Operations Management

Facility location, Facility layout, Line balancing

 Facility location problem

 Class of optimization problems

 Main objective is to minimize materials movement to
geographically dispersed locations
 Geo centroid minimizes the movement
 Cx and Cy are the (X,Y) coordinates, and Y
L1(X1, Y1)
 Q1, Q2, Q3, are the quantities to supply
*

n n *
 L (X )Q
i i i  L (Y )  Q
i i i C(X, Y)
*
Cx = i =1
n
; Cy = i =1
n * L3(X3, Y3)
Q
i =1
i Q
i =1
i L1(X1, Y1)

2 (c) 2016 Milind Padalkar 25 September 2019

Capacitated facility location problem … 1

 Centroid is theoretically sound, but impractical. Centroidal location may

not have any infrastructure
 Capacitated: Assumes that capacity of supply location(s) is finite
 It is a NP-hard optimization problem solved through mixed integer linear
programming methods (MILP).
𝐹𝑖 : 𝑆𝑢𝑝𝑝𝑙𝑦 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛𝑠 𝑖 = 1, … , 𝑚
𝐷𝑗 : 𝐷𝑒𝑚𝑎𝑛𝑑 𝑎𝑡 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛𝑠 𝑗 = 1, … , 𝑛
𝐶𝑖𝑗 : 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 𝑜𝑓 𝑠ℎ𝑖𝑝𝑝𝑖𝑛𝑔 𝑓𝑟𝑜𝑚 𝐹𝑖 𝑡𝑜 𝐷𝑗
𝑓𝑖 : 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑠𝑢𝑝𝑝𝑙𝑦 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑖
𝐾𝑖 : 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑜𝑓 𝑠𝑢𝑝𝑝𝑙𝑦 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑖
𝑌𝑖𝑗 : 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑠ℎ𝑖𝑝𝑝𝑒𝑑 𝑓𝑟𝑜𝑚 𝐹𝑖 𝑡𝑜 𝐷𝑗
𝑋𝑖 : 𝐵𝑖𝑛𝑎𝑟𝑦 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 (1 𝑖𝑓𝐹𝑖 𝑖𝑠 𝑠𝑒𝑡 𝑢𝑝, 0 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒)

3 (c) 2016 Milind Padalkar 25 September 2019

Capacitated facility location problem … 2

 Now solve the following MILP

𝑚 𝑛 𝑚

𝑀𝑖𝑛 𝑍 = ෍ ෍ 𝐶𝑖𝑗 . 𝑌𝑖𝑗 + ෍ 𝑓𝑖 . 𝑋𝑖

𝑖=1 𝑗=1 𝑖=1
Subject to
𝑚 𝑛

෍ 𝑌𝑖𝑗 ≥ 𝐷𝑗 𝑎𝑛𝑑 ෍ 𝑌𝑖𝑗 ≤ 𝐾𝑖

𝑖=1 𝑗=1

𝑛 𝑛 𝑚

෍ 𝑌𝑖𝑗 ≤ 𝑀. 𝑋𝑖 𝑎𝑛𝑑 ෍ 𝐷𝑗 ≤ ෍ 𝐾𝑖
𝑗=1 𝑗=1 𝑖=1

For uncapacitated problem, remove the capacity constraint and treat Yij as a
weighted capacity such that sum of Yij taken over all m equals 1

4 (c) 2016 Milind Padalkar 25 September 2019

Facility Layout

 Topology of work centers: Physical arrangement of machines

 Layout choice depends on the type of work, volume of work,
and variability required
 Design decisions have long term implications – very difficult to
change afterwards
 Multiple objectives behind the layout arrangement:
 Minimize materials movement
 Minimize labour movement (for production or maintenance)
 Mixing multiple product lines (cross-flows)
 Maximize flow rates
 Space efficiency
 Safety considerations, e.g. access to fire services, worker safety
 Ease of future expansion

5 (c) 2016 Milind Padalkar 25 September 2019

Basic Types of Layouts

 Process Layout (MTO, ATO)

 Used in a job shop for a low volume, customized products
 Product Layout (MTS)
 Used in a flow shop for a high volume, standard products
 Fixed Position Layout (ETO)
 Used in projects for large products e.g., airplanes, ships and
rockets
 Cellular layouts (ATO, MTO)
 A cell contains a group of machines dedicated for a group of
similar parts
 Suitable for producing a wide variety parts in moderate volume
 Flexible manufacturing layout (flow shop to handle product
diversity)
Process layout: Job shop

 Large product variability, low volumes, low product standardization

 Multiple products may run concurrently through the job shop
 Different paths (routings) through the work centers; Not optimized
for material movement
 Work centers are general-purpose machines, not specialized
machines etc.
 Workers need to be highly
skilled, Automation is low
 Work is highly variable –
depends on orders
 Examples: Electric transformers,
specialized castings,
Automotive spare parts etc.

7 (c) 2016 Milind Padalkar 25 September 2019

Product layout: Flow shop

 Single product, or with limited variants; high volumes, product

and process standardization
 Single product at a time through a fixed path (assembly line)
 Work centers are specialized machines, arranged to minimize
material movement; High automation
 Low labour requirement:
repetitive semi-skilled tasks
 Steady, continuous work
 Not flexible to change
 Stoppage is costly; Low WIP
 Examples: Automotive,
Textile processing, Hot or
cold rolled steel
8 (c) 2016 Milind Padalkar 25 September 2019
Layout design: Fixed location

 Large, highly customized non-

standard products
 Made in situ, i.e. product
location is fixed. Materials,
machines and men come to it
 Scheduling and sequencing the
operations rather than materials
movement
 Examples: Large structures,
turbines, aircrafts, rockets, ships

9 (c) 2016 Milind Padalkar 25 September 2019

 Product vs. Process Layouts … 1

 A process layout is a functional grouping of machines. For

example, a group of lathes are arranged in one area, drill machines
in another area, grinding machines in another area and so on.
 Different jobs jump from one area to another differently. Hence,
the jobs crisscross through the areas.
 High set up times, small production runs
 Suitable for MTO or ATO production systems – typically job shops,
producing diverse products.
 High customization, variable demand, low production volumes
 Require general purpose machines (not sophisticated ones) and
highly skilled workers.
 Flexibility at the cost of efficiency
Product vs. Process Layouts … 2

 In a product layout, every job visits the machines in the

same order.
 Suitable for MTS or ATS (Assemble to Stock) production
systems
 Typically, a flow shop producing standard products, stable
demand, and high production volumes.
 Low set up times, long production runs
 Low diversity of products, therefore requires special purpose
machines and low-to-moderate skilled workers.
 Efficiency at the cost of flexibility
 Product vs. Process Layouts … 3

 Inventory
• A product layout has a low work-in-process inventory and
high finished goods inventory because production is
initiated by demand forecast.
• A process layout has a high work-in-process inventory and
low finished goods inventory.
 Material handling
• Product layout can use auto-guided transport vehicles
moving in a fixed path for materials.
• Process layout require variable path forklifts.
 Product vs. Process Layouts … 4

 Scheduling jobs
• In process layout, jobs arrive throughout the planning
period.
• Hence a process layout requires dynamic scheduling.
Scheduling decisions are made each time a new job
arrives.
• For product layout, you have a production line. Sequencing
and timing of job flow are standardized and set when the
line is designed.
• Scheduling is unaffected by changes in demand.
 Product vs. Process Layouts … 5

 Line balancing
• A balanced line is when every machine in the line is
processing the job in an even flow. i.e. no machine is idle
because of having to wait for the preceding machine to
finish (no latency).
• Product layout requires line balancing and workcenter
stocking.
• When demand changes, the line has to be rebalanced.

• Process layout does not require line balancing.

Balancing production lines … 1

 Manufacturing process involves a pre-defined sequence of

operations on multiple machines (work centers).
 This sequence is called a “line”.
 Different work centers have different rates of production
 This makes it necessary to balance the “line”.
 “Balancing” means all work centers are arranged in terms of
their capacities so that you obtain a “Swift, Even Flow”.
 This means that the system is producing at its maximum
possible capacity with all work centers working in tandem

15 (c) 2016 Milind Padalkar 25 September 2019

Balancing production lines … 2

 How do you balance the four lines shown below?

Line 1 M1 3 M2 5

Line 2 M1 5 M2 3

Line 3 M1 4 M2 8 M3 5

M1 5 M2 3
Line 4 M5 5
M3 4 M4 8

16 (c) 2016 Milind Padalkar 25 September 2019

Line balancing: An illustration … 1

Line 1 M1 3 M2 5
20/hr 12/hr

 One way to balance: Adjust the capacity to LCM (12,20) = 60/hr

Line 1 M1 3 M2 5 M2 5

M1 3 M2 5 M2 5

M1 3 60/hr M2 5 60/hr

 But problematic because LCM may not be small.

 Demand may not exist and the high investment can be wasted

17 (c) 2016 Milind Padalkar 25 September 2019

Line balancing: An illustration … 2

Line 1 M1 3 M2 5
20/hr 12/hr

 If demand is fixed: Run M1 so that M2 will not “starve”

 M1 must run in a Start-Stop mode such that
0 T
M1 runs ------ > t* M1 stops ------ >

 For M2 to run continuously, t*

20  t*  12  T   0.6
T
 For any interval T, M1 runs 60% of the interval time
 In general, R2
R1  t*  R2  T  t*  T , R2  R1
R1
 This is the lower bound. Upper bound is 1 (M1 always runs)
18 (c) 2016 Milind Padalkar 25 September 2019
Line balancing: An illustration … 3

 BUT Every Start and Stop comes with a cost; AND

 When M1 runs, it creates in-process inventory (holding cost).
Choosing the right level of M1 operation topt:
Let Start − Stop Cost = S ; Operation rates for M 1 , M 2 : R1 , R2
Holding Cost / Unit / hr = H , in − process inventory at time t = q
q = ( R1 − R2 )  t ; Holding Cost over dt at time t = H  q  dt
t
H t = Holding Cost upto time t =  H ( R1 − R2 )  t  dt
0

t2
At optimum S = H t = H ( R1 − R2 )
2
2S
topt =
H ( R1 − R2 )
19 (c) 2016 Milind Padalkar 25 September 2019
Line balancing policy

 Line balancing policy:

 If topt ≤ t*, then run M1 for t*
 If topt > t*, then run M1 for min(topt , 1)

Cost

Ht
 Note
 topt is cost-optimized interval S
 It does not ensure zero WIP

topt Time

20 (c) 2016 Milind Padalkar 25 September 2019

Line balancing: What if R1 is stochastic?

Line 1 M1 3 M2 5
12/hr
Rt ~ N(R , σ2)
 Stochastic = random behavior over time _
 M1 runs at rate Rt which follows some distribution: Assume Rt ~ N(R , σ2)
 Assume total duration t* is divided into n equal intervals of Δt
 Rate Rt is drawn from the normal distribution n times

 i n 
H t = Holding Cost upto time t =  H  ( R j − R2 )t t
i =1  j =1 
n  i 
At optimum S = H t =  H  ( R j − R2 )t t
i =1  j =1 
n  2S
topt  ; with std dev   2
(n + 1)  H ( R − R2 )

21 (c) 2016 Milind Padalkar 25 September 2019

Line balancing: What if both R1 and R2 are stochastic?

Line 1 M1 3 M2 5
Rt ~ N(R1, σ2) Rt ~ N(R2, σ2)

 The mathematics is complex

 It cannot be solved algebraically

 Needs simulation to understand the model behavior

22 (c) 2016 Milind Padalkar 25 September 2019

Cellular Layout
• Like job shop, but machines for similar jobs are grouped
into cells
• i.e. similar jobs will be made from machine clusters
• Hence the name cellular manufacturing
• Can be viewed as physical clustering of several mini-job
shops
• Workers and machines are specialized
• Low automation and highly skilled workers
• Less set-up time & per unit cost
• More sensitive to changes in product mix or changes in
volume
• Example: Small electric motors
Cellular Layout – schematic

Machines
Enter

Worker 2
Worker
Worker 1 3

Exit

Key: Product route

Worker route
A job shop that can become cellular … 1

Assembly

4 6 7 9

Machines in
5 8
process
layout 2 10 12
1 3 11

A B C Raw materials
A job shop that can become cellular … 2

• The previous slide shows a facility in which three parts A, B, C

flow through the machines.

• There are other parts D, E, F, G, H. The entire flow is given in a

matrix form on the next slide.

• Parts in rows and machines in columns.

• We use a hashing technique to identify which rows and

columns can be interchanged to cluster the machines
together.
Clustering algorithm using hashing … 1

Machines
Parts 1 2 3 4 5 6 7 8 9 10 11 12
A x x x x x
B x x x x
C x x x
D x x x x x
E x x x
F x x x
G x x x x
H x x x
Clustering algorithm using hashing … 2

Machines
Parts 1 2 4 3 5 6 7 8 9 10 11 12
A x x x x x
B x x x x
C x x x
D x x x x x
E x x x
F x x x
G x x x x
H x x x
Clustering algorithm using hashing … 3

Machines
Parts 1 2 4 3 5 6 7 8 9 10 11 12
A x x x x x
D x x x x x
B x x x x
C x x x
E x x x
F x x x
G x x x x
H x x x
Clustering algorithm using hashing … 4

Machines
Parts 1 2 4 8 3 5 6 7 9 10 11 12
A x x x x x
D x x x x x
B x x x x
C x x x
E x x x
F x x x
G x x x x
H x x x
Clustering algorithm using hashing … 5

Machines
Parts 1 2 4 8 3 5 6 7 9 10 11 12
A x x x x x
D x x x x x
F x x x
B x x x x
C x x x
E x x x
G x x x x
H x x x
Clustering algorithm using hashing … 6

Machines
Parts 1 2 4 8 10 3 5 6 7 9 11 12
A x x x x x
D x x x x x
F x x x
B x x x x
C x x x
E x x x
G x x x x
H x x x
Clustering algorithm using hashing … 7

Machines
Parts 1 2 4 8 10 3 6 9 5 7 11 12
A x x x x x
D x x x x x Cell 1
F x x x
C x x x Cell 2
G x x x x
B x x x x
E x x x
H Cell 3 x x x
 Cellular layout: No longer a job shop

Assembly

8 10 9 12

11
4 Cell1 Cell 2 6 Cell 3
7

2 1 3 5

Raw materials A C B
Each of A, B, C now visits only one area, minimizing jumping.
 Advantages of Cellular Layouts

• Reduced material handling and transit time

• Reduced setup time
• Reduced work-in-process inventory
• Better use of human resources
• Better scheduling, easier to control and automate
 Disadvantages of Cellular Layouts

• Sometimes cells may not be formed because of

inadequate part families.
• Some cells may have a high volume of production and
others very low. This results in poorly balanced cells.
• When volume of production changes, number of workers
are adjusted and workers are reassigned to various cells.
To cope with this type of reassignments, workers must be
multi-skilled and cross-trained.
• Sometimes, machines are duplicated in different cells. This
increases capital investment.
Layout design: Flexible manufacturing

 Automated work centers, with

robotic or automated material
handling
 Computer-controlled scheduling
 Low set-up times
 Quick response to change
 Wide variety of products
 Highly skilled but low labor
requirement
 Examples: Contract manufacturers
e.g. Foxconn, Flextronics, Sanmina,
Jabil etc.
 High volume, low lifecycle items
such as electronics

37 (c) 2016 Milind Padalkar 25 September 2019

Activity Relationship Chart

 An activity relationship chart is a graphical tool used to

represent importance of locating pairs of operations
near each other.
 Importance is described using letter codes defined
below:
A - absolutely necessary
E - especially important
I - important
O- ordinarily important
U - unimportant
X - undesirable
Activity Relationship Chart
Example: It’s ordinarily
important to locate
office rooms near
Production area loading/unloading area
O
Office rooms A
U I
Storage O E
A X A
Dock area U U
U O
Locker room O
U
Tool room
From-To Chart

• A from-to chart is used to analyze flow of materials

between departments. The example below shows
distances in feet. So, the distance between Saws and
Drills is 30 feet. The chart may also show material
handling trips or cost per period.

Punch
Saws Milling Press Drills
Saws 18 40 30
Milling 18 38 75
Punch Press 40 38 22
Drills 30 75 22