Facilities Location, Layout

and Planning
 FACILITY PLANNING
• The placement of facility – customers,
suppliers, other links in the supply
chain
• Resources
• Strategy – 99cents Only example
• Access to customers
• Government impacts
 Objectives of Facility Layout

 Minimize material handling costs

 Utilize space efficiently
 Utilize labor efficiently
 Eliminate bottlenecks
 Facilitate communication and interaction
between workers, between workers and
their supervisors, or between workers and
customers
 Reduce manufacturing cycle time or
customer service time
 Objectives of Facility Layout

 Eliminate waste or redundant movement

 Facilitate the entry, exit, and placement of
material, products, or people
 Incorporate safety and security measures
 Promote product and service quality
 Encourage proper maintenance activities
 Provide a visual control of operations or
activities
 Provide flexibility to adapt to changing
conditions
 Increase capacity
 Questions on Layout
Planning
• How should the facility be laid out?
• Does my layout cause unnecessary
movement/excess travel time?
• Does my work flow in a logical
manner?
• Does size dictate layout or does
layout/product flow dictate the size?
 Basic Types of Layouts

 Process Layout
 Machines grouped by process they perform
 Product Layout
 Linear arrangement of workstations to
produce a specific product
 Fixed Position Layout
 Used in projects where the product cannot
be moved
 Manufacturing Process Layout
Milling
Lathe Department Department Drilling Department
M M D D D D
L L

M M D D D D
L L

G G G P
L L

G G G P
L L
Grinding Painting Department
Department
L L
Receiving and A A A
Shipping Assembly
 Manufacturing Process Layout
Milling
Lathe Department Department Drilling Department
M M D D D D
L L

M M D D D D
L L

G G G P
L L

G G G P
L L
Grinding Painting Department
Department
L L
Receiving and A A A
Shipping Assembly
 Manufacturing Process Layout
Milling
Lathe Department Department Drilling Department
M M D D D D
L L

M M D D D D
L L

G G G P
L L

G G G P
L L
Grinding Painting Department
Department
L L
Receiving and A A A
Shipping Assembly
 A Product Layout
In

Out
 Fixed-Position Layouts
 Typical of projects
 Equipment, workers, materials, other
resources brought to the site
 Highly skilled labor
 Often low fixed
 Typically high variable costs
 Designing Process Layouts

 Minimize material handling costs

 Block Diagramming
 Minimize nonadjacent loads
 Use when quantitative data
is available
 Relationship Diagramming
 Based on location preference between areas
 Use when quantitative data is not available
 Block Diagramming
 Create load summary chart
 Calculate composite (two way)
movements
 Develop trial layouts minimizing number
of nonadjacent loads

 Example
 Relationship Diagramming
(Murther’s Grid)

 Used when quantitative

data is not available
 Muther’s grid displays
preferences
 Denote location
preferences with weighted
lines
 Relationship Diagramming
Example

Production

Offices

Stockroom
Shipping and
receiving

Locker room

Toolroom
 Relationship Diagramming
Example A Absolutely
necessary
E Especially
important
Production I Important
O O Okay
U Unimportant
Offices A X Undesirable
U I
Stockroom O E
Shipping and
A X A
receiving U U
U O
Locker room O
O
Toolroom
 Relationship Diagramming
Example 1 Absolutely
necessary
2 Especially
important
Production 3 Important
4 4 Okay
5 Unimportant
Offices 1 6 Undesirable
5 3
Stockroom 4 2
Shipping and
1 6 1
receiving 5 5
5 4
Locker room 4
4
Toolroom
Facility Location
Models
 Types Of Facilities
 Heavy manufacturing
Auto plants, steel mills, chemical plants
 Light industry
Small components mfg, assembly
 Warehouse & distribution centers
 Retail & service
Factors in Heavy Manufacturing
Location

 Construction costs
 Land costs
 Raw material and finished goods
shipment modes
 Proximity to raw materials
 Utilities
 Labor availability
 Factors in Light Industry
Location

 Construction costs
 Land costs
 Easily accessible
geographic region
 Education & training capabilities
 Factors in Warehouse
Location

 Transportation costs
 Proximity to markets (Customers)
 Service Location
Considerations
• Labor
• Cost of Living
• Real Estate
• Construction
• Government Incentives
• Examples – Amoco, Mass St, Tattoo
Parlors, Walgreen’s
 Global Location Factors
 Government stability  Raw material availability
 Government regulations  Number and proximity of
suppliers
 Political and economic
 Transportation and
systems
distribution system
 Economic stability and  Labor cost and education
growth
 Available technology
 Exchange rates  Commercial travel
 Culture  Technical expertise
 Climate  Cross-border trade
 Export import regulations, regulations
duties and tariffs  Group trade agreements
Regional Location Factors
 Community  Availability of sites
government  Financial Services
 Local business  Community
regulations inducements
 Government services  Proximity of suppliers
 Business climate  Education system
 Community services
 Taxes
 Site Location Factors
 Customer base  Zoning restrictions
 Construction/  Traffic
leasing cost  Safety/security
 Land cost  Competition
 Site size  Area business
 Transportation climate
 Utilities  Income level
Location Incentives
 Tax credits Wal-Mart in Wyandotte
 Relaxed government regulation
 Job training
 Infrastructure improvement
 Money
Center-of-Gravity Technique

 Locate facility at center of geographic area

 Based on weight and distance traveled
 Establish grid-map of area
 Identify coordinates and weights shipped
for each location
 Facility Summary
• Why is it important?
• Location analysis
• Location Criteria – global, local,
regional - education
• Location and Strategy
• Location and Customers
• Layout planning
Project Management
and Operations
 Project
Management
First Essay on Project Management:
1697 – “An Essay Upon Projects”

1959 HBR Article – “The Project Manager”

Air Force Manual 1964

 Project Management
In today’s global marketplace, complexity and speed are
certainties. In such an environment, a good axiom for project
management is, Do It, Do It Right, Do It Right Now. Creating
clear direction, efficiency, timely response, and quality outcomes
requires project managers who are agile -- adept at change. The
associated disciplinary areas are clearly spelled out in the
following PMI definition.

“Project management is the application of knowledge, skills,

tools, and techniques to a broad range of activities in order to
meet the requirements of a particular project. Project
management is comprised of five Project Management Process
Groups – Initiating Processes, Planning Processes,
Executing Processes, Monitoring and Controlling
Processes, and Closing Processes.

Source: Project Management Institute - http://www.pmi.org/info/PP_AboutProfessionOverview.asp?nav=0501

 Elements of Project
Management
 Project team
 Individuals from different departments within
company
 Matrix organization
 Team structure with members from different
functional areas depending on skills needed
 Project manager - Leader of project team
 Project Charter – high level description of what is
to be accomplished in a project and delegates
authority to project manager to implement
actions to complete project
 Project Planning
 Statement of work
 Written description of goals, work &
time frame of project
 Activities require labor, resources &
time
 Precedence relationship shows
sequential relationship of project
activities
 Elements of
Project Planning
 Define project objective(s)
 Identify activities
 Establish precedence relationships
 Make time estimates
 Determine project completion time
 Compare project schedule objectives
 Determine resource requirements to
meet objective
 Work Breakdown
Structure
 Hierarchical organization of work to be
done on a project
 Project broken down into modules
 Modules subdivided into
subcomponents, activities, and tasks
 Identifies individual tasks, workloads,
and resource requirements
 Project Control
 All activities identified and included
 Completed in proper sequence
 Resource needs identified
 Schedule adjusted
 Maintain schedule and
budget
 Complete on time
 A Gantt Chart
Around since 1914
 Popular tool for project scheduling
 Graph with bar for representing the time for
each task
 Provides visual display of project schedule
 Also shows slack for activities
 Amount of time activity can be
delayed without delaying project
 Gantt Charts
Gantt described two principles for his
charts:
1. measure activities by the amount of time
needed to complete them
2. the space on the chart can be used the
represent the amount of the activity that
should have been done in that time.

Gantt charts were employed on major infrastructure projects

including the Hoover Dam and Interstate highway system and
still are an important tool in project management.
 A Gantt ChartMonth
0 | 2 | 4 | 6 | 8 | 10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive
materials

Build house

Select paint

Select carpet

Finish work

1 3 5 7 9
Figure 6.2 Month
Example of Gantt Chart
Problem
 CPM/PERT
 Critical Path Method (CPM)
 DuPont & Remington-Rand (1956)
 Deterministic task times

 Project Eval. & Review Technique

(PERT)
 US Navy, Lockheed
 Multiple task time estimates
 PERT/CPM
Program Evaluation and Review Technique (PERT):
developed in conjunction with the development of the
Polaris missile program for submarines – developed by
the US Navy with Lockheed as the lead contractor

Critical Path Method (CPM): developed through a joint

venture between the DuPont Corporation and the
Remington Rand Corporation – the original purpose
was to monitor and evaluate plant maintenance
management projects.
 Project Network for a House

3
Lay Dummy
foundation
2 0 Build Finish
3 1 house work
1 2 4 6 7
Design house Order and 3 1
and obtain receive 1 1
Select Select
financing materials paint carpet
5

Figure 6.4
 Critical Path
 A path is a sequence of connected
activities running from start to end
node in network
 The critical path is the
path with the longest
duration in the network
 Project cannot be
completed in less than
the time of the critical
path
The Critical 3
Lay
foundation
2
3

1
0
Dummy

Build
house
Finish
work

Path
1 2 4 6 7
3 1
Design house Order and
and obtain receive 1 1
Select Select
financing materials
paint carpet

A: 1-2-3-4-6-7
3 + 2 + 0 + 3 + 1 = 9 months
B: 1-2-3-4-5-6-7
3 + 2 + 0 + 1 + 1 + 1 = 8 months
C: 1-2-4-6-7
3 + 1 + 3 + 1 = 8 months
D: 1-2-4-5-6-7
3 + 1 + 1 + 1 + 1 = 7 months
 The Critical 3
Lay
foundation
2
3

1
0
Dummy

Build
house
Finish
work

Path
1 2 4 6 7
3 1
Design house Order and
and obtain receive 1 1
Select Select
financing materials
paint carpet

Activity Start Times

3 Finish at
Start at 5 months 9 months
2 0
3 1 1
1 2 4 6 7
3
1 1
Start at 8 months
Start at 3 months
5
Figure 6.6
 Project Crashing
 Crashing is reducing project time by
expending additional resources
 Crash time is an amount of time an activity is
reduced
 Crash cost is the cost of reducing the activity
time
 Goal is to reduce project duration at minimum
cost
 Time-Cost Relationship
 Crashing costs increase as project duration
decreases
 Indirect costs increase as project duration
increases
 Reduce project length
as long as crashing
costs are less than
indirect costs
 Life Cycle Management
• Long term view of projects to guide
decision making – solutions that provide
life time success vice short term
• Acquisition; development; production;
introduction; sustainment; disposal
• Links system costs to big picture; better
use of resources; minimize total cost of
ownership
Capacity and
Aggregate
Planning
 Capacity Outputs:
Examples
Input Measures of Output Measures
Type of Business
Capacity of Capacity
Car manufacturer Labor hours Cars per shift
Hospital Available beds Patients per month
Pizza parlor Labor hours Pizzas per day
Floor space in
Retail store Revenue per foot
square feet
 The goal of capacity planning
decisions
(1) The capacity of the firm to produce
the service or good
(2) The processes for providing the
service or making the good
(3) The layout or arrangement of the
work space
(4) The design of work processes to
enhance productivity
 Capacity
• The max output that an organization be
capable of producing
• Measure a single facility:
– Design vs. Effective capacity
– Capacity Utilization: design vs. efficient utilization
• For systems have more than one facility and
flows of product
– System capacity and bottleneck
– Improve system capacity
Determinants of Effective Capacity
• Facilities
• Human considerations
– Adding people
– Increasing employee motivation
• Operations
– Improving operating rate of a machine
– Improving quality of raw materials and components
• External forces
– Safety regulations
 Capacity Utilization
Measures how much of the available capacity
is actually being used:
actual output rate
Utilization    100% 
available capacity
– Always <=1(percentage of usage)
– Higher the better
– Denominator:
• If effective capacity used: efficient utilization
• If design capacity used: design utilization
 Aggregate Planning
• The process of planning the quantity and
timing of output over the intermediate
range (3-18 months) by adjusting
production rate, employment, inventory
• Master Production Schedule: formalizes
the production plan and translates it into
specific end item requirements over the
short to intermediate horizon
 Capacity Planning
• The process of determining the
amount of capacity required to
produce in the future. May be at the
aggregate or product line level
• Master Production Schedule -
anticipated build schedule
• Time horizon must exceed lead times
for materials
 Capacity Planning
• Look at lead times, queue times, set up times, run
times, wait times, move times
• Resource availability
• Material and capacity - should be in synch
• driven by dispatch list - listing of manufacturing
orders in priority sequence - ties to layout
planning
• load profiles - capacity of each section
the capacity decisions:

• When to add capacity

• How much capacity to add
• Where to add capacity
• What type of capacity to
add
• When to reduce capacity
 Capacity Planning
• Rough Cut Capacity Planning -
process of converting the master
production schedule into
requirements for key resources
• capacity requirements plan - time-
phased display of present and future
capacity required on all resources
based on planned and released orders
 Capacity Planning
• Capacity Requirements Planning (CRP)
- process of determining in detail the
amount of labor and machine resources
required to meet production plan
• RCCP may indicate sufficient capacity
but the CRP may indicate insufficient
capacity during specific time periods
 Theory of Constraints
• Every system has a bottle neck
• capacity of the system is constrained
by the capacity of the bottle neck
• increasing capacity at other than
bottle neck operations does not
increase the overall capacity of the
system
 Theory of Constraints
• What needs to be changed
• What to change to
• How to make the change happen
 Theory of Constraints
• Identify the constraint
• Subordinate
• Inertia
• Walk the process again
• inertia of change can create new
bottle necks
 Capacity Planning
 Establishes overall level of
productive resources
 Affects lead time
responsiveness, cost &
competitiveness
 Determines when and how
much to increase capacity
Capacity Expansion
 Volume & certainty of anticipated
demand
 Strategic objectives for growth
 Costs of expansion & operation
 Incremental or one-step
expansion
 Sales and Operations
Planning (S&OP)
• Brings together all plans for
business
• performed at least once a month
• Internal and external
 Adjusting Capacity to
Meet Demand
1. Producing at a constant rate and using inventory
to absorb fluctuations in demand (level
production)
2. Hiring and firing workers to match demand (chase
demand)
3. Maintaining resources for high demand levels
4. Increase or decrease working hours (overtime
and undertime)
5. Subcontracting work to other firms
6. Using part-time workers
7. Providing the service or product at a later time
period (backordering)
 Demand Management
 Shift demand into other periods
 Incentives, sales promotions,
advertising campaigns
 Offer product or services with
countercyclical demand patterns
 Partnering with suppliers to reduce
information distortion along the
supply chain
 Remedies for Underloads

1. Acquire more work

2. Pull work ahead that is scheduled
for later time periods
3. Reduce normal capacity
 Remedies for Overloads

1. Eliminate unnecessary requirements

2. Reroute jobs to alternative machines or
work centers
3. Split lots between two or more machines
4. Increase normal capacity
5. Subcontract
6. Increase the efficiency of the operation
7. Push work back to later time periods
8. Revise master schedule
Scheduling as part of the
Planning Process
 Scheduling
• Scheduling is the last step in the planning
process?
• It is one of the most challenging areas of
operations management.
• Scheduling presents many day-to-day
problems for operations managers because of
– Changes in customer orders
– Equipment breakdowns
– Late deliveries from suppliers
– A myriad of other disruptions
 Objectives in Scheduling

 Meet customer due dates

 Minimize job lateness
 Minimize response time
 Minimize completion time
 Minimize time in the system
 Minimize overtime
 Maximize machine or labor utilization
 Minimize idle time
 Minimize work-in-process inventory
 Efficiency
 Sequencing Rules

 FCFS - first-come, first-served

 LCFS - last come, first served
 DDATE - earliest due date
 CUSTPR - highest customer priority
 SETUP - similar required setups
 SLACK - smallest slack
 CR - critical ratio
 SPT - shortest processing time
 LPT - longest processing time
 Critical Ratio Rule
CR considers both time and work remaining

time remaining due date - today’s date

work remaining remaining processing time

If CR > 1, job ahead of schedule

If CR < 1, job behind schedule
If CR = 1, job on schedule

Ties scheduling to Gantt Chart or PERT/CPM