2.1 Facilities Planning - L2 PDF

Chapter 2
Thursday, September 19, 2013 Industrial Engineering 1

Introduction
Facilities
Location
Structural
Facilities Design
Planning
Facilities Layout
Design Design
Handling System
Design

Facilities Location
Location – A place or position of allocating

the facilities, buildings, equipment etc.
Layout - The way that something is
physically arranged such as the space of
material handling, storage, labor, support
activity & services and equipment.

Facilities Design
Structure design: building and support

services - gas, water, light, air,"
Layout design: space requirements and
location of resources in available space.
Handling system design: movement of
material, people, information and
equipment.

FACILITIES LOCATION:
Evaluating Location Alternatives
There are numbers of technique that are

helpful in evaluating location alternatives:
○ Location breakeven analysis
○ Minisum
○ Minimax
○ Transportation method
○ Assignment technique
○ Factor Rating, and
○ The Center of Gravity Method

a) Location Breakeven Analysis
Based on economic comparison of
location alternatives is facilitated by the
use of this method.
The analysis can be done numerically
or graphically.

Variable Costs
“The portion of the total cost

that varies directly with the
volume of output.”
e.g. labor, materials, transportation, and
variable overhead

Fixed Costs
“The portion of the total cost

that remains constant
regardless of output levels.”
e.g. land, property taxes, insurance,
equipment, and building

For cost analysis, the total cost
are given as:
Total Cost = FC + VC(Q)

Where:
FC = Fixed Cost
VC = Variable Cost per unit
Q = Quantity/volume of output

Assumption
1. Only one product is involved
2. What have been produced are sold out.
3. Variable cost/unit is constant regardless
of how many quantity produced.
4. Fixed cost remains unchanged when
output quantity changed
5. Sale price is fixed regardless of sale
quantity

TC = FC + VC(Q) Location
Break--Even Analysis
Break
Fixed Costs Variable Costs Total Costs

Community per Year per Unit (Fixed + Variable)
A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30

Break
for 20,000 units

A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30
Total Variable Costs

Break
for 20,000 units

A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30

$62 (20,000)

Break
for 20,000 units

A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30

$62 (20,000) = $1,240,000

Break
for 20,000 units

A $150,000 $62 $1,390,000
B $300,000 $38
C $500,000 $24
D $600,000 $30
Total Costs = $150,000 + $62 (20,000)

Break
for 20,000 units

A $150,000 $62 $1,390,000
B $300,000 $38 $1,060,000
C $500,000 $24 $ 980,000
D $600,000 $30 $1,200,000

Fixed Costs Total Costs
Community per Year (Fixed + Variable)
A
B
C
$150,000
$300,000
$500,000
$1,390,000
$1,060,000
$ 980,000
Location
D $600,000 $1,200,000
Break
Annual cost (thousands of dollars)
1600
1400
1200
1000
800
600
400
200
0
2 4 6 8 10 12 14 16 18 20 22
Q (thousands of units)
Location
A $150,000 $1,390,000
B $300,000 $1,060,000
C $500,000 $ 980,000
D $600,000 $1,200,000 Break--Even Analysis
Break
1600 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800
600
400
200
0
2 4 6 8 10 12 14 16 18 20 22
A
B
C
$150,000
$300,000
$500,000
$1,390,000
$1,060,000
$ 980,000
Location
D $600,000 $1,200,000
Break
1600 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800
600
Break-even
Break-
400
point
200
A best
0
2 4 6 8 10 12 14 16 18 20 22
Community
Fixed Costs
per Year
Total Costs
(Fixed + Variable) Location
A $150,000 $1,390,000
B $300,000 $1,060,000 Break--Even Analysis
Break
C $500,000 $ 980,000
1600
D $600,000 $1,200,000 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800 Break--even point
Break
600
Break-even
400
point
200
A best B best
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3
Community
Fixed Costs
per Year
Total Costs
(Fixed + Variable) Location
A $150,000 $1,390,000
B $300,000 $1,060,000 Break--Even Analysis
Break
C $500,000 $ 980,000
1600
D $600,000 $1,200,000 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800 Break-even point
600
Break-even
400
point
200
A best B best C best
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3
Location
Break
1600 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800 Break-even point
600
Break-even
400
point
200
A best B best C best
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3
Location
Break
1600 A
(20, 1390)
1400
(20, 1200) D
1200 Break-Even Quantities
(20, 1060) B
C
1000
(A) (B)
(20, 980)
800 $150,000 + $62Q Break-
= $300,000
Break + $38Q
-even point
600 Q = 6,250 units
Break-even
Break-
400
point
(B) (C)
200 $300,000 + $38Q = $500,000 + $24Q
A best B best C best units
Q = 14,286
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3

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Chapter 2

Thursday, September 19, 2013 Industrial Engineering 1

Thursday, September 19, 2013 Industrial Engineering 2

Location – A place or position of allocating

Thursday, September 19, 2013 Industrial Engineering 3

Structure design: building and support

Thursday, September 19, 2013 Industrial Engineering 6

There are numbers of technique that are

Thursday, September 19, 2013 Industrial Engineering 8

Thursday, September 19, 2013 Industrial Engineering 9

“The portion of the total cost

Thursday, September 19, 2013 Industrial Engineering 11

“The portion of the total cost

Thursday, September 19, 2013 Industrial Engineering 12

Total Cost = FC + VC(Q)

Thursday, September 19, 2013 Industrial Engineering 13

Thursday, September 19, 2013 Industrial Engineering 14

Fixed Costs Variable Costs Total Costs

Thursday, September 19, 2013 Industrial Engineering 16

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Thursday, September 19, 2013 Industrial Engineering 17

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Thursday, September 19, 2013 Industrial Engineering 18

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Thursday, September 19, 2013 Industrial Engineering 19

Fixed Costs Variable Costs Total Costs

Total Costs = $150,000 + $62 (20,000)

Thursday, September 19, 2013 Industrial Engineering 20

Fixed Costs Variable Costs Total Costs

Thursday, September 19, 2013 Industrial Engineering 21

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