling Bulk Mat. Handling
Work flow Haphazard One direction
Machinery/ Eqpt. General Purpose Special Purpose
Bottlenecks Common Avoidable
W. I. P. More Less
Floor area More Less
Incentives Individual Group
Fixed Investment Low High
Cross Skills High Low
Production Planning Easier Complicated
Production Control Easier Complicated
Expansion Easier 17 Difficult
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 18

Cellular Layout (in a Product Layout):

R. Assembly Inspection Despatch

M.
Line 1
Shear1 Press1 Press2
M/c 1 M/c 5
Shear 2 Press3

M/c 4
M/c 2
Insp. M/c 3
Paint
Body shop Gear Shop Line 2
R.
M.
Assembly Inspection Despatch

18
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 PLANT LAYOUT 19

Combined Layout:

Cutting Pckg.
Insp. Stitching Insp. Finishing Insp. Iron

R KURTA

M F
AISLE
SHIRT
G

Cutting Insp. Stitching Insp. Finishing Insp. Iron Pckg.

19
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 20

Facility Layout

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 21

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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 22

Facility Layout Defined

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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 Basic Production Layout
23

Formats

 Process Layout (also called job-shop or

functional layout)

 Product Layout (also called flow-shop

layout)

 Group Technology (Cellular) Layout

 Fixed-Position Layout

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 24
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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 Process Layout: CRAFT 25

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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 26
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
 Switchingdepartments then checking the results of
the “closeness” score

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 Example of Systematic 27

Layout Planning: Reasons for

Closeness

Code Reason

1 Type of customer

2 Ease of supervision

3 Common personnel

4 Contact necessary

5 Share same price

6 Psychology

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 28

Example of Systematic
Layout Planning:
Importance of Closeness
Line Numerical
Value Closeness
code weights
A Absolutely necessary 16

E Especially important 8

I Important 4

O Ordinary closeness OK 2

U Unimportant 0

X Undesirable 80
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 29
Example of Systematic Layout
Planning: Relating Reasons and
Importance
Area
From To
2 3 4 5 (sq. ft.)
I U A U
1. Credit department 100
6 -- 4 --
U I A
2. Toy department 400
-- 1 1,6

3. Wine department
Note
Notehere
here U X
300
that
thatthe
the(1)
(1) -- 1
Credit NoteX here
Note herethat
that
4. Camera department CreditDept.
Dept. 100
and the
the (2) ToyDept.
1(2) Toy Dept.
and(2)
(2)Toy
Toy
Dept. and
andthe
the(5)
(5)100
5. Candy department Dept.are
are
given Candy
CandyDept.
Dept.are
are
givenaahigh
high
rating given
givenaahigh
high
Closeness rating Letter
ratingofof6.6.
Reason for rating Number
rating
ratingof
of6.
6.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 30
Example of Systematic Layout
Planning:
Initial Relationship Diagram

1 E 3 The
Thenumber
numberof oflines
lines
here
hererepresent
representpaths
paths
I U U required
requiredto tobe
betaken
takeninin
4 transactions
transactionsbetween
between
the
thedepartments.
departments. The The
2 5
A more
morelines,
lines,the
themore
more
Note the
theinteraction
interactionbetween
between
Notehere
hereagain,
again,Depts.
Depts.(1)
(1)and
and
(2) departments.
departments.
(2)are
arelinked
linkedtogether,
together,and
and
Depts.
Depts.(2)
(2)and
and(5)
(5)are
arelinked
linked
together
togetherby
bymultiple
multiplelines
linesor
or
required
requiredtransactions.
transactions.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 31

Example of Systematic Layout

Planning:
Initial and Final Layouts

5 2 4 2
3 20 ft
3 1 5 1 4
Note
Noteininthe
the
50 ft Final
FinalLayout
Layout
that
thatDepts.
Depts.
Initial Layout Final Layout (1)
(1)and
and(5)
(5)
are
arenot
notboth
both
Ignoring space and Adjusted by square
building constraints placed
placed
footage and building
size
directly
directlynext
next
to
toDept.
Dept.(2).
(2).
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All
 32

Group Technology:
Benefits
1. Better human relations

2. Improved operator expertise

3. Less in-process inventory and

material handling

4. Faster production setup

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 33

Group Technology:
Transition from Process Layout
1. 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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 34

Fixed Position Layout

Question:
Question: What
What are
are our
our primary
primary
considerations
considerations for
for aa fixed
fixed position
position
layout?
layout?

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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 35

Retail Service Layout

 Goal--maximize net profit per
square foot of floor space
 Servicescapes

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

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

 36

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All