Production and

Operations Management

ATAKLTY ADUGNA (ASS. PROFESSOR)

MEKELLE UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT

1
CHAPTER-5

FACILITY LAYOUT
AND
LOCATION DECISION

2
5.1. Facility Layout

3
INTRODUCTION
Facility layout refers to the format in
which departments, workgroups within
departments, workstations, machines and
stock-holding points within a production
facility are arranged.
The aim of facility layout is smooth flow
of work, materials and customers through
the production system.

4
Importance of Facility Layout Decisions
Facility layout decisions are important in
that:
They require substantial investments of
money and effort
 They involve long-term commitments,
which make mistakes difficult to
overcome, and
 They have a significant impact on the
cost and efficiency of short-term
operations. 5
Objectives of Facility Layout Decisions
Minimize material handling costs
Utilize space efficiently
Utilize labor efficiently
Eliminate bottlenecks
Facilitate communication and interaction
between workers, between workers and their
supervisors, or between workers and customers
Reduce manufacturing cycle time or customer
service time
Eliminate waste or redundant movement

6
Cont…
Facilitate the entry, exit, and placement of
material, products, or people
Incorporate safety and security measures
Promote product and service quality
Provide a visual control of operations
Provide flexibility to adapt to changing
conditions

7
 Characteristics of the Facility Layout Decisions

Location of the various working areas

impacts the flow through the system.
The layout can affect productivity and
costs generated by the system.
Layout alternatives are limited by:
◦ the amount and type of space required for the
various areas
◦ the amount and type of space available
◦ the operations strategy

8
Cont…
Layout decisions tend to:
Be infrequent
expensive to implement
Be studied and evaluated
extensively
Involve long-term commitment or
resources

9
Basic Layout Types
1. Product (Assembly Line) Layouts
 Product layouts are used to achieve a
smooth and rapid flow of large volumes
of products or customers through a
system.
 The entire job is divided into a series of
standardized tasks, permitting
specialization of both labor and
equipment.
10
Cont…
For instance, if a portion of a
manufacturing operation required the
sequence of cutting, sanding, and
painting, the appropriate pieces of
equipment would be arranged in the same
sequence.
Product layouts achieve a high degree of
labor and equipment utilization.

11
Characteristics of Product Layouts
Special-purpose equipment are used
Changeover is expensive and lengthy
Material flow is continuous
Little direct supervision is required
Planning, scheduling and controlling
functions are relatively straight-forward
Production time for a unit is relatively short
In-process inventory is relatively low i.e.
there is no buffering between successive
operating units.
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Advantages

A high rate of output.

Low unit cost due to high volume; the high
cost of specialized equipment is spread over
many units.
Labor specialization reduces training costs
and time, and results in a wide span of
supervision.
Low material—handling cost per unit;
material handling is simplified because units
follow the same sequence of operations.
13
Cont…
A high utilization of labor and equipment.
Routing and scheduling are established in
the initial design of the system; they do
not require much attention once the
system is operating.
Accounting, purchasing, and inventory
control are fairly routine.

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Disadvantages

 They involve intensive division of labor usually

creates dull, repetitive jobs
 provide little opportunity for advancement
 may lead to morale problems, and to repetitive
stress injuries.
 Poorly skilled workers may exhibit little interest in
maintaining equipment or in the quality of output.
 The system is fairly inflexible in response to
changes in the volume of output or changes in
product or process design.

15
Cont…
 The system is highly susceptible to shutdowns
caused by equipment breakdowns or excessive
absenteeism.
 Preventive maintenance, the capacity for quick
repairs, and spare-parts inventories are necessary
expenses.
 Incentive plans tied to individual output are
impractical since they would cause variations
among outputs of individual workers, which
would adversely affect the smooth flow of work
through the system.
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Designing Product Layouts

Designing product layouts requires the

consideration of:
Sequence of tasks to be performed by
each workstation (logical order)
Speed considerations – line balancing

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Steps in Developing Product Layout

Step 1: Identify tasks & immediate

predecessors
Example 10.4 Vicki's Pizzeria and the Precedence Diagram
Immediate Task Time
Work Element Task Description Predecessor (seconds
A Roll dough None 50
B Place on cardboard backing A 5
C Sprinkle cheese B 25
D Spread Sauce C 15
E Add pepperoni D 12
F Add sausage D 10
G Add mushrooms D 15
H Shrinkwrap pizza E,F,G 18
I Pack in box H 15
Total task time 165
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Cont…

19
 Cont…
Step 2: Determine the desired output rate
Assume Vicki needs to produce 60 pizzas
per hour
Step 3: Calculate the cycle time
The amount of time each workstation is
allowed to complete its tasks so that a unit
is processed and completed.

20
 Cont…
.
availabletime sec./day 60 min/hr x60 sec/min
Cycle time(sec./unit)    60 sec./unit
desiredoutput  units/hr 60 units/hr

Limited by the bottleneck task (the longest task

in a process):
available time 3600sec./hr.
Maximumoutput   72 units/hr,or pizzas per hour
bottlenecktask time 50 sec./unit

What the department needs to produce is 60 units per

hour, but given the above task times, it can produce
72 units.
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Step 4: Compute the theoretical minimum number
of workstations

 TM = number of stations needed to achieve 100%

efficiency (every second is used)
  TM    task times  165 seconds  2.75, or 3 stations
cycle time 60 sec/unit

 Step 5: Assign tasks to workstations

(balance the line)
Start at the first station & choose the longest
eligible task following precedence
relationships

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Cont…
Continue adding the longest eligible task that
fits without going over the desired cycle time.

When no additional tasks can be added within

the desired cycle time, begin assigning tasks to
the next workstation until finished

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 cont…
.
Workstation Eligible task Task Selected Task time Idle time
A A 50 10
1
B B 5 5
C C 25 35
2 D D 15 20
E, F, G G 15 5
E, F E 12 48
F F 10 38
3
H H 18 20
I I 15 5
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 Cont…
Step 6: Compute efficiency, idle time &
balance delay
Efficiency (%) is the ratio of total
productive time to total time.

Efficiency (%) 
 t

165 sec.
100  91.7%
NC 3 stations x 60 sec.
Balance delay (%) is the amount by which
the line falls short of 100%
Balance delay  100%  91.7%  8.3%
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Process (Job Shop) Layouts
Used when the operations system must
handle a wide variety of products or
services.
Designed to facilitate processing items or
providing services that present a variety of
processing requirements.
A manufacturing example of a process
layout is the machine shop, which has
separate departments for milling, grinding,
drilling, and so on.
26
Characteristics of Process Layouts
General-purpose equipment is used
Changeover is rapid
Material handling equipment is flexible
Operators are highly skilled
Technical supervision is required
Planning, scheduling and controlling
functions are challenging
Production time is relatively long
In-process inventory is relatively high

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Fixed-Position Layouts

In fixed-position layouts, the item being

worked on remains stationary, and
workers, materials, and equipment are
moved as needed.
Fixed-position layouts are used in large
construction projects (buildings, power
plants, and dams), shipbuilding, and
production of large aircraft and space
mission rockets.

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FACILITY LOCATION

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 Introduction
The Need for Facility Location Decisions
1. For existing businesses, location decisions
are tools for marketing strategies.
 In such cases, location decisions refer to
additional locations not new ones.
2. Inability of existing businesses to meet
growth in demand by making expansions.
3. Depletion of basic raw materials in one
location.
4. Shift in markets for existing products
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The Nature of Location Decisions
• The nature of location decisions can be
seen in terms of:
a. Importance of Location Decisions
b. Objectives of Locations and
c. Location options

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 a. Importance of Location Decisions
Location decisions are important in that:
i. They involve long-term commitment of
resources
ii. They determine investment and operating
costs
iii. They determine revenue or sales volume
iv. Availability of qualified labor
v. Availability of suppliers

32
b. Objectives of Location Decisions
Sales generation
Cost Minimization
Profit maximization
Accessing raw materials
Proximity to customers and delivering
services to all customers
In any situation, there can never be a single
best location.

33
 c. Location Options
Four Location options are generally
considered in making location
decisions.
1. Expansion
 Realistic only if there exists
adequate space.
 Preferable only if the existing
location has special features that
other locations do not have.
34
 Cont’d
2. Adding a new location
This is important for:
a. Counter attacks against rivals
b. Expanding markets in new locations
c. Defensive strategy against new entrants
3. Moving into a New Location
The causes for moving into a new location can be
either:
d. A shift in markets
e. exhaustion of raw materials
f. the cost of operations 35
 Procedures for Making Location
Decisions
1. Decide on the criteria to use for evaluating
location alternatives, such as increased
revenues or community service.
2. Identify important factors, such as location
of markets or raw materials.
3. Develop location alternatives:

36
 Cont’d
a. Identify the general region for a
location
b. Identify a small number of
community alternatives
c. Identify site alternatives among the
community alternatives.
4. Evaluate the alternatives and make
a selection.

37
Factors that Affect Location Decisions
Many factors affect location decisions,
each of them may not have equal
importance and thus managers consider
the most important ones.
In a manufacturing industry, for instance,
the most important factors include
availability of raw materials, energy,
water supply transportation cost etc.

38
 Cont…

In the service industry, the

important factors can be
 proximity to customers and
traffic flows, and
 competitors’ location.
The factors are generally be
classified into the following ones.
39
 1. Regional Factors
a. Location of Raw Materials:
Firms locate near or at the
source of raw materials for three
primary reasons:
I. necessity
II. Perishability and
III. transportation costs
b. Location of markets
40
2. Labor Factors
Labor factors include:
a. Labor cost and availability of labor
b. Wage rates
c. Attitude of labor towards work and
labor productivity
d. Availability and seriousness of labor
unions
e. Labor skills

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3. Community Related Factors
From a company standpoint, a number of
factors determine the desirability of a
community as a place for its workers and
managers to live.
They include facilities for education,
shopping, recreation, transportation,
religious worship, and entertainment; the
quality of police, fire, and medical
services; local attitudes toward the
company; and the size of the community.
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4. Site Related Factors
Evaluation of potential sites may require
consulting with engineers or architect
especially in the case of heavy
manufacturing or the erection of large
buildings.
Soil conditions, load factors, and drainage
rates can be critical and often necessitate
certain kinds of expertise in evaluation.
 
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Service and Retail Locations

Service and retail are typically governed

by somewhat different considerations than
manufacturing organizations in making
location decisions.
customer access is usually a prime
consideration.
Retail and service organizations typically
place traffic volume and convenience high
on the list of important factors.
44
 Cont….
 If a business is unique, and has its own
drawing power, nearness to competitors
may not be a factor.
Restaurants and specialty stores often
locate in and around malls, benefiting
from the high traffic.
Medical services are often located near
hospitals for convenience of patients.
Available public transportation is often a
consideration for medical service centers.
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Quantitative Evaluation of Location
Alternatives
1. Factor Rating
Steps Followed:
1. Determine which factors are relevant
(e.g., location of market, water supply,
parking facilities, revenue potential).
2. Assign a weigh to each factor that
indicates its relative importance compared
with all other factors. Typically, weights
sum to 1.00.
46
Cont..
3. Decide on a common scale for all factors
(e.g., 0 to 100).
4. Score each location alternative.
5. Multiply the factor weight by the score
for each factor, and sum the results for
each location alternative.
6. Choose the alternative that has the
highest composite score

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 Example
A photo-processing company intends to
open a new branch store. The table below
contains information on two potential
locations.
Scores
Factor Weight Weighted Scores
(out of 100)
Alt. 1 Alt. 2 Alternative 1 Alternative 2

Proximity to
.10 100 60 .10(100)=10.0 .10(60)=6.0
existing store
Traffic volume .05 80 80 .05(80)=4.0 .05(80)=4.0
Rental costs .40 70 90 .40(70)=28.0 .40(90)=36.0
Size .10 86 92 .10(86)=8.6 .10(92)=9.2
Layout .20 40 70 .20(40)=8.0 .20(70)=14.0
Operating costs .15 80 90 .15(80)=12.0 .15(90)=13.5 48
 2. The Center of Gravity Method
The center of gravity method is a technique for
locating single facilities that considers the existing
facilities, the distances between them, and the
volumes of goods to be shipped.
The center of gravity method is a method to
determine the location of a distribution center that
will minimize distribution costs.
It treats distribution cost as a linear function of the
distance and the quantity shipped.
quantity to be shipped to each destination is
assumed to be fixed (i.e., will not change over
time).
49
Cont…
The technique is often used to locate
intermediate or distribution warehouses.
The center of gravity method begins by placing
the existing locations on a coordinate grid
system.
The purpose is to establish relative distances
between locations.
The center of gravity is found by calculating the
X and Y coordinates that result in the minimal
transportation cost.

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Center of Gravity Method Formulas

Cx =
d V ix i
Cy =
d V
iy i

V i V i
Cx = X coordinate of center of gravity

Cy = Y coordinate of center of gravity

dix = X coordinate of the ith location

diy = Y coordinate of the ith location

Vi = volume of goods moved to or from ith

location
 Grid-Map Coordinates
y n n
 xiWi  yiWi
2 (x2, y2), W2 i=1 i=1
y2 x= n y= n
 Wi  Wi
1 (x1, y1), W1 i=1 i=1
y1
where,
x, y = coordinates of new
3 (x3, y3), W3 facility at center of gravity
y3 xi, yi = coordinates of
existing facility i
Wi =annual weight shipped
from facility i

x1 x2 x3 x

Copyright 2006 John Wiley & Sons, Inc. Supplement 7-52

 Center-of-Gravity Technique: Example

y A B C D
700 x 200 100 250 500
C y 200 500 600 300
600 (135)
B Wt 75 105 135 60
500 (105)
Miles

400
D
300
A (60)
200 (75)
100

0 100 200 300 400 500 600 700 x

Miles

Copyright 2006 John Wiley & Sons, Inc. Supplement 7-53

 Center-of-Gravity Technique: Example (cont.)

n
 xW
i i
i=1 (200)(75) + (100)(105) + (250)(135) + (500)(60)
x= = = 238
n 75 + 105 + 135 + 60
 W
i
i=1

n
 yW
i i
i=1 (200)(75) + (500)(105) + (600)(135) + (300)(60)
y= n
= = 444
75 + 105 + 135 + 60
 W
i
i=1

Copyright 2006 John Wiley & Sons, Inc. Supplement 7-54

 Center-of-Gravity Technique: Example (cont.)

y A B C D
700 x 200 100 250 500
C y 200 500 600 300
600 (135)
B Wt 75 105 135 60
500 (105)
Center of gravity (238, 444)
Miles

400
D
300
A (60)
200 (75)
100

0 100 200 300 400 500 600 700 x

Miles