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Concept
Need for Suitable Location Factors affecting Plant/Facility Location Location Theories Location Models Locational Economics Plant Lay Out Classification of layout Design of Product Layout Design of Process Layout Service Layout
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CONCEPT
Plant/Facility Location be located ? Where a plant or facility is to
Prerequisite
Long range forecasting Companys expansion plan and policy 8/17/12 Diversification plan for product
I.
LOCATION CHOICE
for 1st time operation or new
Consider the long-term business/organizational objectives
organizations
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Contd.
LOCATION CHOICE
expansion/diversification/..
Consider the multi-plant operation strategy additional plants in the same premises or elsewhere
Emphasis on flexibility
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LOCATION CHOICE
for global operations
Consider the reasons and reaches
Virtual Proximity
With the advance telecommunication technologies
Virtual Factory
With the advance telecom and information technologies, operating the factory in foreign and remote locations Contd.
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Contd.
Tangible reasons
To reach the customer To avail tax benefits To avail low-cost/abundant labor, raw material, energy, water etc.
Intangible reasons
For customer service accessibility, personal touch, better understanding the needs
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FACTORS INFLUENCING
(Tangible/Intangible/Strategic)
PLANT
General factors
/ FACILITY
LOCATION
Specific factors
For Mfg. Organizations
Dominant competitive factors Secondary factors
Uncontrollable factors
Controllable factors
Infrastructure availability
Community attitudes
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Community infrastructure
FACTORS
Contd.
General factors
Controllable factors
Proximity to markets for concentrated buyers, for delicate/susceptible/low-self-life products, for products demanding aftersales-service, in-time/low-cost supply of goods and service to the customers, if raw materials are ubiquitous
Supply of materials raw material in right quality/quantity/time/price/place, transportation at a lower cost, proximity to source for processing weight-loosing materials
Transportation facilities timely supply of raw materials (to company) and finished goods (to customers), import/export duties
Labor and wages adequate number/skill, prospective community, productive, conveyance, prevailing wage pattern, cost of living, 8/17/12
FACTORS
Contd.
General factors
Uncontrollable factors
Government Policy labor laws/building-code/safety-rules, incentives to entrepreneurs exemption from sales-tax/excise-duty, soft loans, subsidy on electricity/water etc.
Climatic conditions geological/geographical factor on human efficiency and behavior, climatic conditions requirement for processes (ex- humidity for textile mills, dryness for cement plants) etc.
Supporting industries and services subsidiaries/ancillaries/subcontracts/outsourced vendors, services like communications, banking, consultancy, civil amenities etc.
Community infrastructure and amenity economic overhead capital like roads/railways/port/power lines/utilities and social overhead 8/17/12
FACTORS
Contd.
Favorable labor climate for labor-intensive firms (ex textile, furniture, consumer electronics), wage rates, training requirements, attitude towards work, worker productivity, union strength etc.
Proximity to markets for greater demand of goods/services, for bulky/heavy finished goods
Quality of life schools, recreational facilities/events Proximity to suppliers and resources for those plants who rely on supplying to (receive supplies from) other facilities, to offer/receive staff support, for frequent coordination/communication
Utilities, taxes, and estate costs telephone/energy/water, local/state taxes, financial incentives offered by local/state govt, relocation, land cost etc.
Secondary factors
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FACTORS
Contd.
Proximity to customers after sales service, customer contact Transportation costs & proximity to markets for warehousing/distribution, inventory, delivery time, sales promotion
Location of competitors competitors location, their reaction to cos new location, advantage of cluster
Secondary factors
segment
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LOCATION THEORIES
for finding an optimal (min. cost) location
Alfred Webers Theory of Location of Industries (1909):
Distance travelled by raw/intermediate/finished product materials Labor movement for transportation and work Agglomeration (or concentration) of labor; investment in schools and hospitals; supporting companies for construction, plant and machine erection, financial services etc.
Degglommeration (loosening of over concentration) of inappropriate industries, labor, capital, land; diversification; flat processes.
Some models to identify an ideal location Factor rating method Weighted factor rating method
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Load-distance method
Rate the factors according to their relative importance (higher the rating, more the prominence)
Assign each location Calculate the rating by multiplying the assigned factor to the basic factor
Find the sum of product for each factor Select the best location having highest total score 8/17/12
Example Lets assume that a new medical facility, health care, is to be located in Delhi. The location factors, factor rating and scores for two potential sites are shown in the following table. Which is the best location based on factor rating method?
1 2 3
Facility 8 utilization Total patient 5 per month Average time 6 per emergency 8/17/12 trip
3 4 4
24 20 24
5 3 5
40 15 30
Location models:
Example Lets assume that a new medical facility, health care, is to be located in Delhi. The location factors, weights and scores (1= poor, , 5=excellent) for two Location Factor potential sites are shown in the following table. Sl. Weight Location -I Location -II No. Rating Total Rating Total What is the weighted score for these sites? Which is the best location?
1 2 3 4 5 Facility utilization Average time per emergency trip 25 25 25 3 4 3 1 5 Total: 75 75 15 50 315 5 3 3 2 3 125 75 75 30 30 335 Total patient per month 100
Location models:
LOAD-DISTANCE METHOD
A mathematical model (calculated in terms of distance/time/cost of movement) Example The new health-care facility is targeted to serve seven census tracts in Delhi. The table given(min. movement of weighted loads into or out Based on proximity factors below shows the coordinates for the centre of each census tract, along with the projected populations, measured in of the facility) thousands. Customers will travel from the seven census tract centers to the new facility when they need health-care. Two locations being considered for the new facility are at (5.5, 4.5) and (7, 2) which are the centers of census tracts C and F. Details of seven census tract centers, coordinate distances along with the population for each centre are given below. If we use the population as the loads and use rectilinear distance, which location is better in terms of its total load-distance score?
(X, Y) Population Location (5.5, 4.5) Location (7, 2) Distance (dx+dy) (2.5, 4.5) (2.5, 2.5) (5.5, 4.5) (5,2) (8,5) (7,2) 2 5 10 7 10 20 3+0=3 3+2=5 0 0.5+2.5 =3 2.5+0.5=3 Loaddistance 6 25 0 21 30 80 Distance (dx+dy) 4.5+2.5=7 4.5+0.5=5 1.5+2.5=4 2+0=2 1+3=4 0+0=0 Loaddistance 14 25 40 14 40 0
1 2 3 4 5 6
A B C D E F
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Sl. 1 2 3 4 5 6 7
Minimizes the weighted distance between the warehouse Census its supply/distribution/sales points. X component of CG Y Component of CG and (X, Y) Population
Tract A B C D E F G (2.5, 4.5) (2.5, 2.5) (5.5, 4.5) (5,2) (8,5) (7,2) (9, 2.5) Total: 2 5 10 7 10 20 14 2.5x2=5 2.5x5=12.5 5.5x10=55 5x7=35 8x10=80 7x20=140 9x14=126 Total: 453.50 4.5x2=9 2.5x5=12.5 4.5x10=45 2x7=14 5x10=50 2x20=40 2.5x14=35 Total: 205.50 Overall y3.02
68
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Overall x-
6.67
total cost
At break-even point, there is no loss, no profit BEA for each location can make economic comparison, identifying for a Rs range of production volume.
.
s le u e Sa en it Prof v Re ble ar i a t V cos
Margin of Safety
At BEP,
BEQ = fixed cost / contribution per unit = fixed cost / (selling price variable cost per Los unit) s = F / (S - V) units 8/17/12
BE P
Example Company ABC has a demand of 1,30,000 units of a new product. Three potential locations X, Y and Z have the cost structures shown below. Identify the locations for selected volume of production.
Location X Fixed Costs (Rs.) Variable Costs (Rs.) 1,50,000 10 Location Y 3,50,000 8
20,0 0,00 0 15,0 0,00 0 Co
Location Z 9,50,000 6
st
0
5,00, 000
1,00, 000
000 Volu me
2,00,
3,00, 000
LOCATIONAL ECONOMICS
A location is ideal/economic at a least cost of:
Factors X Y Z Production 1. Total initial investment Distribution 2. Total expected sales Land 3. Distribution expenses 4. Raw material Building expenses Equipment 5. Power and water supply expenses Labor 6. Wages and salaries Material 7. Other expenses 8. Community attitude with better 8/17/12 9. Employee housing
Design of systems
Defining
Defining
elements
Selection
of elements
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Process selection
continuous,
batch, job
Process sequence
product,
process, job
Process technology
manual,
automatic, semiautomatic
air, temp., noise, speed, vibration, safety - positional/ occupational fatigue, place (posture) of sitting, movement of body (parts) etc.
DESIGN OF LAYOUTS
Moore: optimum including equipment, handling Plant layout is a plan of an arrangement personnel, storage equipment space, and of facilities operating material all other
supporting services along with the design of best structure to contain all these facilities.
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The objectives of plant layout are: 1. 2. 3. 4. 5. 6. 7. 8. Streamline the flow of materials through the plant. Facilitate the manufacturing process. Maintain high turnover of in-process inventory. Minimise materials handling and cost. Effective utilisation of men, equipment and space. Make effective utilisation of cubic space. Flexibility of manufacturing operations and arrangements. Provide for employee convenience, safety and comfort. 8/17/12
Principle of integration: A good layout is one that integrates men, materials, machines
2.
Principle of minimum distance: This principle is concerned with the minimum travel
3.
Principle of cubic space utilization: The good layout is one that utilize both horizontal
4.
Principle of flow: A good layout is one that makes the materials to move in forward 8/17/12
TYPES OF LAYOUTS
Flow patterns
project/job
- line/continuous, intermittent/batch,
Types
of Layouts
layouts layouts layouts
Product layouts
Process Position
Combined
Shapes
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intermittent/batch
project/job
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PRODUCT LAYOUT
(Assembly) line/continuous
M/c1 M/c2 M/c3 M/c4 M/c5
High volume production A dedicated set of facilities Fixed sequence of operations Suitable for only one type of product or its minor modifications
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PROCESS LAYOUT
Intermittent/ Batch
M/c Type 1 M/c Type 2 M/c Type 3 M/c Type 4 M/c Type 5
A small range of variety Products/ services are repetitive Large volume on demand, but periodically Identical Facilities are put together
JOB-SHOP LAYOUT
Job shop
Limited people, but highly skilled Wide variety of unique (non-repetitive) products
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POSITION LAYOUT
Line
COMBINED LAYOUTS
layout
Combination
Advantage
of both types
Cellular layouts
Every
production
High
degree of standardization
O-type
I-type
SHAPE OF LAYOUT
U or C-type
L-type
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S-type
Z
Z Z
VERTICAL LAYOUT
Use
of vertical
space
2nd Floor 1st Floor Gr. Floor
Use
of gravity of material
Ease
handling
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LINE BALANCING
Assembly-line balancing often has implications for layout. This would occur when, for balance purposes, workstation size or the number used would have to be physically modified.
The steps in balancing an assembly line (product layout) are: 1. Specify the sequential relationships among tasks using a precedence diagram. 2. Determine the required workstation cycle time C, using the formula
C = Production time per day / Required output per day (in units) 3. Determine the theoretical minimum number of workstations (Nt) required to satisfy the workstation cycle time constraint using the formula Nt = Sum of task times (T) / Cycle time (C) 4. Select a primary rule by which tasks are to be assigned to workstations, and a secondary rule to break ties.
8/17/12 5. Assign tasks, one at a time, to the first workstation until the sum of the task times is equal to the workstation cycle time, or no other tasks are feasible because of time or
Exampl e:
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Earlier the efficiency was: 195/ (11task points x 50 slowest process) = 0.3545 =
35.45%
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Assignment
Select
A region A site within the region Do a dimensional analysis for the selection Identify and apply a particular or a combination of location model to finalize the location
Build List
General factors
Controllable Uncontrollable