Types of Facilities

Manufacturing Planning & Control

Heavy manufacturing

auto plants, steel mills, chemical plants small components mfg, assembly

Light industry

I G Perera
MBA (Uni of W.Sydney) BA, MISMM, ISO 9000 Consultant and Auditor

Warehouse & distribution centers Retail & service

Factors In Heavy Manufacturing Location

Factors In Light Industry Location

Construction costs Land costs Raw material & finished goods shipment modes Proximity to raw materials Utilities Labor availability
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Construction costs Land costs Easily accessible geographic region Education & training capabilities

Factors In Warehouse Location

Factors In Retail Location

Transportation costs Proximity to markets

Proximity to customers Location is everything

1. Availability and cost of land 2. Availability of inputs

The Location Decision: FREE TRADE AREAS

Factors that need to be considered include:
Political and Economic stability within the FTA
g blocs Potential markets within the FTA and with other trading International trade, tariff protection and quotas Common currency/currencies Exchange rate fluctuations Overall FTA infrastructure (transport, communication)

Factors influenci ing a plant location n

3. Suitability of demand 4. Closeness to markets 5. Availability of communication facilities 6. Availability of major modes of transportation 7. Availability of infrastructure facilities 8. Disposal of waste 9. Govt Govt; ; support and taxes & investment encouragement 10. Housing and recreational facilities 11. Security, culture and society 12. skilled labour labour, , population etc 13. Availability of essential services
16 May 2013

The Location Decision: COUNTRY

Factors that need to be considered include:
1. Economic conditions, inflation, exchange rates
2. 3. 4. 5. 6. 7. Government: attitudes, competence & service delivery, , incentives, , taxes laws, Proximity of markets (demand & supply) Markets: existing and potential growth. New markets Competitors (local and international) Culture and cultural differences, language(s) 8. Infrastructure: Communication, Transport 9. Banking and financial services 10. Water, Energy, availability of raw materials 11. Labour (laws, costs, availability, skills level, unions) 12. Environment Regulations

The Location Decision: COUNTRY

Factors that need to be considered include:

The Location Decision: REGION/PROVINCE

Factors that need to be considered include:
1. 2. 3. 4. 5. 6. 7. 8. Regional/Local Government: attitudes, incentives, taxes and rates, service delivery, red tape Building regulations and zoning Pollution regulations Proximity of markets (customers and suppliers) Competitors in the region Availability of suitably skilled labour Availability and location of raw materials, services Attractiveness, climate & facilities of the region including schools, higher education & training facilities, housing

The Location Decision: SITE

Factors that need to be considered include:
1. Availability of suitable sites, cost, construction costs 2 Ability to expand operation 2. 3. Availability of water, electricity and services 4. Access to road/rail/harbours/airports. Congestion levels 5. Parking and other amenities

Evaluation of Locations
There are several evaluation techniques which include:

Alternative Location Evaluation using the Weighted Factor Method

Location Evaluation

Factor

Weighting

Location A Scale Score 1- 5 3 3 4

Location B Scale Score 1- 5 4 4 5

Location C Scale Score 1- 5 3 4 5

Market/Customer (40) Proximity of Market Customer base Com petitors Suppliers (25) P i it of Proximity fS Suppliers li Transport Costs

10 20 10

Weighted score (or Multiple Factor Rating) method Location Cost / Volume analysis Centre-of-Gravity method The Load-Distance method Geographic Information Systems

15 10

3 3

4 2

4 3

Environment (15) Energy Costs Water Site (10) te construction costs Labour cost Local Government (10) Rates/Taxes Incentives

10 5

3 5

4 4

4 5

Si

5 5

3 3

5 5

4 4

5 5 100

3 2

4 5

5 3

Total

BreakBreak -even analysis methodology

1. Determine all relevant costs for each location 2 Identify the annual Fixed and Variable costs 2. 3. Plot the total costs by location 4. Select the lowest cost location

BreakBreak -even analysis Locations X,Y and Z have the cost structures given in the chart below for manufacturing a product, which is expected to sell for Rs. Rs.7000 per unit. unit. Find the most economical location for an expected volume of 2000 units. units.

Location
X Y Z

FC/year
6,000,000 7,000,000 5,000,000

VC/unit
1,500 500 4,000

BreakBreak -even analysis Locations X,Y and Z have the cost structures given in the chart below for manufacturing a product, which is expected to sell for Rs. Rs.7000 per unit. unit. Find the most economical location for an expected volume of 2000 units. units.

BreakBreak -even analysis

Location
X Y Z

FC/year
6,000,000 7,000,000 5 000 000 5,000,000

VC/unit
1,500 500 4 000 4,000

Location
X Y Z

FC/year
6,000,000 7,000,000 5,000,000

VC/unit
1,500 500 4,000 Total cost = VC + FC For X, TC = 6,000 000, ,000 + 1500 x 2000 = 9,000 000, ,000 For Y, For Z,

BreakBreak -even analysis

Z X Y

Mathematical solution Site Z to X to site Y 1) X to Z 6,000,000 + 1500Q >= 5,000,000+ 4000Q

Total co ost

70 60 50

400

1000

Volume

Alternative Location Evaluation using Cost-Volume Analysis

Alternative Location Evaluation using Cost-Volume Analysis

C t Cost

C t Cost

Volume

Volume

Center-of-Gravity Technique
Weighted Center of Gravity Method

Weighted center of gravity method A g decision modeling g technique q logistics that attempts to identify the best location for a single warehouse, store, or plant given multiple demand points that differ in location and importance.

Locate facility at center of geographic area Based on weight g & distance traveled Establish grid-map of area Identify coordinates & weights shipped for each location

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Grid-Map And Coordinates y

2 (x2, y2), W2 y2

x=

n xiWi y=

i=1 n Wi

n yiWi

Center-of-Gravity Example y 700 600 C B o

A X Y
Center

i=1 n Wi

1 (x1, y1), W1 y1

i=1

200 100 250 500 200 500 600 300 75 105 135 60

i=1
where,

500 400

3 (x3, y3), W3 y3

Wt
D

300 200 100 0 100 A

x, y = coordinates of the new facility at center of gravity xi, yi = coordinates of existing facility i
x1 x2 x3 x

200 300 400 500 600 700 x

Wi = annual weight shipped from facility i

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Calculating Center-of-Gravity

x= n xiWi = (200)(75) + (100)(105) + (250)(135) + (500)(60) 75 + 105 + 135 + 60 = 238 i=1 n Wi

Weighted Center of Gravity Method

i=1 n yiWi = (200)(75) + (500)(105) + (600)(135) + (300)(60) 75 + 105 + 135 + 60 = 444

y=

i=1 n Wi

i=1

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Example

Current location and population of the three towns to be served by the warehouse

Figure8.7

Suggested location for the new warehouse

Load-Distance Technique

Load-Distance Calculations

Compute Load x Distance for each site Choose site with lowest Load x Distance Distance can be actual or straight-line

LD =

n li di

where, LD = the load-distance value li di di = =

i=1

the load expressed as a weight, number of trips or units being shipped from the proposed site and location i the distance between the proposed site and location i = (xi - x)2 + (yi - y)2

where, (x,y) = coordinates of proposed site (xi , yi) = coordinates of existing facility
31

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Load-Distance Example
Potential Sites Site 1 2 3 X 360 420 250 Y 180 450 400 X Y Wt A 200 200 75 B 100 500 105 Suppliers C 250 600 135 D 500 300 60
Site 2 Site 3 dA = 333 dB = 323.9 dC = 226.7 dD = 170 dD = 269.3 dA = 206.2 dB = 180.4 dC = 200

Compute load-distance

LD =

li di

i=1

Compute distance from each site to each supplier Site 1 dA = dB = (xA - x1)2 + (yA - y1)2 (xB - x1)2 + (yB - y1)2 = = (200-360)2 + (200-180)2 = 161.2 (100-360)2 + (500-180)2 = 412.3

Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063 Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789 Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*

* Choose site 3
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dC = 434.2

dD = 184.4

Why plant location study?

Factors influenci ing a plant location n
Expansion of a new business Establish a new business Change of the existing business Govt: policies Change in the cost structure

1. Availability and cost of land 2. Availability of inputs 3. Suitability of demand 4. Closeness to markets 5. Availability of communication facilities 6. Availability of major modes of transportation 7. Availability of infrastructure facilities 8. Disposal of waste 9. Govt Govt; ; support and taxes 10. Housing and recreational facilities 11. Security, culture and society 12. skilled labour labour, , population etc

Setting up a plant in a new country

1.Economic 1. Economic stability 2. Understanding of culture, values and language 3. Wage rate, policies and duties etc 4. Local law in related areas 5. Standards

Classification of layouts
Advantages:
1. 2. 3. 4.

1. Process layout Similar machine and services are located together eg, welding area, x-ray machines Machines are better utilized, fewer machines are required High degree of flexibility Low investment in machines Diversity of tasks for the operator

Disadvantages: 1. Material handling cost will be higher

2. 3. 4. 5. 6. Need more planning and control Longer throughput time Higher WIP More capital tied up with WIP Skilled operators

Classification of layouts
2. Product layout Machine and services are located in line with the sequence of the processes processes. . When volumes are high high. .

Classification of layouts
2. Product layout

Disadvantages:
1. A machine breakdown will cause downtime 2. Change over will cause higher downtime 3. The line output will decide by the bottleneck item 4. Higher capital investment is required

Advantages:
1. The flow of product will be logical and smooth 2. Minimum in in-process inventory 3. Less through put time 4. Minimum material handling cost 5. Operators need not be highly skilled 6. Production planning and control is easier 7. Maximum utilization of space

Classification of layouts
3. Group technology layout A combination of product and process layouts. layouts . No of machines and components will be divided into cells. cells . Each cell will produce the total component or the product product. . A multimulti-objective layout layout. . Maternity ward,

Classification of layouts
4. Fixed position layout: layout: Physical chs of the product decide the operators and machinery required required. . Eg Eg: : shipbuilding yard, a construction site Enough space for storage of materials and machinery Movements can be accommodated Coordination with different parties re required Interaction amongst different contractors

Advantages: g 1. Easy y standardization

2. Reliability of estimates and quality 3. Effective machine operation 4. Higher productivity 5. Less material handling 6. Accurate costing 7. Better customer service 8. Less down down-time on changeover

The volume vs variety

High

BreakBreak -even analysis

Fixed position Process Cell Y Product

Fixed-position layout

Varie ety

Cell layout Product layout

Total co ost

Process layout

Low Low

Use Fixed position

Use process

Use Cell

Use Product

Volume High

Volume

The general functional (process) layout method

Step - 1
Collect info relating to work centers and flow between them Draw up a schematic layout showing the network centers and flow between them. them.

The Product layout method Key decisions

1. What is the cycle time? 2. What is the bottleneck? 3. How many workstations? 4. How to balance the line? 5. What should be the layout?

Step - 2

St - 3 Step Step - 4

Adjust the schematic layout fit into geographic area. area. Draw up the actual layout layout. . Calculate the distances of travelling and the costs involved. involved. Try to reduce the distance by exchanging the work centers. centers.

Cycle time: time:

If work stations 1,2,and 3 have process times 4, 8 and 7 minutes respectively, what is the cycle time of the product?

Step - 5

The Product layout method

Task A B C D E F G H Time (mts) 2.5 1.5 3.75 1.7 1 1.5 1.5 Description Assemble frame Mount switch Assemble motor housing Mount motor housing Attach blades Attach safety grill Attach wire cord Check quality and test Predecessors none A NONE A,C D E B F,G

A-2.5

B-1.5

G-1.5

H-1.3

C-3.75

D-1.7

E-1

F-1.5

Task C gives the cycle time of the line line. . That decides the max rate of production

3.5

S1. Draw the precedence diagram

Cycle time: time:

If we want to assemble 75 fans per day, what should be the cycle time?

Number of work stations

How many number of workstations for the above problem?

Required cycle time = Production time Demand

No of work stations =

Sum of task times Cycle time

Required cycle time =

420 = 5.6 mts/unit 75

No of work stations = 14.75 = 2.63 = 3 5.6

Rules for loading workstations

1. Assign tasks in order from the largest number of following tasks tasks. . 2. Assign tasks in order of the longest operating times. times .
Task
A C D B E F G H

ws1
A-2.5 B-1.5 G-1.5 H-3
Task
A C D

Follower s
6 4 3 2 2 1 1 0

Time
2.5 3.75 1.7 1.5 1 1.5 1.5 3.5

ws2
C-3.75 D-1.7 E-1

Followers
6 4 3 2 2 1 1 0

Time
2.5 3.75 1.7 1.5 1 1.5 1.5 3.5

WS3 WS-1
5.6 2.5 = 3.1 3.1 1.5 = 1.6 1.6 1.5 = .1

F1.5

B E F G H

WS-2
5.6 3.75 = 1.85

WS-2
5.6 1.7 = 3.9 3.9 1 = 2.9 2.9 1.5 = 1.4 1.4-1.3 = 0.1

Idle time

Efficiency of the assembly line

Efficiency =

Sum of task times No of work stations x Cycle time

Thank you !
I G Perera
Tel: 0344285500 Ext 1800 Direct: 0344285533 Mobile : 0777367753 E-mail : PereraIG@masholdings.com

Efficiency 14.75 = 0.88 3 x 5.6

= 88%