mgt3303 michel leseure facility decisions learning objectives: –to discuss facility location...

MGT3303Michel Leseure

Facility Decisions

• Learning objectives:– To discuss facility location decisions– To discuss capacity planning– To discuss factory layout problems

• Reading: Chapter 5 and its supplement


Location Problems

• Where should a facility be located:– Given a range of qualitative and

quantitative decision variables


Qualitative Location Factors

• Local Infrastructure– Institutional (e.g., reliable electrical power grid)– Transportational (e.g., railway systems)

• Worker Education and Skills– Education and skills of local workers.

• Product Content Requirements– The minimum percentage of product that must be

produced in a country in order for the product to be sold in that country.

• Political/Economic Stability


Quantitative Location Factors

• Labor Costs– Labor costs vary dramatically, depending on

location. Cheap labor often lacks needed education and skills.

• Distribution Costs– Distance and the time required to deliver products

can offset lower location costs.

• Facility Costs– Special economic zones (SEZ)

• Duty-free areas established to attract foreign investment in the form of manufacturing facilities


Quantitative Location Factors

• Exchange Rates– Variations in rates can have a significant

effect on sales and profits.

• Tax Rates– Taxes vary considerably between countries

and within countries.– All forms of taxes should be considered

(property, payroll, inventory, and investment taxes).


Geographic Information Systems (GIS)

– Computer tool that assesses alternative locations for operations.

– Provides a “bird’s eye view” of a particular region of interest.


Evaluating Potential Locations

• Factor Rating System1. Identify the specific criteria or factors to be

considered.

2. Assign a weight to each factor.

3. Select a common scale for rating each factor.

4. Rate each potential location on each of the factors.

5. Multiply each factor’s score by its weight.

6. Sum the weighted scores and select the location with the highest score.


Factor-Rating System Example

Factor Weight Rating Site A

Rating Site B

Score Site A

Score Site B

Size and education of workforce within 15 miles 20 60 75 1,200 1,500

Availability of part-time workers (students) 10 45 20 450 200

Distance to telecommunication infrastructure 25 80 90 2,000 2,250

Distance to higher education facilities 5 50 35 250 175

Cost of living index 15 85 80 1,275 1,200

Cultural amenities 10 65 40 650 400

Crime statistics 15 95 90 1,425 1,350

Totals 100 7,250 7,075


Evaluating Potential Locations

• Center of Gravity Method– Used to determine the optimal location of a

facility based on minimizing the transportation costs between where the goods are produced and where they are sold or redistributed.

– Locate each existing operation on an X and Y coordinate grid map.

– Calculate X coordinate of center of gravity– Calculate Y coordinate of center of gravity


Center of Gravity Formulas

Cx = X coordinate of the center of gravity

Cy = Y coordinate of the center of gravity

dix = X coordinate of the ith location

diy = Y coordinate of the ith location

Vi = Volume of goods transported to the ith location

VVdi

iixxC

V

Vd

i

iiyyC


Example

Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month?

Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month?

Several automobile showrooms are located according to the following grid which represents coordinate locations for each showroom

S howroom No o f Z-Mo b ile s s o ld p e r mo nth

A 1250

D 1900

Q 2300

X

Y

A(100,200)

D(250,580)

Q(790,900)

(0,0)


Example

C = 100(1250) + 250(1900) + 790(2300)

1250 + 1900 + 2300 =

2,417,000

5,450 = x 443.49C =

100(1250) + 250(1900) + 790(2300)

1250 + 1900 + 2300 =

2,417,000

5,450 = x 443.49

C = 200(1250) + 580(1900) + 900(2300)

1250 + 1900 + 2300 =

3,422,000

5,450 = y 627.89C =

200(1250) + 580(1900) + 900(2300)

1250 + 1900 + 2300 =

3,422,000

5,450 = y 627.89

You then compute the new coordinates using the formulas:You then compute the new coordinates using the formulas:

You then take the coordinates and place them on the map:You then take the coordinates and place them on the map:

S ho wro o m No o f Z-Mo b ile s s o ld p e r mo nth

A 1250

D 1900

Q 2300X

Y

A(100,200)

D(250,580)

Q(790,900)

(0,0)

ZZ

New location of facility Z about (443,627)

New location of facility Z about (443,627)


Capacity Planning

• Establishes the overall level of productive resources for a firm

• Usually results in a capital investment decision – long term focus

• These decisions are usually irreversible!• Given:

• a sales forecast

• a risk profile (aggressive, risk-averse, etc.)


Measuring Capacity

• Objective is to measure a level of activity• Several possible measures, based either on staff

or plant/equipment– An hospital would measure capacity according to

its number of beds or overall capacity• different units for emergency room (staff)

– A building contractor would measure a project in terms of staff

– Precision machinist: Machine hours per month


Measuring Capacity

• It is important to differentiate:– Planned capacity:

• the theoretical capacity of a system given some allowances

– Actual capacity: • the actual demand of the usage of resources, under- or

over-capacity

– Efficiency: • the degree to which production is as efficient as planned


Example

• A precision machinist has a theoretical capacity of 15,000 hours. In a given month, 16,000 hours were sold. 3,000 hours were subcontracted.

• This case:– is an example of under-capacity– is an example of 100% utilisation– the efficiency is 87% (13,000/15,000)


Capacity Planning: Decision objectives

• Decisions objectives are:– Anticipate growth or wait?– Forecast the end of a growth period– Avoid overcapacity (unit cost

consequence!)– What should be done in the case of over-

capacity?

Size of operations unit Timing of capacity


Best Operating Levels With Economies & Diseconomies Of Scale


Timing of capacity

UnitsCapacity

Time

Demand

Units

Capacity

Time

Demand

Capacity

Time

Demand

Units

Incrementalexpansion

Demand

Capacity lead strategy

Capacity lag strategy

Average capacity strategy

One-step expansion


Layout Decisions

• How should machines, workers, departments, etc. be arranged?

• Several generic options


Types of Layout

Layout Type

Process Similar operations are performed in a common or functional area, regardless of the product in which the parts are used.

Product (Flow-shop layout)

Equipment/operations are located according to the progressive steps required to make the product.

Group Technology (GT) or Cellular

Groups of dissimilar machines are brought together in a work cell to perform tasks on a family of products that share common interests.

Fixed-Position The product, because of its size and/or weight, remains in one location and processes are brought to it.


Process or Functional Layout

• Job and batch systems are based on functional layouts– machines, processes

and equipment of the same type are grouped together in the same department or area

Materials in

Finished goodsout


Product Layout

• High volume production systems use product layouts– machines, equipment and workplaces are

arranged according to the order in which operations need to be carried out to produce a complete component, product or sub‑assembly (lines, flow systems)


Flexible Line Layouts


Design Methods – Process Layouts


Design Methods – Process Layouts

Total cost: $2,223($1 for adjacent departments - $1 for each travel-through)


Improvement: 3-5 Permutation

*Only interdepartmental flow with effect on cost is depicted.

Total cost: $1,878(= $2,223 – 230 + 50 - 165)


Assembly Line Balancing

• Means the design of the layout of an efficient assembly line– Product Layout– Also called flowlines, as product flows

through workstations– Is also a pre-schedule of operations

Labour resources and physical facilities

Material inputs

Finished products


Problem Statement

Tasks to be allocatedto work stations

Flow of material

Workstations

Objective:To find the best allocation of taskswhich will produce the desiredoutput while maximising efficiencyand achieving good 'balance'


Line Balancing

• The main objective of line design will be to maximise line efficiency (or minimise total work station idle time)

• At the same time any idle time should be spread as evenly as possible among the work stations, ie the line should be 'balanced'

Cycle time

Station work

content

Idle time


Procedure

• Summarise precedence data in a table• Draw a precedence diagram• Compute the desired cycle time• Compute the theoretical number of

workstations• Assign tasks to workstation (heuristics)• Draw layout and compute efficiency


Example• Cold Sheffield Ltd needs 5 tasks to assemble its

product. It has 1200 minutes of assembly workforce time available per day and it needs to produce 100 units per day. Precedence relationships between the task are:

• Tasks Time Predecessors• A 4 (mn) None• B 5 A• C 2 B• D 10 A• E 3 C,D• Design a balanced assembly line.


Draw a Precedence Diagram

A

B4

5

C

2

D

10

E

3


Cycle Time Computation

• Target output: 100 units/day• Target cycle time:

– The number of minutes to complete work at one workstation

– A measure of the frequency with which products roll off the assembly line

• Available work time: 1200 minutes per day

production time availabledesired output

C =

1200 100

C = = 12 minutes / units


Theoretical Number of Workstations

Sum of elementary tasks timeCycle Time

Theoretical number

of workstations

=

= 24 / 12 = 2


Task Assignment

A B

4 5

C

2

D

10

E

3

Workstation 1(11 minutes)


Task Assignment

A B

4 5

C

2

D

10

E

3




(Alternative AB and CD)


Summary of Solution

Workstation 1 (ABC)- 11 mn

Efficiency of line = 24 / 3 * 12 = 24/36 = 66.7%(sum of tasks time divided by number of workstations times cycle time)

Workstation 2 (D)- 10 mn

Workstation 3 (E)-3 mn

Linear layout


Low Efficiency

• Although with 2 workstations, there would be enough time to complete all tasks (24 mn), the tasks cannot be combined in a linear layout in 2 workstations!

• Try alternative forms of layouts– U-shaped layouts– Gives the option to combine non

sequential tasks


U-Shape Layout Solution

Workstation 1

A,BWorkstation 2

C,D

E12 mn 12 mn

Line is perfectly balanced – 100% efficiency


Class Exercise

Problem 5-1, p. 190

Problem 5-11, p. 192


Suggested Homework

• Solved Problems p. 188• Problem 5-2 p. 191• Problem 5-12 p. 192• Problems S5-1, S5-2, p. 210

mgt3303 michel leseure facility decisions learning objectives: –to discuss facility location...

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