chapter 3 facility layout & design part one

8/6/2019 Chapter 3 Facility Layout & Design Part One

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Incotec Innovation and Performance

MANUFACTURING and OPERATIONS MANAGEMENT

3. Facility Location & Layout

Part One


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Chapter 3: Facility Location & Layout

Strategic Importance

A facility is something built or established to serve a purpose

Facilities management is a location of that decision for that facility and

the composition or internal layout of the facility once located.


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Factory location has long term impact on business.

The location has to fulfill the business objectives and also

should be able to build the flexibility to remain competitive

in future to come.

There are numerous external factors which affects the

location potential and value for business. Therefore,

selection of location is one of the most important and

strategic decision.

Major investments of the business is induced duringbuilding the required infrastructure and it makes large

impact on manufacturing and economic feasibility.

Strategic Importance


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Site

LocationFactors


Influencing Factors

egional

Location

Factors

GlobalLocation

Factors


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Influencing Factors

Government stability Government regulations

Economic systems

Stability and growth

Financial Stability

Culture

Climate

Exim policies

Resource availability

Infrastructure

Labor cost and Education

Technology Risk

Technical expertise

Group trade agreements


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Influencing Factors

Grouped into 5 factors:Economic performance:

Domestic economy, international trade, international

investment, employment, prices

Government efficiency:

Public finance, fiscal policy, institutional framework, businesslegislation, education

Business efficiency:

Productivity, labor market, finance, management practices,

impact of globalization

Infrastructure:

Basic infrastructure, technology infrastructure, scientific

infrastructure, health & environment, value system

Resources & Environment:

Human resource, material availability, logistics &

transportation, education system

Competitiveness of

Region:

Degree to which a

region, under free &

fair market conditions,

produces goods &services which meet the

needs of the intended

markets, while

maintaining reasonable

value system.


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Influencing Factors

Grouped into 5 factors:

Local resources:

Land, man, machine, material, ..

Proximity / access to markets / customers:

Location benefit, minimizing logistics and travel time/cost.

Access to suppliers:

Availability of suppliers for required volume / cost ..

Quality of life:

Education, economy, social environment, culture, health,

public safety .

Local incentives:

Government policies, labor laws, environmental laws, tax

benefits, business cluster, land price & availability

Competitiveness of Site:

Degree to which a site

has the necessary

prerequisites to

establish uniform,

consistent and steadyflow of all inputs and

capability to serve the

end user within the

standard norms.


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Framework: Global Site

PHASE I

Global

Strategy

PHASE II

Regional Facility

Configuration

PHASE III

Desirable Sites

PHASE IV

Location Choices

Competitive STRATEGY

INTERNAL CONSTRAINTS

Capital, growth strategy,

existing network

PRODUCTION TECHNOLOGIESCost, Scale/Scope impact, support

required, flexibility

COMPETITIVE

ENVIRONMENT

PRODUCTION METHODSSkill needs, response time

FACTOR COSTS

Labor, materials, site specific

GLOBAL COMPETITION

TARIFFS AND TAX

INCENTIVES

REGIONAL DEMAND

Size, growth, homogeneity,

local specifications

POLITICAL, EXCHANGE

RATE AND DEMAND RISK

AVAILABLEINFRASTRUCTURE

LOGISTICS COSTS

Transport, inventory,

coordination


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Objective Comparison

Draw up a list ofpossible locations

Define the decision criteria Six common criteria used by companies

1. Cost of operating

2. Availability of the skills

3. Sales potential in the adjacent markets

4. Risk of doing the business

5. Attractiveness of living environments

6. Quality of infrastructure

Collect data for each location

Weight the criteria

Find risk data at available data information system

Rank locations according to weighted sum of their scores

Assess the dynamics of the labor pool Availability of skilled labor


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Business Decision

Alternative1

: Purchase one large facility,requiring one large initial investment

Alternative 2: Add capacity incrementallyin smaller chunks as needed


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Location Analysis

Location analysis is a dynamic process where entrepreneur analyses and compares the appropriateness or

otherwise of alternative sites with the aim of selecting the best site for a given enterprise. It consists the

following:

Demographic Analysis: It involves study of population in the area in terms of total population (in no.), age

composition, per capita income, educational level, occupational structure etc.

Trade Area Analysis: It is an analysis of the geographic area that provides continued clientele to the firm. He

would also see the feasibility of accessing the trade area from alternative sites.

Competitive Analysis: It helps to judge the nature, location, size and quality of competition in a given trade

area.

Traffic analysis: To have a rough idea about the number of potential customers passing by the proposed site

during the working hours of the shop, the traffic analysis aims at judging the alternative sites in terms ofpedestrian and vehicular traffic passing a site.

Site economics: Alternative sites are evaluated in terms of establishment costs and operational costs under

this. Costs of establishment is basically cost incurred for permanent physical facilities but operational costs

are incurred for running business on day to day basis, they are also called as running costs.


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Optimum Location


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Factor Rating Method


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Center of Gravity Method

X = [(75*60)+(90*40)+(160*70)+(250*80)+(260*50)]/(60+40+70+80+50)

X = 174

y = [(80*60)+(175*40)+(90*70)+(150*80)+(60*50)]/(60+40+70+80+50)

y = 110


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Center of Gravity Method

(75, 80), 60

(90, 175), 40

(1

60, 90), 70

(250, 150), 80

(260, 60), 50

X = 174

y = 110


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Break Even MethodLocation Fixed Cost

aria le Cost Total Cost

A 350,000.00 5.00 400,000.00B 170,000.00 25.00 420,000.00

C 100,000.00 40.00 500,000.00

D 250,000.00 20.00 450,000.00

aria le cost is per unit of production for say 10,000 units.

A

B

C

D

Quantity / olume

Cost

C B A


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Facility Layout

Fixed position Layout

Product Layout

Process Layout

Combination Layout


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Fun with Mind Reading

Can you Read the mind .


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Fun with Mind ReadingRead the Mind. . .

Please follow the instructions below carefully.

Think of a number between 1 and 10.

Multiply the number by 9.

Add the digits of your result.

Subtract 5 from your new number.

Find the alphabet that corresponds to your number, if1 = A, 2 = B, 3 = C,.

Think of a country that begins with your letter.

Write down your country.

Think of an animal beginning with the second letter of your country.

Think of the color of that animal.Write down the animal and its color.

Think of an animal that begins with the last letter of your country.

Think of a fruit that begins with the last letter of this second animal.

Write down the fruit and the animal.


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Fun with Mind ReadingRead the Mind. . .

Denmark is an unlikely place to find

Orange Elephants and

Black Kangaroos

chapter 3 facility layout & design part one

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