Facilities Location, Layout and Planning

FACILITY PLANNING

• The placement of facility – customers, suppliers, other links in the supply chain

• Resources• Strategy – 99cents Only example• Access to customers• Government impacts

Objectives of Facility Layout

Minimize material handling costsMinimize material handling costs Utilize space efficientlyUtilize space efficiently Utilize labor efficientlyUtilize labor efficiently Eliminate bottlenecksEliminate bottlenecks Facilitate communication and interaction Facilitate communication and interaction

between workers, between workers and their between workers, between workers and their supervisors, or between workers and customerssupervisors, or between workers and customers

Reduce manufacturing cycle time or customer Reduce manufacturing cycle time or customer service timeservice time

Objectives of Facility Layout

Eliminate waste or redundant movementEliminate waste or redundant movement Facilitate the entry, exit, and placement of Facilitate the entry, exit, and placement of

material, products, or peoplematerial, products, or people Incorporate safety and security measuresIncorporate safety and security measures Promote product and service qualityPromote product and service quality Encourage proper maintenance activitiesEncourage proper maintenance activities Provide a visual control of operations or Provide a visual control of operations or

activitiesactivities Provide flexibility to adapt to changing Provide flexibility to adapt to changing

conditionsconditions Increase capacityIncrease capacity

Questions on Layout Planning

• How should the facility be laid out?• Does my layout cause unnecessary

movement/excess travel time?• Does my work flow in a logical manner?• Does size dictate layout or does

layout/product flow dictate the size?

Process LayoutProcess Layout Machines grouped by process they performMachines grouped by process they perform

Product LayoutProduct Layout Linear arrangement of workstations to produce a Linear arrangement of workstations to produce a

specific productspecific product Fixed Position LayoutFixed Position Layout

Used in projects where the product cannot be movedUsed in projects where the product cannot be moved

Basic Types of Layouts

Manufacturing Process Layout

L

L

L

L

L

L

L

L

L

L M

M

M

M

D

D

D

D

D

D

D

D

G

G

G

G

G

G

A A AReceiving andShipping Assembly

Painting Department

Lathe DepartmentMilling

Department Drilling Department

Grinding Department

P

P

A Product Layout

InIn

OutOut

Fixed-Position Layouts

Typical of projectsEquipment, workers, materials, other

resources brought to the siteHighly skilled laborOften low fixed Typically high variable costs

Designing Process Layouts

Minimize material handling costs Block Diagramming

Minimize nonadjacent loads Use when quantitative data

is available Relationship Diagramming

Based on location preference between areas Use when quantitative data is not available

Block Diagramming Create load summary chartCreate load summary chart Calculate composite (two way) movementsCalculate composite (two way) movements Develop trial layouts minimizing number of Develop trial layouts minimizing number of

nonadjacent loadsnonadjacent loads

ExampleExample

Relationship Diagramming(Murther’s Grid)

Used when quantitative data is not available

Muther’s grid displays preferences

Denote location preferences with weighted lines

Relationship Diagramming Example

ProductionProduction

OfficesOffices

StockroomStockroom

Shipping and Shipping and receivingreceiving

Locker roomLocker room

ToolroomToolroom


AA AA

AA OO

OO

OOOO

OO

UU

UU UU

UU

EEXX

II


OfficesOffices

StockroomStockroom



ToolroomToolroom

A Absolutely necessaryE Especially importantIImportantO OkayUUnimportantX Undesirable


11 11

11 44

44

4444

44

55

55 55

55

2266

33


OfficesOffices

StockroomStockroom



ToolroomToolroom

1 Absolutely necessary2 Especially important3 Important4 Okay5 Unimportant6 Undesirable

Facility Location Facility Location ModelsModels

Types Of Facilities

Heavy manufacturingAuto plants, steel mills, chemical plants

Light industrySmall components mfg, assembly

Warehouse & distribution centersRetail & service

Factors in Heavy Manufacturing Location

Construction costsLand costsRaw material and finished goods

shipment modesProximity to raw materialsUtilitiesLabor availability

Factors in Light Industry Location

Construction costsConstruction costs Land costsLand costs Easily accessible Easily accessible

geographic regiongeographic region Education & training capabilitiesEducation & training capabilities

Factors in Warehouse Location

Transportation costsProximity to markets (Customers)

Service Location Considerations

• Labor• Cost of Living • Real Estate• Construction• Government Incentives• Examples – Amoco, Mass St, Tattoo Parlors,

Walgreen’s

Global Location Factors Government stability Government regulations Political and economic systems Economic stability and growth Exchange rates Culture Climate Export import regulations,

duties and tariffs

Raw material availability Number and proximity of

suppliers Transportation and

distribution system Labor cost and education Available technology Commercial travel Technical expertise Cross-border trade regulations Group trade agreements

Regional Location Factors Community government Local business regulations Government services Business climate Community services Taxes

Availability of sites Financial Services Community inducements Proximity of suppliers Education system

Site Location Factors

Customer baseConstruction/ leasing

cost Land costSite sizeTransportationUtilities

Zoning restrictionsTrafficSafety/securityCompetitionArea business climate Income level

Location Incentives

Tax credits Wal-Mart in WyandotteRelaxed government regulation Job training Infrastructure improvementMoney

Locate facility at center of geographic area Based on weight and distance traveled Establish grid-map of area Identify coordinates and weights shipped

for each location

Center-of-Gravity Technique

Facility Summary

• Why is it important?• Location analysis • Location Criteria – global, local, regional -

education• Location and Strategy• Location and Customers• Layout planning

Project Managementand Operations

Project Project ManagementManagement

First Essay on Project Management:1697 – “An Essay Upon Projects”

1959 HBR Article – “The Project Manager”

Air Force Manual 1964

Project Management

In today’s global marketplace, complexity and speed are certainties. In such an environment, a good axiom for project management is, Do It, Do It Right, Do It Right Now. Creating clear direction, efficiency, timely response, and quality outcomes requires project managers who are agile -- adept at change. The associated disciplinary areas are clearly spelled out in the following PMI definition.

“Project management is the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project. Project management is comprised of five Project Management Process Groups – Initiating Processes, Planning Processes, Executing Processes, Monitoring and Controlling Processes, and Closing Processes.

Source: Project Management Institute - http://www.pmi.org/info/PP_AboutProfessionOverview.asp?nav=0501

http://www.pmi.org/info/PP_AboutProfessionOverview.asp?nav=0501

Elements of Project Management

Project team Individuals from different departments within company

Matrix organization Team structure with members from different functional areas

depending on skills needed Project manager - Leader of project team Project Charter – high level description of what is to be

accomplished in a project and delegates authority to project manager to implement actions to complete project

Project PlanningStatement of work

Written description of goals, work & time frame of project

Activities require labor, resources & timePrecedence relationship shows sequential

relationship of project activities

Elements of Project Planning

Define project objective(s) Identify activitiesEstablish precedence relationshipsMake time estimatesDetermine project completion timeCompare project schedule objectivesDetermine resource requirements to meet

objective

Work Breakdown Structure

Hierarchical organization of work to be done on a project

Project broken down into modulesModules subdivided into subcomponents,

activities, and tasks Identifies individual tasks, workloads, and

resource requirements

Project Control

All activities identified and includedCompleted in proper sequenceResource needs identifiedSchedule adjustedMaintain schedule and

budgetComplete on time

A Gantt Chart

Popular tool for project scheduling Graph with bar for representing the time for

each task Provides visual display of project schedule Also shows slack for activities - amount of time

activity can be delayed without delaying project

Around since 1914

A Gantt Chart| | | | |

Activity

Design house and obtain financing

Lay foundation

Order and receive materials

Build house

Select paint

Select carpet

Finish work

00 22 44 66 88 1010MonthMonth

MonthMonth11 33 55 77 99

CPM/PERTCritical Path Method (CPM)

DuPont & Remington-Rand (1956) Deterministic task times

Project Evaluation & Review Technique (PERT)

US Navy, Lockheed Multiple task time estimates

Project Network for a House

3322 00

11

3311 11

111 2 4 6 7

3

5

Lay Lay foundationfoundation

Design house Design house and obtain and obtain financingfinancing

Order and Order and receive receive materialsmaterials

DummyDummy

Finish Finish workwork

Select Select carpetcarpet

Select Select paintpaint

Build Build househouse

Critical Path A path is a sequence of connected

activities running from start to end node in network

The critical path is the path with the longest duration in the network

Project cannot be completed in less than the time of the critical path

The Critical Path

A: 1-2-3-4-6-73 + 2 + 0 + 3 + 1 = 9 months

B: 1-2-3-4-5-6-73 + 2 + 0 + 1 + 1 + 1 = 8 months

C: 1-2-4-6-73 + 1 + 3 + 1 = 8 months

D: 1-2-4-5-6-73 + 1 + 1 + 1 + 1 = 7 months

33

22 00

11

33

11 11

111 2 4 6 7

3

5




DummyDummy





The Critical Path 33

22 00

11

33

11 11

111 2 4 6 7

3

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DummyDummy





1 2 4 6 7

3

5

32 0

13

1 1

Start at 3 months

Start at 5 months

1

Finish at 9 months

Start at 8 months

Figure 6.6

Activity Start Times

Project Crashing

Crashing is reducing project time by expending additional resources

Crash time is an amount of time an activity is reduced

Crash cost is the cost of reducing the activity time

Goal is to reduce project duration at minimum cost

Crashing costs increase as project duration decreases

Indirect costs increase as project duration increases

Reduce project length as long as crashing costs are less than indirect costs

Time-Cost Relationship

Life Cycle Management• Long term view of projects to guide decision making

– solutions that provide life time success vice short term

• Acquisition; development; production; introduction; sustainment; disposal

• Links system costs to big picture; better use of resources; minimize total cost of ownership

Capacity and Capacity and Aggregate Aggregate Planning Planning

Capacity Outputs: Examples

Type of Business Input Measures of Capacity

Output Measures of Capacity

Car manufacturer Labor hours Cars per shift

Hospital Available beds Patients per month

Pizza parlor Labor hours Pizzas per day

Retail store Floor space in square feet Revenue per foot

The goal of capacity planning decisions

(1) The capacity of the firm to produce the service or good

(2) The processes for providing the service or making the good

(3) The layout or arrangement of the work space

(4) The design of work processes to enhance productivity

Capacity

• The max output that an organization be capable of producing

• Measure a single facility:– Design vs. Effective capacity– Capacity Utilization: design vs. efficient utilization

• For systems have more than one facility and flows of product– System capacity and bottleneck– Improve system capacity

Determinants of Effective Capacity• Facilities• Human considerations

– Adding people– Increasing employee motivation

• Operations– Improving operating rate of a machine– Improving quality of raw materials and components

• External forces– Safety regulations

Capacity Utilization

Measures how much of the available capacity is actually being used:

– Always <=1(percentage of usage)– Higher the better– Denominator:

• If effective capacity used: efficient utilization• If design capacity used: design utilization

actual output rateUtilization 100%available capacity

Capacity Planning

• The process of determining the amount of capacity required to produce in the future. May be at the aggregate or product line level

• Master Production Schedule - anticipated build schedule

• Time horizon must exceed lead times for materials

Capacity Planning• Look at lead times, queue times, set up times, run times, wait

times, move times• Resource availability• Material and capacity - should be in synch• driven by dispatch list - listing of manufacturing orders in

priority sequence - ties to layout planning• load profiles - capacity of each section

the capacity decisions:

• When to add capacity• How much capacity to add• Where to add capacity• What type of capacity to add• When to reduce capacity

Capacity Planning

• Rough Cut Capacity Planning - process of converting the master production schedule into requirements for key resources

• capacity requirements plan - time-phased display of present and future capacity required on all resources based on planned and released orders

Capacity Planning

• Capacity Requirements Planning (CRP) - process of determining in detail the amount of labor and machine resources required to meet production plan

• RCCP may indicate sufficient capacity but the CRP may indicate insufficient capacity during specific time periods

Theory of Constraints

• Every system has a bottle neck• capacity of the system is constrained by the

capacity of the bottle neck• increasing capacity at other than bottle

neck operations does not increase the overall capacity of the system

Theory of Constraints

• What needs to be changed• What to change to • How to make the change happen

Capacity Planning

Establishes overall level of productive resources

Affects lead time responsiveness, cost & competitiveness

Determines when and how much to increase capacity

Capacity Expansion

Volume & certainty of anticipated demand

Strategic objectives for growthCosts of expansion & operation Incremental or one-step expansion

Sales and Operations Planning (S&OP)

• Brings together all plans for business• performed at least once a month• Internal and external

Adjusting Capacity to Meet Demand

1. Producing at a constant rate and using inventory to absorb fluctuations in demand (level production)

2. Hiring and firing workers to match demand (chase demand)

3. Maintaining resources for high demand levels4. Increase or decrease working hours (overtime

and undertime)5. Subcontracting work to other firms6. Using part-time workers7. Providing the service or product at a later time

period (backordering)

Demand Management

Shift demand into other periods Incentives, sales promotions, advertising

campaignsOffer product or services with

countercyclical demand patternsPartnering with suppliers to reduce

information distortion along the supply chain

Facilities Location, Layout and Planning

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