Production and Operations Management

Module-2
Plant Location and Layout

Question-1
What is Plant Location? What are the factors to
be considered while selecting plant location?
Plant location may be understood as the function of determining where
the plant should be located for maximum operating economy and
effectiveness.

Plant location must be selected properly by entrepreneurs while planning

to set up their business units. While taking such a decision, they must
consider some important factors.

The following image depicts important factors affecting a plant location.

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 Production and Operations Management

1. Law and order situation

Plant location must be at that place where law and order situation is in
control. Entrepreneurs give a lot of importance to this factor while
locating a business unit in any state or region. If a state has bad law and
order situation, then the business must not be located within that state,
unless it has other important factors such as availability of heavy or
bulky raw materials.

2. Availability of infrastructure facilities

Plant location which is selected must have proper infrastructure

facilities. Without good infrastructure facilities, it will be difficult to do
business efficiently. The infrastructure facilities are the backbone of all
industries. Without it, business cannot be done.

Crucial infrastructure facilities that help industries to grow:

1. Transport and communications,

2. Banking and insurance services,
3. Regular fuel supply,
4. Continuous supply of electricity and water, etc.

3. Good industrial relations

Plant location must be at those places where good industrial-relations are

maintained. Industrial relations become bad, because of aggressive and
selfish trade unions. Entrepreneurs do not want to locate their business at
places where anti-social elements are extensive, although there are other
favorable factors such as good infrastructure facilities, cheap labor, etc.

4. Availability of skilled workforce

Plant location must be convenient and easily accessible to skilled

workforce. Most businesses require skilled-labor force such as
engineers, management experts, computer programmers, etc. The

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 Production and Operations Management

entrepreneurs must consider the availability of competent and skillful-

workforce at a particular place to locate their business.

5. Social infrastructure

Plant location must has a good social infrastructure. There is a need for
social-infrastructure not only for employees but also for the development
of their families. The availability of social-infrastructure will increase
the employees' welfare.

There must be suitable social infrastructure facilities like;

 Education institutions,
 Hospitals and health centers,
 Community centers like worship place, garden, meditation center,
etc.
 Recreation facilities like theaters, clubs, communication facilities,
etc.

6. Investor friendly attitude

Plant location must be in those states whose governments have an investor-

friendly attitude. Government must give attractive incentives and
concessions to those who start business units in their states. There must
not be any bureaucratic control for starting a business.

An investor-friendly attitude will not only attract investment, but will

also result in the overall development.

7. Nearness to market

Plant location must be near a market. Every business unit depends on a

market for selling its goods and services. The goods and services must
reach the market on time, and it must be available to the consumers at a
low price. Therefore, this factor is given importance while selecting
location of a plant.

B.Com Sem-6 POM Prof. Alankar Trivedi

 Production and Operations Management

Locating a plant near the market is preferred, when the product is fragile
(easily breakable), perishable, heavy or bulky and when quick service is
required.

8. Nearness to raw-materials' source

Plant location must be usually near to the source of raw-material. Raw-

materials' costs are about 50% of the total cost. So, it is important in the
business to get the raw materials in time and at a reasonable price.
Therefore, a business must be located close to the source of raw
material, especially in the case of “Gross Materials.”

Gross Materials are those which lose weight in the production process.
Examples of Gross Materials are sugarcane, iron ore, limestone, so on.

However, if the raw material is a “Pure Material,” then the business may
be located away from the source of raw materials.

Pure Materials are those which add their weight to the finished product.
Examples of Pure materials are cotton textiles, bakeries, silk fabrics, etc.

9. Nearness to supporting industries

Plant location must be near its supporting industries and services. If it

purchases spare parts from an outside agency, then these agencies must
be located very close to the business. If not, the business will have to
spend a lot of extra money on transport. It will also be difficult, to
control the quality of the spare parts because of the distant location.

10. Must meet safety requirements

Plant location must meet all essential safety requirements. Due to air,
water and sound pollution, some factories have a bad effect on the health
of the people. Therefore, these factories must be located away from
residential areas. Safety of environment must also be given priority in
this regards.

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 Production and Operations Management

11. Miscellaneous factors

Following miscellaneous factors also affect a plant location:

 Availability and cost of land,

 Suitability of land - soil and topography,
 Climatic conditions,
 Location of a similar unit, etc.

Question-2
What is Plant Layout? What are the types of
plant layout?
Plant layout refers to the arrangement of machinery, equipment
and other industrial facilities for achieving quickest and smooth
production.

Types of Plant Layout:

1. Product Layout / Line Processing / Flow Line Layout

2. Process Layout / Functional Layout / Job shop layout
3. Fixed Position / Static Layout
4. Combination Layout
5. Cellular manufacturing (CM) layout or Group Technology
layout

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 Production and Operations Management

1. Product Layout / Line Processing / Flow Line Layout:

Product layouts are found in flow shops (repetitive assembly and process
or continuous flow industries).

Flow shops produce high-volume, highly standardized products that

require highly standardized, repetitive processes. In a product layout,
resources are arranged sequentially, based on the routing of the products.

This type of layout is generally used in systems where a product has to

be manufactured or assembled in large quantities.

In product layout the machinery and auxiliary services are located

according to the processing sequence of the product without any buffer
storage within the line itself.

Product Layout Advantages:

 Low material handling cost per unit

 Less work in process

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 Production and Operations Management

 Total production time per unit is short

 Low unit cost due to high volume
 Less skill is required for personnel
 Smooth, simple, logical, and direct flow
 Inspection can be reduced
 Delays are reduced
 Effective supervision and control

Product Layout Disadvantages:

 Machine stoppage stops the line

 Product design change or process change causes the layout to
become obsolete
 Slowest station paces the line
 Higher equipment investment usually results
 Less machine utilization
 Less flexible

2. Process Layout / Functional Layout / Job shop layout

Process layouts are found primarily in job shops, or firms that
manufacture customized, low-volume products that may require
different processing requirements and sequences of operations.

Process layouts are facility configurations in which operations of a

similar nature or function are grouped together.

As such, they occasionally are referred to as functional layouts.

Their purpose is to process goods or provide services that involve a

variety of processing requirements.

Process layouts are also quite common in non-manufacturing

environments. Examples include hospitals, colleges, banks, auto
repair shops, and public libraries.

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 Production and Operations Management

Process Layout Advantages:

 Better machine utilization

 Highly flexible in allocating personnel and equipment because
general purpose machines are used.
 Diversity of tasks for personnel
 Greater incentives to individual worker
 Change in Product design and process design can be incorporated
easily
 More continuity of production in unforeseen conditions like
breakdown, shortages, absenteeism

Process Layout Disadvantages:

 Increased material handling

 Increased work in process
 Longer production lines
 Critical delays can occur if the part obtained from previous
operation is faulty
 Routing and scheduling pose continual challenges

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 Production and Operations Management

3. FIXED POSITION LAYOUT

A fixed-position layout is appropriate for a product that is too large or

too heavy to move. For example, battleships are not produced on an
assembly line.

Other fixed-position layout examples include construction (e.g.,

buildings, dams, and electric or nuclear power plants), shipbuilding,
aircraft, aerospace, farming, drilling for oil, home repair, and automated
car washes.

Advantages of Fixed Position Layout:

 Material movement is reduced

 Promotes pride and quality because an individual can complete the
whole job
 Highly flexible; can accommodate changes in product design,
product mix, and production volume

Disadvantages of Fixed Position Layout:

 May result in increase space and greater work in process

 Requires greater skill for personnel
 Personnel and equipment movement is increased
 Requires close control and coordination in production and
personnel scheduling

4. COMBINATION LAYOUT

 This type of a layout is a combination of process and product

layout and hence combination advantages of both types of layouts.
 A combination is possible where an item is being made in different
types and sizes in such case machinery is arranged in a process
layout but the process grouping is arranged in a sequenced to
manufacture various type and size of products. Combination layout

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 Production and Operations Management

is also useful when a number of item are produced in a same

sequence but none of the items are produced in bulk and thus , no
item justifies for an individual and independent product line line.

5. CELLULAR LAYOUT

Cellular manufacturing is a type of layout where machines are

grouped according to the process requirements for a set of similar
items (part families) that require similar processing. These groups are
called cells.

Therefore, a cellular layout is an equipment layout configured to support

cellular manufacturing.

Processes are grouped into cells using a technique known as group

technology (GT). Group technology involves identifying parts with
similar design characteristics (size, shape, and function) and similar
process characteristics (type of processing required, available machinery
that performs this type of process, and processing sequence).

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 Production and Operations Management

Question-3
What is Production Planning and Control (PPC)?
What are the essential functions of PPC?
Production planning and control is an important task of Production
Manager. It has to see that production process is properly decided in
advance and it is carried out as per the plan. Production is related to the
conversion of raw materials into finished goods. This conversion process
involves a number of steps such as deciding what to produce, how to
produce, when to produce, etc. These decisions are a part, of production
planning. Merely deciding about the task is not sufficient.

The whole process should be carried out in a best possible way and at
the lowest cost. Production Manager will have to see that the things
proceed as per the plans. This is a control function and has to be carried
as meticulously as planning. Both planning and control of production are
necessary to produce better quality goods at reasonable prices and in a
most systematic manner.

“Production planning and control involves generally the organization

and planning of the manufacturing process. Specifically, it consists of
the planning of the routing, scheduling, dispatching and inspection, co-
ordination and the control of materials, methods, machines, tooling and
operating times. The ultimate objective is the organization of the supply
and movement of materials and labour, machine utilization and related
activities, in order to bring about the desired manufacturing results in
terms of quantity, time and place.”

Goldon B. Carson

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 Production and Operations Management

Production Planning:

1. To determine the requirements for men, materials and equipment.

2. Production of various inputs at a right time and in right quantity.

3. Making most economical use of various inputs.

4. Arranging production schedules according to the needs of marketing

department.

5. Providing for adequate stocks for meeting contingencies.

6. Keeping up-to-date information processes.

Production Control:

1. Making efforts to follow the production schedules.

2. Issuing necessary instructions to the staff for making the plans

realistic.

3. To ensure that goods produced according to the prescribed standards

and quality norms.

4. To ensure that various inputs are made available in right quantity and
at proper time.

5. To ensure that work progresses according to the pre-decided plans.

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 Production and Operations Management

The following are main elements/functions of Production Planning and

Control.

1. Routing
2. Loading
3. Scheduling
4. Dispatching
5. Follow up
6. Inspection
7. Corrective action

1. Routing: It is about selection of path or route through which raw

materials pass in order to make it into a finished product. The
points to be noted while routing process are – full capacity of
machines, economical and short route and availability of alternate
routing. Setting up time for the process for each stage of route is to
be fixed. Once overall sequence are fixed, then the standard time
of operations are noted using work measurement technique.

2. Loading and scheduling: Loading and Scheduling are concerned

with preparation of workloads and fixing of starting and
completing date of each operation. On the basis of the performance
of each machine, loading and scheduling tasks are completed.

3. Dispatching: Dispatching is the routine of setting productive

activities in motion through the release of orders and instructions,
in accordance with previously planned time and sequence,
embodied in route sheet and schedule charts. It is here the orders
are released.

4. Expediting / Follow-up: It is a control tool which brings an idea

on breaking up, delay, rectifying error etc., during the progress of
work.

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 Production and Operations Management

5. Inspection: Inspection is to find out the quality of executed work

process.

6. Corrective action: At evaluation process, a thorough analysis is

done and corrective measures are taken in the weaker spots.

Question-4
What is the process of PPC?
Stages of Production Planning & Control

Production Planning & Control is done in three stages namely,

1. Pre-planning
2. Planning
3. Control.

Stage 1: Pre-Planning

Under this phase of production planning, basic ground work on the

product design, layout design and work flow are prepared. The
operations relating to the availability scope and capacity of men, money
materials, machines, time are estimated.

(a) What to produce Product planning and development

including product design.

(b) How to produce Process planning, material planning, tool

planning etc.

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 Production and Operations Management

(c) Where to produce Facilities planning, capacity planning

(d) When to produce Production scheduling and machine

loading

(e) Who will produce Man power planning

(f) How much to produce Planning for quantity, Economic batch

size etc.

Stage 2: Planning

This is a phase where a complete analysis on routing, estimating and

scheduling is done. It also tries to find out the areas of concern for short
time and long time so that prominent planning can be prepared.

Stage 3: Control

Under this phase, the functions included are dispatching, follow up,
inspection and evaluation. It tries to analyze the expedition of work in
progress. This is one of the important phases of the Production Planning
and Control.

B.Com Sem-6 POM Prof. Alankar Trivedi

 Production and Operations Management

Question-5
What is the process of Production Planning?
Production planning is “the administrative process that takes place
within a manufacturing business and that involves making sure that
sufficient raw materials, staff and other necessary items are procured
and ready to create finished products according to the schedule
specified”, as defined by the Business Dictionary.

A production plan serves as a guide for your company’s production

activities. It establishes and sequences activities which must be carried
out to achieve a production target, so that all staff involved are aware of
who needs to do what, when, where and how.

A production plan will help you meet product demand while minimizing
production time and cost by improving process flow, reducing the
waiting time between operations, and optimizing use of plant, equipment
and inventory. In order to do this, you must align your production plan
to your business strategy and business plan, and support production
planning by coordinating with other departments, such as procurement,
finance and marketing.

B.Com Sem-6 POM Prof. Alankar Trivedi

 Production and Operations Management

The diagram above shows the production planning and control process
divided in five steps:

 Step 1: forecast the demand of your product

 Step 2: determine potential options for production
 Step 3: choose the option for production that use the combination
of resources more effectively
 Step 4: monitor and control
 Step 5: adjust

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 Production and Operations Management

STEP 1. Forecast the demand of your product

Estimate your demand, so that you know how many products you need
to produce during a specific time period. You may have already some
confirmed orders for the next couple of month, but on top of that, you
need to predict how many more may come.

Different methods exist to forecast your product demand. A traditional

technique to estimate product demand is based on historical information
(e.g. orders placed by your customers in the past). While this is a very
common method, you need to consider external and internal events in
your business environment that could alter past patterns. For example,
new market trends, a slowdown in the economy, or a new marketing
campaign that could increase or decrease your product demand
compared to what happened in the past.

STEP 2. Determine potential options for production

Determine the different production options available to meet the

forecasted demand of your product. For example, if you want to produce
100 shirts, you need to use a certain number of machines, human
resources, materials, and time. Different combinations of these inputs
can lead to different production times and costs.

a. Start by mapping all the steps of your production process. When

doing so, take into account if tasks are sequenced or dependent on other
tasks, or if they happen simultaneously or independently. Below is an
example of how a simple process-mapping flowchart could look. Each
box represents a task of your production process. The map of the
production process will be different and unique to each company. Think
about how to improve process flow by eliminating bottlenecks.

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 Production and Operations Management

b. Determine the resources needed to complete each task involved in

your production process.

Look at how different combination of resources lead to different

production times and costs:

 Human Resources. Determine the number of staff that will be

involved in each phase of the production process, their availability,
and the cost. Make sure their time is well utilized.

 Machinery and Equipment. Identify the machines needed and

their availability, including any maintenance or replacement that
may be needed.

 Materials. Make a list of all the materials needed for production

and how you obtain them. Assess the reliability of your suppliers,
including delivery time. Having materials available when needed is
crucial for the production process.

 Inventory. It is important that you consider how to optimize your

inventory. Keeping a large inventory is expensive, but keeping a
low inventory is risky if demand fluctuates on a regular basis.
Having a good inventory control system in place can help your

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 Production and Operations Management

firm accommodate variations in demand and mitigate possible

problems or delays that may occur during the production process.

STEP 3. Choose the option for production that uses the combination
of resources more effectively

Compare the cost and time of each potential production option and
choose the option that uses the most efficient combination of resources
and that allows you to meet product demand. The chosen option should
maximize the operational capacity of your firm.

Always make sure you can cover the costs involved in the production
process (purchase of materials, office rent, payment of staff salary,
leasing, etc.)

You need to share your production plan with all the departments and
staff that contribute or interact with the production process, including
human resources, procurement, finances, marketing, etc. If everybody
knows what to do, and what materials and equipment should be used for
each task of the production process, operations will be smoother.

STEP 4. Monitor and control

You want to ensure that your plan is working in the way it is intended.
Monitoring and controlling is about comparing what is happening with
what should be happening. Having a control system in place helps you
detect problems as soon as they occur, allowing you more time to correct
before it is too late.

STEP 5. Adjust

Be prepared to adjust the plan if needed. The production plan needs to

be flexible to accommodate changes in customers’ demand (e.g. an
important order that gets cancelled). Also, you need to take into account
possible risks that may arise during the production process (e.g. a
machine breaks, a worker gets sick or a supplier does not deliver on
time) and have a risk mitigation plan.

B.Com Sem-6 POM Prof. Alankar Trivedi

 Production and Operations Management

Question-6
What is the need / importance of Production
Planning and Control?
For efficient, effective and economical operation in a manufacturing unit
of an organization, it is essential to integrate the production planning and
control system. Production planning and subsequent production control
follow adaption of product design and finalization of a production
process. Production planning is an activity that is performed before the
actual production process takes place. It involves determining the
schedule of production, sequence of operations, economic batch
quantities, and also the dispatching priorities for sequencing of jobs.
Production control is mainly involved in implementing production
schedules and is the corollary to short-term production planning or
scheduling. Production control includes initiating production,
dispatching items, progressing and then finally reporting back to
production planning. In general terms, production planning means
planning of the work to be done later and production control refers to
working out or the implementation of the plan.

So, the system of production planning and control serves as the nervous
system of a plant. It is a coordinating agency which co-ordinate the
activities of engineering, purchasing, production, selling and stock
control departments. An efficient system of production planning and
control helps in providing better and more economic goods to customers
at lower investment. It is essential in all plants irrespective of their
nature and size.

 Better Service to Customers: Production planning and control,

through proper scheduling and expediting of work, helps in
providing better services to customers is terms of better quality of
goods at reasonable prices as per promised delivery dates. Delivery
in time and proper quality, both help in winning the confidence of

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 Production and Operations Management

customers, improving relations with customers and promoting

profitable repeat orders.

 Fewer Rush Orders: In an organization, where there is effective

system of production planning and control, production, operations
move smoothly as per original planning and matching with the
promised delivery dates. Consequently, there will be fewer rush
orders in the plant and less overtime than, in the same industry,
without adequate production planning and control.

 Better Control of Inventory: A sound system of production

planning and control helps in maintaining inventory at proper
levels and, thereby, minimizing investment in inventory. It requires
lower inventory of work-in-progress and less finished stock to give
efficient service to customers. It also helps in exercising better
control over raw-material inventory, which contributes to more
effective purchasing.

 More Effective Use of Equipment: An efficient system of

production planning and control makes for the most effective use
of equipment. It provides information to the management on
regular basis pertaining to the present position of all orders in
process, equipment and personnel requirementsfor next few
weeks. The workers can be communicated well in advance if any
retrenchment, lay-offs, transfer, etc. is likely to come about. Also,
unnecessary purchases of equipment and materials can be avoided.
Thus, it is possible to ensure proper utilization of equipment and
other resources.

 Reduced Idle Time: Production planning and control helps in

reducing idle time i.e. loss of time by workers waiting for materials
and other facilities; because ensures that materials and other

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 Production and Operations Management

facilities are available to the workers in time as per the production

schedule. Consequently, less man-hours are lost, which has a
positive impact on the cost of production.

 Improved Plant Morale: An effective system of production

planning and control co-ordinates the activities of all the
departments involved in the production activity. It ensures even
flow of work and avoids rush orders. It maintains healthy working
conditions in the plant thus, there is improve plant morale as a by-
product.

 Good public image: A proper system of production planning and

control is helpful in keeping systematized operations in an
organization. Such an organization is in a position to meet its
orders in time to the satisfaction of its customers.
Customer’s satisfaction leads to increased sales, increased profits,
industrial harmony and ultimately good public image of the
enterprise.

 Lower frequent capital requirements: Under a sound system of

production planning and control, everything relating to production
is planned well in advance of operations. Where, when and what is
required in the form of input is known before the actual production
process starts. Inputs are made available as per schedule which
ensures even flow of production without any bottlenecks. Facilities
are used more effectively and inventory levels are kept as per
schedule neither more nor less. Thus, production planning and
control helps, in minimizing capital investment in equipment and
inventories.

B.Com Sem-6 POM Prof. Alankar Trivedi