Chapter 8 & 9 of Heizer and Render (2014)

Tutorial Chapter 5: Location

and Layout Decisions
Prepared by

Dr Noor Ajian Mohd Lair

Senior Lecturer
Mechaincal Engineering Program
Faculty of Engineering
Universiti Malaysia Sabah

Office No 43, 2nd floor

Ext: 3422
email: [email protected]
 TEACHING MATERIALS
• KM40803 IE updated materials until chapter 6
(Test 1: Ch 1 till Ch 6) already uploaded into the
email account.
• KM00403 M & A updated materials until Chapter
14 (Test 1: Ch 1 till Ch 7) already uploaded into
the email account.

NOTES: Formulas for Exam for both courses have

also been unloaded. You have until Thursday
next week (31 March 2016) for comments.
Otherwise, the formulas will be used as it is
during the comming Test 1.
 Group Discussions
• 10.30 to 11.30 am or 4pm to 5 pm: Forms 6 groups and
discuss the following (Ch 8 & 9 Textbook):
– Group 1: Factor Rating Method
– Group 2: Locational Cost-Volume Analysis
– Group 3: Center of Gravity Method
– Group 4: Process Layout
– Group 5: Staffing and Balancing Work
– Group 6: Line Balancing
• 11.30 am to 12.30pm or 5pm to 6 pm: each group is
required to explain/present the topics
• All discussions must be in English (marks will be
deducted if convers other language)
 Chapter 8 & 9 of Heizer and Render (2014)

Location Decisions
 1.Factor-Rating Method
► Six steps in the method
1. Develop a list of relevant factors called key
success factors
2. Assign a weight to each factor
3. Develop a scale for each factor
4. Score each location for each factor
5. Multiply score by weights for each factor for
each location
6. Make a recommendation based on the highest
point score

© 2014 Pearson Education, Inc. 8-5

 1. Factor-Rating Example
The Five Flags over Florida, a US chain of 10 family oriented theme parks, has decided
to expand overseas by opening its first park in Europe. It wishes to select between
France and Denmark. The factors (key success factors), their weights and rates are
given below:

TABLE 8.4 Weights, Scores, and Solution

SCORES
(OUT OF 100)
KSF WEIGHT FRANCE DENMARK
Labor availability and
.25 70 60
attitude

People-to-car ratio .05 50 60

Per capita income .10 85 80

Tax structure .39 75 70

Education and health .21 60 70

Totals 1.00
© 2014 Pearson Education, Inc. 8-6
 1. Factor-Rating Example
Calculates the total weighted scores for each location.
TABLE 8.4 Weights, Scores, and Solution
SCORES
(OUT OF 100) WEIGHTED SCORES
KSF WEIGHT FRANCE DENMARK FRANCE DENMARK

Labor availability
.25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0
and attitude

People-to-car ratio .05 50 60 (.05)(50) = 2.5 (.05)(60) = 3.0

Per capita income .10 85 80 (.10)(85) = 8.5 (.10)(80) = 8.0

Tax structure .39 75 70 (.39)(75) = 29.3 (.39)(70) = 27.3

Education and
.21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7
health
Totals 1.00 70.4 68.0

 The French location (with weighted scores of 70.4 points) is preferable as the total
weighted scores are higher than Denmark (with weighted scores of 68 points)
© 2014 Pearson Education, Inc. 8-7
 2. Locational
Cost-Volume Analysis
► Three steps in the method
1. Determine fixed and variable costs for each
location
2. Plot the cost for each location
3. Select location with lowest total cost for
expected production volume

© 2014 Pearson Education, Inc. 8-8

 2. Locational Cost-Volume
Analysis Example
Esmail Mohebbi, owner of European Ignition Manufacturing, needs
to expand his capacity. He is considering three locations- Athens,
Brussels, and Lisbon- for a new plant. The company wishes to find
the most economical location for an expected volume of 2,000 units
per year.
Mohebbi determines that the fixed costs per year at the sites are
$30,000, $60,000 and $110,000, respectively; and variable costs
are $75 per unit, $45 per unit, and $25 per unit, repectively. The
expected selling price of each ignition system produced is $120.

Total Cost = Fixed Cost + (Variable Cost x Volume)

Expected Profit = Total Revenue - [Fixed Cost + (Variable Cost x Volume)]

© 2014 Pearson Education, Inc. 8-9

 2. Locational Cost-Volume
Analysis Example
Three locations:
Selling price = $120
Expected volume = 2,000 units
Fixed Variable Total
City Cost Cost Cost
Athens $30,000 $75 $180,000
Brussels $60,000 $45 $150,000
Lisbon $110,000 $25 $160,000

Total Cost = Fixed Cost + (Variable Cost x Volume)

Expected Profit = Total Revenue - [Fixed Cost + (Variable Cost x Volume)]
© 2014 Pearson Education, Inc. 8 - 10
 2. Locational Cost-Volume
Analysis Example
1. The total cost equations:

Athens:
Total Cost Athen = 30,000 + 75(x)

Brussels:
Total Cost Brussels= 60,000 + 45(x)
Lisbon
Total Cost Lisbon= 110,000 + 25(x)

© 2014 Pearson Education, Inc. 8 - 11

▶ Estimate two points for plotting graphs

Total Cost Athen = 30,000 + 75(x)

1st point : 2nd Point:
x=0 x = 10,000
y = 30,000 y =780,000

Total Cost Brussels= 60,000 + 45(x)

1st point : 2nd Point:
x=0 x = 10,000
y = 60,000 y =510,000
Total Cost Lisbon= 110,000 + 25(x)
1st point : 2nd Point:
x=0 x = 10,000
© 2014 Pearson Education, Inc.y = 110,000 y =360,000 8 - 12
 2. Locational Cost-Volume
Analysis Example
2. Plot the graph of each equation and identified the equations with the
significant intersection points
–
$180,000 – Not significant
Figure 8.2 –
$160,000 –
$150,000 –
–
$130,000 –
Annual cost

–
$110,000 –
–
–
$80,000 –
–
$60,000 –
–
– Athens Lisbon
$30,000 – Brussels
lowest lowest cost lowest
– cost cost
$10,000 |– | | | | | |
0– 500 1,000 1,500 2,000 2,500 3,000
© 2014 Pearson Education, Inc. 8 - 13
Volume
2. Locational Cost-Volume Analysis Example
3. Identified the significance crossover/intersection points
Crossover point – Athens/Brussels
30,000 + 75(x) = 60,000 + 45(x)
30(x) = 30,000
(x) = 1,000
Crossover point – Brussels/Lisbon
60,000 + 45(x) = 110,000 + 25(x)
20(x) = 50,000
(x) = 2,500
For volume of less than 1,000 units Athens would be preferred. For Volume
between 1,000 and 2,500 units Brussels would be preferred. For volume more
than 2,500 units Lisbon would be preferred. Therefore, since the expected
volume is 2,000 units per year, Brussels would be selected as it provides the
lowest cost location with the expected profit of $90,000 per year.
Expected Profit
© 2014 Pearson (Brussels)
Education, Inc. = $120(2,000) - [$60,000 + ($45 x 2,000)]-$90,000
8 - 14
 3. Center-of-Gravity Method
► Place existing locations on a
coordinate grid
► Grid origin and scale is arbitrary
► Maintain relative distances
► Calculate x and y coordinates for
‘center of gravity’
► Assumes cost is directly proportional
to distance and volume shipped

© 2014 Pearson Education, Inc. 8 - 15

 3. Center-of-Gravity Method
åd Q ix i
x-coordinate of the = i
center of gravity åQ i
i

åd Q iy i
y-coordinate of the = i
center of gravity åQ i
i

where dix = x-coordinate of location i

diy = y-coordinate of location i
Qi = Quantity of goods moved to or from
location i

© 2014 Pearson Education, Inc. 8 - 16

 3. Center-of-Gravity Method -
Example
Quain's Discount Department Stores, a chain of four large Target-type
outlets, has store locations in Chicago, Pittsburgh, New York, and Atlanta;
they are currently being supplied out of an old and inadequate warehouse
in Pittisburgh, the site of the chain's first store. the firm wants to find some
"central" location in which to build a new warehouse. Data on demands and
map coordinates for each location is given below:
TABLE 8.5 Demand for Quain’s Discount Department Stores
STORE MAP NUMBER OF CONTAINERS
LOCATION COORDINATES SHIPPED PER MONTH
Chicago 30, 120 2,000
Pittsburgh 90, 110 1,000
New York 130,130 1,000
Atlanta 60, 40 2,000

© 2014 Pearson Education, Inc. 8 - 17

 3. Center-of-Gravity Method
North-South Figure 8.3

New York (130, 130)

Chicago (30, 120)
120 –
Pittsburgh (90, 110)
90 –

60 – d1x = 30
d1y = 120
30 – Q1 = 2,000
Atlanta (60, 40)

–
| | | | | |
East-West
30 60 90 120 150
Arbitrary
origin
© 2014 Pearson Education, Inc. 8 - 18
 3. Center-of-Gravity Method

(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)

x-coordinate =
2000 + 1000 + 1000 + 2000
= 66.7

(120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)

y-coordinate =
2000 + 1000 + 1000 + 2000
= 93.3

Therefore, the new warehouse should be located at coordinates (66.7,93.3)

© 2014 Pearson Education, Inc. 8 - 19

 3. Center-of-Gravity Method
North-South
New York (130, 130) Figure 8.3
Chicago (30, 120)
120 –
Pittsburgh (90, 110)
90 –

+ Center of gravity (66.7, 93.3)

60 –

30 –
Atlanta (60, 40)

–
| | | | | |
East-West
30 60 90 120 150
Arbitrary
origin
Therefore, the new warehouse should be located at coordinates (66.7,93.3) as
illustrated above.
© 2014 Pearson Education, Inc. 8 - 20
 Chapter 8 & 9 of Heizer and Render (2014)

Layout Decisions
 4. Process Layout Example
Walters Company management want to
arrange the six departments of its factory in
a way that will minimise interdepartmental
material handling cost. They make an initial
assumption that each department is 20 x 20
feet and the building is 60 feet long and 40
feet wide.
Walters Company assumes that a forklift
carries all interdepartmental loads. The
cost of moving one load between adjacent
departments is estimated to be $1. Moving
a load between non-adjacent departments
costs $2.
© 2014 Pearson Education, Inc. 9 - 22
 4. Process Layout Example
Procedures:
1. Construct a “from-to matrix”
2. Determine the space requirements
3. Develop an initial schematic diagram
4. Determine the cost of this layout
5. Try to improve the layout
6. Prepare a detailed plan

© 2014 Pearson Education, Inc. 9 - 23

 4. Process Layout Example:
initial Layout
Figure 9.4 1. From to Matrix (flow)
Number of loads per week
Department Assembly Painting Machine Receiving Shipping Testing
(1) (2) Shop (3) (4) (5) (6)

Assembly (1) 50 100 0 0 20

Painting (2) 30 50 10 0

Machine Shop (3) 20 0 100

Receiving (4) 50 0

Shipping (5) 0

Testing (6)

© 2014 Pearson Education, Inc. 9 - 24

 4. Process Layout Example:
initial layout
Figure 9.5 2. Space requirements
Area A Area B Area C
Assembly Painting Machine Shop
Department Department Department
(1) (2) (3)

40’
Receiving Shipping Testing
Department Department Department
(4) (5) (6)

Area
© 2014 Pearson Education, Inc. D 60’E
Area Area F 9 - 25
* Called as the initial layout
 4. Process Layout Example:
initial layout
Interdepartmental Flow Graph (sequence of parts move)
Figure 9.6
100

Assembly 50 Painting 30 Machine

(1) (2) Shop (3)

10
100

Receiving Shipping Testing

(4) (5) (6)
50

© 2014 Pearson Education, Inc. 9 - 26

 4. Process Layout Example:
initial layout
4. Determine Layout Cost
n n
Cost = åå X ijCij
i=1 j=1
Cost = $50 + $200 + $40
(1 and 2) (1 and 3) (1 and 6)
+ $30 + $50 + $10
(2 and 3) (2 and 4) (2 and 5)
+ $40 + $100 + $50
(3 and 4) (3 and 6) (4 and 5)
= $570
Total cost of the initial layout is $570
© 2014 Pearson Education, Inc. 9 - 27
 4. Process Layout Example:
1st Iteration
5. Randomly revised Interdepartmental Flow Graph
Figure 9.7
30

Painting 50 Assembly 100 Machine

(2) (1) Shop (3)

50 100

Receiving Shipping Testing

(4) (5) (6)
50

© 2014 Pearson Education, Inc. 9 - 28

 4. Process Layout Example: 1st
Iteration
4. Determine the
n n
Layout Cost
Cost = åå X ijCij
i=1 j=1

Cost = $50 + $100 + $20

(1 and 2) (1 and 3) (1 and 6)
+ $60 + $50 + $10
(2 and 3) (2 and 4) (2 and 5)
+ $40 + $100 + $50
(3 and 4) (3 and 6) (4 and 5)
= $480
The cost of the new layout is $480, lower than the initial layout. Accept the
new layout.
© 2014 Pearson Education, Inc. 9 - 29
 4. Process Layout Example:
1st Iteration
Figure 9.8
Area A
6. Detailed
Area B
Plan Area C

Painting Assembly Machine Shop

Department Department Department
(2) (1) (3)

40’
Receiving Shipping Testing
Department Department Department
(4) (5) (6)

Area D Area E Area F

© 2014 Pearson Education, Inc. 9 - 30
60’
 4. Conclusion
▶ This is an heuristics method of developing
layout and only until 1st iteration is
demonstrated.
▶ A heuristics can produce better and better
layout if procedures are repeated few
times (or few iterations).
▶ for 6 departments there are actually 720
(or 6!) potential arrangements or you will
have to run 720 iterations to cover them
all.
▶ When the cost cannot be reduced further
then the optimal solution is reached.
Notes: This is also the fundamental implemented in CRAFT technique. CRAFT is
covered in KM40803
© 2014 Pearson Industrial Engineering.
Education, Inc. 9 - 31
 5. Staffing and Balancing Work
Cells
Determine the takt time
Total work time available
Takt time =
Units required

Determine the number

of operators required

Total operation time required

Workers required =
Takt time

© 2014 Pearson Education, Inc. 9 - 32

 5. Staffing Work Cells Example
▶ Stephen Hall's company in Dayton makes
auto mirrors. The major customer is the
Honda plant nearby. Honda expects 600
mirrors daily, and the work cell producing
the mirror is scheduled for 8 hours. Hall
wants to determine the takt time and the
number of workers required.

© 2014 Pearson Education, Inc. 9 - 33

 5. Staffing Work Cells
Example
600 Mirrors per day required
Mirror production scheduled for 8 hours per day
From a work balance 60

chart total operation 50

time = 140 seconds

Standard time required

40

30

20

10

Figure 9.10
0
Assemble Paint Test Label Pack for
shipment
© 2014 Pearson Education, Inc. Operations 9 - 34
 5. Staffing Work Cells
Example
600 Mirrors per day required
Mirror production scheduled for 8 hours per day
From a work balance
chart total operation
time = 140 seconds

Takt time = (8 hrs x 60 mins) / 600 units

= .8 min = 48 seconds
Total operation time required
Workers required = Takt time
= 140 / 48 = 2.92
Therefore, three workers are required to fulfill the Honda's daily
order.
© 2014 Pearson Education, Inc. 9 - 35
 6. Line Balancing
▶ Boeing wants to develop a precedence diagram
for an electrostatic wing component that requires
a total assembly time of 65 minutes. The tasks,
assembly times and sequence requirements for
the componenets is given in Table 9.2.
▶ Boeing determines that there are 480 productive
minutes of work available per day. Furthermore,
the production schedule requires that 40 units of
the wing component to be completed as output
from the assembly line each day. It now wants
to group the tasks into workstations.
© 2014 Pearson Education, Inc. 9 - 36
 6. Wing Component Example
TABLE 9.2 Precedence Data for Wing Component
ASSEMBLY TIME TASK MUST FOLLOW
TASK (MINUTES) TASK LISTED BELOW
A 10 – This means that
B 11 A tasks B and E
cannot be done
C 5 B until task A has
D 4 B
been completed

E 11 A
F 3 C, D
G 7 F
H 11 E
I 3 G, H
Total time 65

© 2014 Pearson Education, Inc. 9 - 37

 6. Wing Component Example
The precedence diagram (network diagram) for
the wing assemby tasks (activities)

5
C
10 11 3 7
A B F G
4 3
D I
11 11
E H

© 2014 Pearson Education, Inc. 9 - 38

 6. Wing Component Example
Estimate the Cycle time and Min Number of
Workstations
Precedence Data for Wing
TABLE 9.2 Component 480 available mins
TASK MUST
per day
ASSEMBLY TIME FOLLOW TASK 40 units required
TASK (MINUTES) LISTED BELOW
A 10 –
Production time available
B 11 A per day
Cycle time = Units required per day
C 5 B
Figure 9.12
D 4 B = 480 / 40
5
E 11 A = 12 minutes per unit
C
10 n
11 3 7
åB Time for task
F 3 C, D
A F i G
G 7 Minimum
F number i=1 4
of workstations = 3
H 11 E
11
Cycle
D time
11 I
I 3 G, H = 65E/ 12 H
Total time 65 =5.42, or 6 stations
© 2014 Pearson Education, Inc. 9 - 39
 6. Wing Component Example
Layout Heuristics That May Be Used to Assign Tasks
TABLE 9.3
to Workstations in Assembly-Line Balancing
1. Longest task time From the available tasks, choose the
task with the largest (longest) task time
2. Most following tasks From the available tasks, choose the
task with the largest number of following
tasks
3. Ranked positional From the available tasks, choose the
weight task for which the sum of following task
times is the longest
4. Shortest task time From the available tasks, choose the
task with the shortest task time
5. Least number of From the available tasks, choose the
following tasks task with the least number of subsequent
tasks

© 2014 Pearson Education, Inc. 9 - 40

 6. Wing Component Example
480 available mins
Figure 9.13 per day
40 units required
Cycle time = 12 mins
Minimum
Station 5 workstations = 5.42 or 6
2
C
10 11 3 7
A B F G
4 3
D Station 3
Station 4 I
11 11
Station 6
Station Station 6
1 E H
Station Station
3 5
© 2014 Pearson Education, Inc. 9 - 41
The total cycle time per station must be less or equal to 12 mins
 Wing
Idle time =
Component Example
(Actual number of workstations) x (Largest asigned cycle time)-∑Task
per operation/process Time
Precedence Data for Wing 480 available mins
TABLE 9.2 Component
= ((6 stations) x (12 minutes)) - 65 minutes per day
TASK MUST
= 7 minutes
ASSEMBLY TIME per cycle TASK
FOLLOW
40 units required
TASK (MINUTES) LISTED BELOW Cycle time = 12 mins
A 10 –
Minimum
B 11 A workstations = 5.42 or 6
C 5 B
∑
%Idle time = Idle time per operation/process X 100 Figure 9.12
D balanced line)
(of the 4 (Actual numberBof workstations) x (Largest assigned cycle time)
5
E = 7/((611stations) x (12
A minutes))
C
10 11 3 7
F = 9.7 % 3 C, D

G 7 F
A B F G
4
3
H 11 E D
11 11 I
I 3 G, H
E H
Total time 65

© 2014 Pearson Education, Inc. 9 - 42

 Wing Component Example
Precedence Data for Wing 480 available mins

3/26/2018
TABLE 9.2 Component per day
ASSEMBLY TASK MUST
TIME FOLLOW TASK
40 units required
TASK (MINUTES) LISTED BELOW Cycle time = 12 mins
A 10 –
Minimum
B 11 A
workstations = 5.42 or 6

Figure 9.12
C 5 B
5
D 4 B
∑ Task times C
E
Efficiency = 11 A 10 11 3 7
(Actual number of workstations) x (Largest Assigned cycle time)
(of the balanced line) A B F G
F 3 C, D 4
3
= 65 minutes / ((6 stations) x (12 minutes))
G 7 F D I
11 11
= 90.3%
H 11 E E H
Or 1- %Idle Time (of the balanced line)
I 3 G, H
Therefore, 6 workstations recomended with expected efficiency of 90.3%
Total time 65
 The End

© 2014 Pearson Education, Inc. 9 - 44