Facility Location

A facility (plant) is a place where men, materials, money, machinery and equipment, etc., are brought together for manufacturing a product Location selection: Region ->Locality ->Site Necessity?

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New venture Expansion Market changes Inputs or Cost changes Government policy Organizational policy.

Importance of Facility Location

1. 2.

3.
4.

5.
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Got long term impacts Influences plant layout and facilities needed Influences capital investment and operating costs Irreversible Determines competitive strength.

Factors in Location Analysis

1. 2. 3. 4. 5. 6. 7.
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Availability & cost of land Availability & cost of raw material Nearness to Market Transport & Communication facilities Availability & cost of labour Availability of fuel, power, water Soil characteristics

Factors in Location Analysis

8.
9. 10.

11.
12.

13.
14.
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Natural factors Industrial atmosphere Government subsidies and policies Infrastructure facilities e.g. housing, banks, schools, hospitals and recreation Political climate Organization policy Social acceptability.

Location Analysis Techniques

1.
2. 3. 4. 5.

6.

Factor rating technique Total cost technique Break even analysis technique Dimensional analysis technique Brown & Gibson model Transportation method.

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1. Factor Ratings Technique

(Location Analysis Techniques)
Factor Weight (1-5) Loc.-A Rating (1-10) Loc.-A Loc.-B Score Rating (W x R) (1-10) Loc.-B Score (W x R)

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Tax advantages Suitability of labor skills Proximity to customers Proximity to suppliers Adequacy of water Receptivity of community Educational facilities Rail/air transportation Suitability of climate Availability of power Total Score

1. Factor Ratings Technique

(Location Analysis Techniques)
Factor Weight (1-5)
4 3 3 5 1 5 4 3 2 2

Loc.-A Rating (1-10)

Loc.-A Loc.-B Score Rating (W x R) (1-10)

Loc.-B Score (W x R)

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Tax advantages Suitability of labor skills Proximity to customers Proximity to suppliers Adequacy of water Receptivity of community Educational facilities Rail/air transportation Suitability of climate Availability of power Total Score

1. Factor Ratings Technique

(Location Analysis Techniques)
Factor Weight (1-5)
4 3 3 5 1 5 4 3 2 2

Loc.-A Rating (1-10)

3 7 5 8 10 4 7 10 4 4

Loc.-A Loc.-B Score Rating (W x R) (1-10)

10 5 2 2 3 4 1 5 7 8

Loc.-B Score (W x R)

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Tax advantages Suitability of labor skills Proximity to customers Proximity to suppliers Adequacy of water Receptivity of community Educational facilities Rail/air transportation Suitability of climate Availability of power Total Score

1. Factor Ratings Technique

(Location Analysis Techniques)
Factor Weight (1-5)
4 3 3 5 1 5 4 3 2 2

Loc.-A Rating (1-10)

3 7 5 8 10 4 7 10 4 4

Loc.-A Loc.-B Score Rating (W x R) (1-10)

12 21 15 40 10 20 28 30 8 12 10 5 2 2 3 4 1 5 7 8

Loc.-B Score (W x R)
40 15 6 10 3 20 4 15 14 16

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Tax advantages Suitability of labor skills Proximity to customers Proximity to suppliers Adequacy of water Receptivity of community Educational facilities Rail/air transportation Suitability of climate Availability of power Total Score

1. Factor Ratings Technique

(Location Analysis Techniques)
Factor Weight (1-5)
4 3 3 5 1 5 4 3 2 2

Loc.-A Rating (1-10)

3 7 5 8 10 4 7 10 4 4

Loc.-A Loc.-B Score Rating (W x R) (1-10)

12 10 21 5 15 2 40 2 10 3 20 4 28 1 30 5 Select 8 7 8 8 192

Loc.-B Score (W x R)
40 15 6 10 3 20 4 15 14 16 143

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Tax advantages Suitability of labor skills Proximity to customers Proximity to suppliers Adequacy of water Receptivity of community Educational facilities Rail/air transportation Suitability of climate Availability of power Total Score

2. Total Cost Analysis

(Location Analysis Techniques)

Total Cost = Fixed Cost + Operational Cost Fixed cost include expenditure on land, building, machines and other equipments etc. Operational costs are the expenditure incurred on inputs, transformation process and the distribution of output. Selection Criteria : Select the site with lowest total cost.
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2. Total Cost Analysis

(Location Analysis Techniques)
1-Land 5 5 4 4 5 3 4 3 2 1 2 2-Plant

3-Material
4-Construction 5-Distribution

Total costs

5 4 3 2 1

3
2 1

A
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B Locations

2. Total Cost Analysis

(Location Analysis Techniques)
Exercise: Punjab Industries is planning to set up a new plant. Following is a table showing alternative locations and respective costs (in Rs.). If the volume is to be 5,00,000 units, what is the preferred location? If the volume is expanded to 10,00,000 units, would the decision change?
Costs Transport/unit Power/unit Land* 1.00 1.50 50 lakh Mohali Panchkula 1.50 2.50 35 lakh Chandigarh 1.20 1.00 100 lakh

Building*
Location taxes Wages per unit
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130 lakh
10 lakh 0.90

110 lakh
7 lakh 1.00

140 lakh
13 lakh 1.40

*. To be costed at 20% per annum

3. Breakeven Analysis
(Location Analysis Techniques)

Labor

Transportation

Material

Costs
Total Fixed Costs

Volume of Units
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3. Breakeven Analysis
(Location Analysis Techniques) E

B C A D

Total Costs

A D E C
Volume of Output

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3. Breakeven Analysis
(Location Analysis Techniques) E

B C Cost curves A D

Costs/ A Sales D E C

Sales curve

Volume of Output
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Selection Criteria : Select the site which gives earliest BEP.

3. Breakeven Analysis
(Location Analysis Techniques) E

B C A D

Costs/ A Sales D E C

BEPD

Volume of Output
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4. Dimensional Analysis
(Location Analysis Techniques)

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Costs can be tangible or intangible also Intangible costs are difficult to be expressed in absolute terms Dimensional analysis considers costs in relative terms Costs can be either in absolute terms or in relative terms Weights of various factors are in power (index).

4. Dimensional Analysis
(Location Analysis Techniques)

Relative merit of site A wrt site B:

MA

[CA1] [CB1]

[CA2] [CB2]

MB

.
2

[CA n] [CB n]

If
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MA MB

is more than one then location B will be better than A.

4. Dimensional Analysis
(Location Analysis Techniques)

Costs Site

Labour

Power

Education facilities (1-10)

Recreation facilities (1-10)

M
N Weightage

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Rs. 2,00,000
Rs. 1,00,000 1

Rs. 40,00,000
Rs. 20,00,000 1

4
8 2

2
4 2

Exercise: Which site is better?

5. Brown & Gibson Model

(Location Analysis Techniques)

Considers three types of location factors

1.

Critical factors

Must 0 or 1 Can be put in monetary terms Absolute costs Can only be put in qualitative terms Relative ratings

2.

Objective factors

3.

Subjective factors

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5. Brown & Gibson Model

(Location Analysis Techniques)

For site i Location Measure, LMi is calculated as:

Where: CFM - Critical Factor Measure (0 or 1) OFM - Objective Factor Measure SFM - Subjective Factor Measure W - Objective factor decision weight
LMi = CFMi x {W x OFMi + (1-W) x SFMi }

Selection Criteria : More the LM, better the site is.

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6. Transportation Method
(Location Analysis Techniques)

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

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6. Transportation Method
(Location Analysis Techniques)
Exercise: Agri-Products Company has two factories, one at Bathinda and one at Amritsar. There are four warehouses. The company is thinking of locating an additional factory either at Ambala or at Ludhiana. Following matrix gives details of shipping costs, manufacturing capacities and warehouse requirements. Which location would you select?
Place Bathinda Amritsar 25 10 15 10 100 Solan 9 8 2 5 150 Karnal 10 6 3 7 300 Jammu Chandigarh 20 5 10 5 250 CAPACITY (units) 200 400 200 200

Ambala Ludhiana
REQUIRED (units)
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Facility Layout

Also known as Plant layout or Facility design Layout is concerned with overall arrangement of production processes, support facilities and all other facilities required for facilitating the production of goods or services.

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Objectives: Facilities Layout

1.
2. 3. 4. 5.
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Facilitate pre-determined manufacturing process Minimization of material handling and material movement Elimination of bottlenecks through balancing of plant capacities Higher material turnover through shorter operating cycle Effective utilization of installed capacity so as to maximize ROI

Objectives: Facilities Layout

Effective utilization of cubic space of the factory area 7. Effective utilization of manpower resources through better provision of supervision and control 8. Elimination, improvement or confinement of objectionable operations 9. Avoidance of industrial accidents and hazards 10. Better working conditions for employees.
6.

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Advantages: Facilities Layout

1. 2. 3. 4.

5.

Better productivity Reduced cost of manufacturing Better quality Ease of working Maximum safety and minimum health hazards

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Advantages: Facilities Layout

Reduces cost of inspection and supervision 7. Minimum handling of materials 8. Minimum damage and spoilage of materials 9. Reduced congestion of materials, machinery and men 10. Flexibility with regard to changing production conditions.
6.
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Factors Affecting Facility Layout

1. 2. 3.

4.
5. 6.

Product and Material Specification Location and Site of the Plant Manufacturing Process Material Handling Storage of in-process Inventory Plant personnel and employee facilities

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Factors affecting Facility Layout

Service facilities Design of building Flexibility Work areas and Equipment Working conditions Disposal of waste and dangerous gases.

7.
8. 9. 10. 11.

12.

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Types of Facility Layout

1. 2. 3. 4.

Process Layout Product Layout Combined Layout Fixed Position Layout

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1. Process Layout

(Types of Facility Layout)

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Similar to job shop type production Equipment performing similar operations are grouped together Depending upon the process requirements, a product travels to specific process shops Useful when volume is low and variety is more Gives flexibility in sequence of operations Machine break-downs do not result in stoppage of line High WIPs; Operations are not balanced Requires complex PPC.

1. Process Layout: Illustration

(Types of Facility Layout)
Turning
Grinding Stores Painting

Receiving

Forming
Welding Assembly

Plant Office FG - Stores Shipping

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2. Product Layout

(Types of Facility Layout)

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Equipment are laid out in sequence of operation along the flow lines Also referred as Line layout Material flow continuously at a uniform rate Useful when volume and standardization is high Operations are balanced Does not offer flexibility in sequence of operations Machine break-downs do result in stoppage of line Low WIPs; simple PPC.

2. Product Layout: Illustration

(Types of Facility Layout)

A Sawing Grinding Inspection Bending

FG Assembly Inspection

B Sawing
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Inspection Drilling

Grinding

3. Combined Layout

(Types of Facility Layout)

Combination of the process and product layout for batch productions Each process is setup as a unit and these units are arranged into a product layout.

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4. Fixed Position Layout

(Types of Facility Layout)

The major equipment or the product remains in a fixed position All tools, machines, men and material are brought to it Examples: ship building, aircraft manufacture or overhaul.

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4. Fixed Position Layout: Illustration

(Types of Facility Layout)

Machines
Labor

Ship-building Material
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Tools

Work Study

Work study is simply the study of work to ensure best possible use of human and material resources It is the analysis of work into smaller parts followed by rearrangement of these parts to give the same effectiveness at lesser cost It examines both the method and duration of the work involved in a process
1. 2.

Method Study Work Measurement

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Objective is to increase Productivity.

Productivity

Productivity is the ratio between the amount produced and the amount of resources used in the course of production Productivity is a measure of how efficiently inputs are converted to outputs Productivity = output/input Measure of Process Improvement.

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Exercise 1: Productivity
Two workers paint twenty-four tables in eight hours. What is their productivity?

Inputs: 16 hours of labor (2 workers x 8 hours) Outputs: 24 painted tables Productivity P ?

Outputs 24 tables 1.5 tables / hour Inputs 16 hours

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Measures to increase Productivity

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. GJ-IMT12.

Better basic education of work force Better diet and refreshment Better infrastructure Better labor utilization Training and motivation Well planned investments on equipment and timely maintenance Research & Development Controlling unproductive activities and wastages Exploitation of information technologies Learn from failures and accumulated knowledge Empower people Encourage creativity.

Productivity Growth Rate

Can be used to compare a processs productivity at a given time (P2) to the same process productivity at an earlier time (P1)

P2 P 1 Growth Rate P 1
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Productivity Growth Rate

Exercise 3:
Last week a company produced 150 units using 200 hours of labor This week, the same company produced 180 units using 250 hours of labor Check Productivity Growth of the company?

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Productivity Growth Rate

Exercise 3:

Last week a company produced 150 units using 200 hours of labor This week, the same company produced 180 units using 250 hours of labor

150 units P 0.75 units / hour 1 200 hours P2 180 units 0.72 units / hour 250 hours

P2 P 0.72 0.75 1 Growth Rate 0.04 P 0.75 1

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or a negative 4% growth rate

Method Study: Procedure

1. Select
the work to be studied Economic, technical and human considerations

2. Record
relevant facts about the present methods by direct observation process flow charts
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Method Study: Procedure

Process flow charts, universally accepted symbols:
Operation

Transport

Storage

Delay

Inspection
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Method Study: Procedure

Exercise: Make a process flow chart for the following sequence of operation: Component assembly -> Wait for inspection -> Inspect assembly -> Send to Painting shop -> Paint the assembly -> Check quality -> Send to FG store -> Store

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Method Study: Procedure

Exercise: Make a process flow chart for the following sequence of operation: Component assembly -> Wait for inspection -> Inspect assembly -> Send to Painting shop -> Paint the assembly -> Check quality -> Send to FG store -> Store
Component assembly

Inspect assembly

Paint the assembly

Wait for inspection

Send to Painting shop

Check quality

Send to FG Store

FG Store

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Method Study: Procedure

3. Examine
critical examination of facts in an ordered sequence using some technique What? (operations, delays, inspections, or handand-body motions, etc) Why so? Who? (number and skills of persons) Why so? When? (sequence or time schedule of operation) Why so? Where? (work place) Why so? How? (use of tools, raw materials, etc) Why so?
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Method Study: Procedure

4. Develop
most practical, economic and effective method

5. Define
the new method so that it can always be identified

6. Install
implement method as standard practice

7. Maintain
by regular routine checks.
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Work Measurement or Time Study

Uses of Time Study

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Determining the work content and thereby setting wages and incentives Arriving at cost standard per unit of output Comparing the work efficiencies of various operators Manpower planning Aiding in Method Study.

Work Measurement or Time Study

Basic Steps in Time Study

1.
2. 3. 4. 5. 6. 7.
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Subdivide the job into observable and distinct elements Choose acceptable operator for study Make direct observations of the work elements Performance rate each element and record Calculate the normal time Establish allowances Compute the standard time.

Work Measurement or Time Study Standard Time

Standard time is the total time in which a job should be completed at standard performance Standard time is equal to sum of Basic time and Allowance time Allowance is given because of personal time, fatigue, unavoidable delays, etc. Basic time (or Normal time) is the observed time multiplied with a rating factor based upon whether the observed worker is a fast worker or slow worker

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Work Measurement or Time Study Three basic systems of Time Study

1. Using a Stop Watch
Actual performance is studied

2. Using Synthetic Time Standard

Work is sub-divided into standard components and standard times available for previous available time studies are used PMTS Predetermined Motion Time System

3. Using Statistical Sampling.

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