Facility Planning for a Gas Manufacturing
CHUI WING CHEONG
Hong Kong Oxygen
CHU LAP KEUNG
Dept. of Industrial and Manufacturing Systems Engineering
Hong Kong University
Abstract
Introduction
Facility planning is a branch of industrial engineering that
cletermines the best plant location and designs the facilities for
the production of products and/or services. The choice of the
plant location depends on a number of factors such as the rapid
growth of the company. the availability of cheap land and
labour. placement with respect to customers and suppliers. and
the legal manoeuvrability that is available in that place (especially
in the. developing countries). On the othrr hand, the facility
aspects includes designing the building (the building itself. and
other utilities like gas. water. power. heat and sewage), the
layout of the plant and the material handling system which
provides
the links between various activities in the olant.
Facility planning is typically multi-faceted, eclectic and
complex. It draws upon. the expertise and experience from
various departments within the organisation. There are two
major problems associated with facility planning. The first
concerns the project management aspect: coordinating such an
activity and motivating the people with various backgrounds
Mill not be entirely Straightforward. Another is that facility
planning only occurs infrequently. People will generally be
lacking in experience in tackling the problems in finding the
new site. designing the plant, move-in and fine tuning. Also,
facility planning is domain Specific. Some mathematical models
have been proposed in tackling the plant location and layout
problems [FMA 92]. Such an operations research approach falls
short of providing a complete Solution, which requires a
combination of quantitative. qualitative and management
techniques.
On the more Specific issue of designing the plant layout and
material handling system, more concrete methodologies have
been established. Generally, it depends on experience encoded
as checklists and cook-book procedures. In any case, the facility
designer must develop a thorough understanding in the products,
the processes, the required production volume and seasonal
fluctuations, and the relationships between the various activities
in the factory,
In the authors’ opinion, benchmarking will be appropriate
and effective in tackling the facility planning problems. That
means, by having a number of successful cases, useful
24 1994-95 Annual Issue of IIE (HK)
Plant
comparisons can be made between these cases and
in the one
question, baed on a number of viewpoints and criteria.
Unfortunately. such a COrpus of knowledge established by the
local research .and industrial communities is not sufficient.
It is not the aim of this paper to establish a benchmark as
such: this is a major undertaking itself. This paper is about the
facility planning of a gases production plant in Hong Kong,
highlighting
< the typical issues in plant relocation. and some
general approaches that can be applied (the systematic plant
layout methodology and computer-aided layout planning). This
case is interesting because the company in question is Hong
Kong Oxygen ( HKO ), a large company by Hong Kong's standard.
The steps taken in its approach are therefore carefully planned
and worked out. Another reason for the cornpany to he meticulous
is because of the need to deal with its products which are very
dangerous by. nature such a case study, in facility planning will
be useful in due course to fur-ther the knowledge in this area writh
a view on establishing a benchmark.
Reasons of Relocation
HKO has been operating in its exihting site in Tseung Kwan
O since early. 1960's The area is about 10.000 square metres. By
that time. Tseung Kwan o WaS a very rural area and transportation
was via sea route only. Initially, there were only two production
plants: the Hydrogen gas and Dissolved acetylene gas plants.
More plants were later built and it now has Nitrous oxide plant,
Carbon dioxide plant. Air separation unit, medical and industrial
gas filling facilities
Under the town plannin, g scheme adcanced by the Hong
Kong Government. Tseung Kwam O is going to be developed
into a residential area. Land reclamation has started in late 1980's
and those affected factories. mainly ship building and ship
repairing. har.e then closed. In early 1991, the South East New
Territories Development Office of the government approached
HKO to discuss its proposal to gazette reclamation work in front
of HKO. This proposal could. in theory, cut off HKO's marine
access and therefore cause both explicit and implicit impacts to
the company.
(i) HKO required sea water access for barges, tugs and vessels.
These were for cylinder transportation, liquid product
transportation. and huge plant equipment transportation. An
adequately safe manoeuvring space had to be allowed for
such.
(ii) HKO used mainly sea water cooling system. There would be
a high chance that the cooling water intake consisting to a
material extent of water just discharged at the outlet. This
would increase the temperature and endanger the process.
Provision against short circuiting due to reduced Water
movements in the area had to be provided.
(iii)Acceptable arrangements would have to be made to prevent
the waterway ceasing to be navigable due to silting Up or
improper uSe for mooting or anchorage, and also to prevent
the water becoming Unusable as cooling water due to floating
detritus or other pollution that was more likely to occur in a
waterway with little flow.
 Facility Planning for a Gas Manufacturing
(iv)HKO did not wish to see that after the town development was
completed, public complaints about the existence of HKO
factory would force HKO to move out of the present site.
If HKO were to remain in this site. the company had to face
the above impacts. It was very difficult to measure the importance
or the extent of the above impacts. Also. it was not all dear
at that time whether the volume of business would increase or
decrease in the future. There is also a number of problems
associated with relocating the plant, e.g. the uncertainties due to
the change in technologies and the impact on labour relations
if the new site location was significantly away from Tseung
Kwan O. Finally. the management decided to go ahead due to
the following reasons:
(i) better safety could be achieved in the new plant:
(ii) considerable profit could be derived by n-developing the
existing piece of land into a residental and commercial area.
Choice of Plant Location
HKO entered into deep discussion with the Territory
Development Department of the government to see the viable
location for the new plant. HKO understood that the government
preferred to have this kind of chemical processing plant to be
located inside an industrial estate, or in some rural areas like
Castle Peak. It then approached the Hong Kong Industrial Estate
Corporation (HKIEC) to see the possibility of relocating the plant
to one of their in dustrial estates. From HKEIC, HKO recognised
the following facts:
(i) All the sites in the Tai Po industrial estate were occupied.
(ii) Suitable sites were available in the Yuen Long industrial
estate.
(iii)There was going to be a third industrial estate. the Tseung
Kwan O industrial estate. which was under reclamation. The
land would be available in 1995.
(iv)To select a site in Castle Peak, HKO would need to enter
substantial negotiation with the government.
HKO already had a second factory in the Tai PO industrial
estate in 1991, which consisted of a Carbon dioxide plant and an
Air separation plant. The remaining area. however, was not
large enough for accommodating all the facilities currently in
Tseung Kwan O. HKO therefore needed to decide between
Yuen Long, (new) Tseung Kwan O and Castle Peak as its future
new site. There were several factors to consider but the
transportation costs stood out as the most important.
Transportation Costs
For the three candidate sites, the costs of production (material
and labour) are essentially the same. The only major diference is
due to the cost of delivery of the products, which include gas
cylinders and bulk liquids. The gas cylinders are delivered from
the new site to the five areas including Kowloon, Hong Kong, New
Territories (West), Outlying Islands and to the Tai PO plant. For
bulk liquid delivery, the cryogenic liquids (oxygen ant. nitrogen)
will be delivered from the Tai PO plant to the new plant.
Since the transportation cost is a significant consideration for
choosing the new site, reliable data is required to allow its
calculation. For the delivery of gas cylinders, the cost of delivering
N cylinders from site A to site B equals to C x N, where C’ is the
cost for delivering one cylinder. The values of C and N are
obtained from the Distribution Department of HKO. To compare
Plant
I
the viability of each candidate site, the total delivery costs from
each site to the five areas are calculated and compared. Based
on the the data. it is found that (new) Tseung Kwan O gives
the lowest total delivery cost for gas cylinders.
For the delivery of bulk liquids. the relative unit costs from
Tai PO to the three candidate sites are calculated. Also, reliable
data is obtained from the Distribution Department. Again, the
cost from Tai PO to (new) Tseung Kwan O is the lowest.
Other Limitations
Cylinder transport across barbour. Compressed gas cylinders
are classified as Dangerous Goods (DG). There are restrictions
in transporting cylinders across the harbour. Trucks are not
allowed to enter crass harbour tunnels. Ferry service for DG
trucks is restricted to one trip per day and moreover, advance
hooking is required. Therefore, HKO requires essentially a site
with sea front access so that cylinder delivery to Hong Kong side
and outlying islands can he made through barges.
Retail customers. There are some retail customers who come
directly to the factory for cylinders. This has to be considered
during the selection of new plant site. Too remote an area will
create difficulties for these customers.
Supply. of labours There will bound to be labour turnover
whenever there is plant relocation. but the extent will heavily be
dependent on n-here the new site is. This is particularly a
problem for HKO. HKO handles a lot of dangerous goods and
the labour force requires longer periods of training than for other
industries If the company loses a large number of labour after
relocation. production will be seriously affected. Such a situation
is the last thing the company would like to encounter. To the
same extent. the new location cannot be at a too remote area
where recruitment of new work force is difficult.
Major Issues in Managing the Plant
Relocation Project
Great care has to be taken over the planning of the relocation
process. Inadequate preparation of the movement process and
of the running-in of the new plant can unnecessarily delay
exploitation of the full potential of the investment. Cash flows
and profitability n-ill suffer. Managing projects of this scale, the
number of detailed studies and tasks involved has to be legion.
The most important ones, among many others, include project
scheduling, budget consideration, land acquisition, the future
use of the existing site, the set-up of the project team, new office
location: and the codes of practice established for fire protection
and safe handling of gases. The followings are just a few that
deserves more discussion.
Process plants. The plants consist of hydrogen, dissolved
acetylene. nitrous oxide, compressed air, carbon dioxide, air
separation. and cylinder filling. For each plant, detailed study is
conducted to investigate its present state, the effect of relocation
on it and the actions that will be taken. Take the hydrogen plant
as an example. Its production unit has been used for over thirty
years and it is the right time to upgrade its technology to expand
its capacity to cope with the expanding market. However,
relocation of the existing production unit requires at least ten
working days The company cannot afford such a long shutdown
period because the market demand is high but the buffer stock
is relatively low.
1994-95 Annual Issue of IIE (HK) 25
 Facility Planning for a Gas Manufacturing
Safety One of the HKO's overriding task is to ensure safe
operation of its plants. Its dealing with numerous dangerous
goods and processes cannot fail to make this point more succinct.
For the existing plaints. HKO has already followed a number of
standards and codes of practice from the Industrial Cases
Committee of Australia. thte National Fire Protection Association
of USA and the British Compressed Gases Association. Now. to
adopt new techniques and deal with newly developed situations.
a number of safety studies are also made which include the
Hazard operability (HAZOP) studies. the environmental impact
assessment (EIA), and the quantitatively risk assessment (QRM).
Facility Design and Systematic Layout
Planning
The next stage in facility planning comes the design of the
facility which consists of designing the structural design of the
factory, layout design and design of the material handling system
This paper mainly deals with the plant layout aspect which seeks
to obtain an optimum arrangement of the gas plant including
production, office and other non-productive activities Also, in
the gas plant which concerns with continuous production flow
and steady demand. the materials handling issues will not be
discussed in great detail here.
A major step in designing the gas plant is to determine its
physical layout. A very popular approach called the systematic
layout planning. or SLP, has been developed by Muther [MUT
73]. SLP is an effective and general plant layout design
methodology. As such, it has a broad application areas including
manufacturing and office activities. SLP consists mainly of three
phases, namely analysis, search and evaluation. Before the SLP
proper. the essential data have to be collected. which include
P(roduct). Q(uantity). R(outing). S(ervice) and T(ime).
The first phase of SLPstudies the various relationships between
the activities (or departments). Essentially, there are two major
types of relationship of concern. These include the flow
relationship and the activity relationship. The stucy of flow
relationship is particularly important for systems with significant
material flow between activities, e.g. storage. processes and
warehouse. Design effort should be made to minimise and
simplify the flow so that the transportation costs will be reduced
and production control will be facilitated. There are several
techniques for analysing and representing the flow of these
systems. The appropriate method chosen depends on a study
of the production variety and quantity (P-Q analysis). Flow
relationship can be measured directly and is therefore
quantitatively in nature.
The activity relationship, on the other hand, has a qualitative
nature and represents the various interactions amongst the
activities. Examples of such interactions include organisation,
control, and potential hazards if two activities are close to one
another. The study of activity relationships is crucial ''or facilities
having little flow but significant communication and organisational
interrelations” [TOM 84] The tool for measuring the activity
relationships ISthe activity chart. Each entry in the chart consists
of a closeness rating and the reason of assigning that value. The
alphabets A, E, I, O, U and X are used for the closeness rating.
An A rating suggests that it is absolutely desirable for two
activities to be located next to one another. On the other hand,
a U rating least significance, E, I, and O are intermediate values.
In addition, an X rating denotes absolutely undesirable for
closeness.
26 1994-95 Annual Issue of IIE (HK)
Plant
Altough both the flow and non-flow relationships are
identified independently, there are situations where they can be
used together. These two types of relationships maybe combined
to form a final activity relationship diagram. The purpose of such
a diagram is to depict spatially the relationships of the activities.
It has nodes a the activities and links connecting those nodes
as the closeness ratings. However the combination of these
quantitative and qualitative values is a difficult problem from a
decision theory viewpoint. Common sense must be resorted to
resolve impractical configurations. The activity relationship
diagram is further enriched by the space requirements of the
activities to form the space relationship diagram
Block plan Based on the space relationship diagram, a
block plan describi ng themacro layout of the plant can be
formed. This is essentially a search process which can be done
manuatlly or by means of some computer programs. When
several block plan have been generated. they are compared
against a sefe of criteria(e.g. economy of cylinder transport and
safety) and the "best'' one is selected.
Computer Aided Layout Planning
The search phase of SLP should try to generate as many
candidate lay outs as possible for evaluation. By generating more
alternatives, the chance of getting a good one will be better.
However, typical layouts usually consist of numerous activities
and it will be time consuming to generate the layout without any
aids As such. computer programs assisting this process have
been devised. Essentially. there are two types of such programs:
construction and improvement. The construction type generates
a layout straight from the activity relationship chart, space
requirement and shape. Examples of the construction type of
layout program are ALDEP and CORELAP, among others. The
improvement type. on the other hand. starts with a layout and
tries to improve it by interchanging the locations of the activities.
The criteria for such improvement is usually the transportation
costs. An example of the improvement program is CRAFT.
Layout Design of the Gas Plant
The design of the gas plant layout illustrates the application
of SLP and computer aided plant layout techniques. For a
complete description of this example, please refer to Chui [CHUI
94].
Data Input. For the new facility, forty one major activities
are classified. The data for each activities are collected which
includes the area requirement, production capacity. the
equipment contained within the area, the utilities required and
the constraints imposed. The information on these constraints
is crucial to the determination of the activity relationships.
Activity Relationships. In this example which does not
involve substantial quantifiable material flow, only the activity
relationships are studied. Every pair of the activities are examined
and a closeness rating is assigned to it. When evaluating activity
relationships for N activities, there are N(N-1)/2 such evaluations.
In order to reduce the amount of work, particularly during the
initial design stage. some activities having very close relationships
are grouped together. For example, the Hydrogen production
plant (01) and Hydrogen filling & storage (07) are grouped
together under "Plant - Hydrogen”. As a result, the following
new groups are formed:
 Facility Planning for a Gas Manufacturing Plant
I
Computer-Aided Layout Planning. In generating alternative
lay-outs. the computer- program CORELAP (Computerised
Relationship Layout Planning)is also used. Unlike other layour
planning programs CORELAP works in a deterministic manner.
That means. with the same set of data input, it always comes uP
with the same answer In order to have alternative layouts, one
may r-r-arrange the input data (e.g. interchanging the positions
of two activities in the activity relationship chart) or to modify
the shapes of the departments slightly.

Etaluation. By using SLP and CORELAP, a number of layout

alternatives are generated The selection of he optimum layout
means the selection of the design that results in the most
favourable compromise among competing criteria These criteria
are listed below. together with the relative importance ratings.

Criteria Raring

Economy of cylinder handling 10

Safety 8
Ease of supervision 6
Room for expansion 5
Flow of raw material 3
Overall layout 2
Convenience 1

Each of the layout alternatives is rated against these criteria.

Points of 3 (high). 2 (medium) and 1 (low) are given. The layout
alternative shown in Fig 2 is the optimum one whereas the
layout generated by CORELAP scores very highly. Although the
macro-level of layout design has been worked out, the derailed
or micro-level design is still underway. Finally, approval must
be obtained from management.

Figure 1: Activity Relationship Chart

Generation of Various Layouts for
Evaluation
Having analysed the activity relationships and then obtained
the space relationship diagram, alternative layollts can be
generated, either manually or using computer-aided layout
planning programs. At thisstage, a number of practical limitations
must also be considered. For example, shape and size of the
site, location of the main entrance and the sea front access,
among others. Using the space relationship dia. gram as a
guideline, the space templates are modified and adjusted, and
the relative locations of the activities are shifted as necessary to
accommodate the practical limitations. Three alternative layouts
are developed and one of them is shown in Fig 2.
Figure 2: Layout Alternative in the form of a block plan
Conclusion
Facility planning is a major undertaking that requires
substantial resources and careful planning. HKO, having the
necessary human and financial resources, sets an example of
tackling such a problem in a thorough manner. The choice of
the location of the new plant depends on a number of factors
including transportation costs, environment, labour,
administrative and other management decisions. It does not
seem that a single mathematical model can provide the complete
solution. On the issue facility design, the well known SLP is
employed to carry out the macro level design and the computer-
aided layout planning program CORELAP is also used. At this
stage, the final details have yet to be finalised.
References
[CHUI 94] W.C. Chui, ''Facilities Planning: Relocation of a Gas
4lanufacturing Plant'' MSc Thesis, Hong Kong University
1994
[FRA 92] R.L. Francis, L.F. McGinnis Jr, J.A. White, FACILITY
LAYOUT .AND LOCATION: AN ANALYTICAL APPROACH,
2nd ed., Prentice Hall International 1992.
[MUT 73] R. Muther, SYSTEMATIC LAYOUT PLANNING,
Cahners Books 1973.
[TOM 84] J..4. Tompkins & J.A. White, FACILITIES PLANNING,
John Wiley & Sons 1984.

1994-95 Annual Issue of IIE (HK) 27