Plant Location

and
Plant Layout
 What is Plant Location?
• Location can be defined as the place to put
something.
• Plant location is the identifying right place to put
the facility of manufacturing unit in order to have
sufficient access of the customers, workers,
transportation, etc.
• It is not advisable or not possible to change the
location of plant very often.
• Hence the selection of location is a key-decision
as large investment is made in building plant and
machinery.
 Factors Affecting Location Decisions
• Proximity to Sources of Supply
• Proximity to Customers
• Availability of transportation facilities
• Proximity to Source of Labour
• Community consideration
• Infrastructure availability
 Proximity to Sources of Supply
• It is essential for the organization to get raw materials
– in right quantity
– at right time
In order to have uninterrupted production.
• This factor is important for those organization where
transportation of raw materials are costly compare to
transportation of finished product.
• Example: Thermal Power plant should be located near
supply of water and coal.
• Paper mill: Transportation of wood is more costly compare
to transportation of paper produced.
• When raw materials universally available with low cost,
locate the plant near market (Restaurant).
 Proximity to Customers
• Ultimate target of any organization is to serve its potential
customer by
– providing good quality product
– at reasonable cost
– at time when they needed
• For some products and services, customers can not visit the
organization frequently, if it will be for away from the society.
• In this condition , try to locate plant (facilities) near the
customer.
• It is applicable particularly to the service organization
(Hospital, Bank, Post office, Restaurant) and FMCG (Retail
stores, LPG gas agencies, grocery stores, supermarket.)
 Availability of transportation facilities
• Some times we need to transport product from one
location to another location.
• Plant should be located to the place where transportation
facilities available easily.
• Better transport facility ensure
– timely supply of raw materials to the company and
– timely supply of finished product to the customers
• There are many transportation mode (like: Road, Rail,
Air, Water, Pipeline, Ropeways)
• You should require to locate your plant where any of
these transportation facility is easily available at less
cost.
 Proximity to Source of Labour
• Skilled labor are important factor for any
organization.
• We have to select the location from where we
can easily get skilled man power with lowest
cost.
• Importing labor is usually costly and involve
administrative problem.
• Example: Most of the US, UK, and Australian
companies have opened their call centres in India
because of low labour costs, and large English-
speaking population.
 Community consideration
• Select the location in such a way that the local
community accept your business.
• Community don’t want business that bring
pollution, noise, traffic; that affects the quality of
life.
• Example: Nuclear Power Plant, Coal Mines,
Airport.
• For this type of organization either you select the
location away from society or you shift the whole
society to some other place.
 Infrastructure availability
• We have to select the location where we can get
basic infrastructure facilities like
– Electricity
– Water
– Waste disposal
 Location Models
• There are various models available which help to
identify the ideal location. Some popular are:
Factor Rating Method
Load Distance Method
Centre of Gravity Method
Locational Cost–Volume Analysis
 Factor Rating Method
• Step 1: Identify dominant factors (e.g., proximity
to market, competition, availability of man power
etc).
• Step 2: Assign weights to each factors based on
their importance compare to other factor. The
sum of these weights must be 100.
• Step 3: Identify all the possible location.
• Step 4: Select a scale to assign rating to each
location w.r.t. to each factor. A commonly used
scale is a five-point scale, with 1 being poor and
5 excellent.
• Step 5: Identify the score of each location by
multiplying the weight of the factor and rating of
the location, summing over all factor.
• Step 6: Select the alternative with the highest
score.
 Problem:1
• Let us assume that a new medical facility,
Health-care, is to be located in Madurai. The
location factors, factor weight and ratings for
two potential sites are shown in the following
table. Which is the best location based on
factor rating method?
Ratings
S.N. Location factor Weight
Location 1 Location 2
1 Facility utilization 30 3 5
2 Total patient per month 20 4 3
3 Average time per emergency trip 25 4 5
4 Land and construction costs 5 1 2
5 Employee preferences 20 5 3
 Problem:2
• Antonio is evaluating three different locations
for his new Italian restaurant. He has identified
seven factors that he considers important and
has decided to use factor rating to evaluate his
three location alternatives based on a five-point
scale, with 1 being poor and 5 excellent. Table
shows Antonio’s factors, the weights he has
assigned to each factor, as well as the factor
score for each factor at each location.
 Problem: 3
• The Dynaco Manufacturing Company is going to
build a new plant to manufacture ring bearings
(used in automobiles and trucks). The site
selection team is evaluating three sites, and they
have identified seven factors which ranking is
given and ratings of each location with respect
to each factor are as follows. They want to use
these ratings to compare the locations. Find out
the best location for Company.
 Ratings
Location Factor Ranking
Site 1 Site 2 Site 3
Labour pool and climate 1 5 3 3
Proximity to supplier 2 4 2 4
Wage rates 3 3 5 2
Community environment 4 2 1 1
Proximity to customer 5 1 3 5
Shipping modes 6 3 2 3
Air Service 7 5 3 2
 Load Distance Method
• The load-distance model is a procedure for
evaluating location alternatives based on load-
distance.
• Consider that a new warehouse is to be located
to serve four different retail outlets.
• Step 1: The first step is to identify the distance
between each outlets and location sites.
• Step 2: The next step is to identify the loads
between warehouse to each retail outlets.
• Load: A load represents the goods moved from
the warehouse to the retail-outlets.
For example, if 200 boxes of a certain product
are shipped between the warehouse and a outlet
one. Hence the load between the warehouse and
outlet one is 200 boxes.
• Step 3: Next, calculate the load-distance score for
each location by multiplying the load to the
distance of outlet summing over all the outlets.
• Step 4: Finally, we select the site with the lowest
load-distance score.
 Problem: 4
• Matrix Manufacturing Corporation is considering
where to locate its warehouse in order to service
its four retail stores located in four Ohio cities:
Cleveland, Columbus, Cincinnati, and Dayton.
Two possible sites for the warehouse are being
considered. One is in Mansfield, Ohio, and the
other is in Springfield, Ohio. Select the best
location for the warehouse. Load between City
and Warehouse, Co-ordinates of four city and
two possible sites are given in Table:
City Co-ordinates (x,y) in Miles
Cleveland (11,22)
Columbus (10,7)
Cincinnati (4,1)
Dayton (3,6)
Mansfield (11,14)
Springfield (6,7)
 Problem: 5
• Joe’s Sports Supplies Corporation is considering
where to locate its warehouse in order to service its
four retail stores in four towns: A, B, C, and D.
Two possible sites for the warehouse are being
considered, one in Jasper and the other in
Longboat. The following table shows the
distances between the two locations being
considered and the four store locations. Also shown
are the loads between the warehouse and the four
stores. Use the load-distance model to determine
whether the warehouse should be located in
Jasper or in Longboat.
 Problem: 6
• The new Health-care facility is targeted to serve seven
housing colonies in Delhi. The table given shows the
coordinates for the centre of each housing colony,
along with the projected populations, measured in
thousands. Patient will travel from these housing
colonies to the new facility when they need health-
care. Three locations being considered for the new
facility are at (5.5, 4.5), (6, 4) and (7, 2). Details of
seven housing colonies, co-ordinate distances along
with the population for each colony are given in Table.
If we use the population as the loads and use
rectilinear distance, which location is better in terms
of its total load-distance score?
 Centre of Gravity Method
• We use the load-distance model to compare two
or more location alternatives.
• The alternative for which the load-distance is
lower is best alternative.
• If we don’t have any alternative, in such case we
can use Centre of Gravity method to identify
facility location.
• In this method we identify Centre of Gravity of
retails outlets, which will be the facility location
for serving all retail outlets.
• X and Y coordinates, give us the centre of gravity for
all retail outlets, are computed in the following way.
• The X coordinate for the centre of gravity is
computed by taking the x coordinate for each retail-
outlets and multiplying it by its load then summing
over all the outlets and divided by the sum of the
loads.
• The same procedure is used to compute the Y
coordinate.
 Problem: 7
• Matrix Manufacturing Corporation is considering
where to locate its warehouse in order to service
its four stores located in four cities: Cleveland,
Columbus, Cincinnati, and Dayton. Identify the
location for the warehouse using centre of gravity
method. Co-ordinates and load of four city are
given in following Table.
 Problem: 8
• The Burger Doodle restaurant chain purchases
ingredients from four different food suppliers.
The company wants to construct a new central
distribution centre to process and package the
ingredients before shipping them to their various
restaurants. The suppliers transport ingredient
items in truck trailers. The locations of the four
suppliers, A, B, C, and D, and the annual number
of trailer loads that will be transported to the
distribution centre are given in following Table.
Using the centre-of-gravity method, determine a
possible location for the distribution centre.
Supplier locations of the four suppliers Trailer loads
A (200,200) 75
B (100,500) 105
C (250,600) 135
D (500,300) 60
 Problem: 9
• Let’s suppose your company wants to expand its
logistics network and locate a facility within a
network of three existing facilities. Given the
following assumptions below, what are the
coordinates for the new potential location?
• Let’s assume the following:
• Warehouse 1 has a daily outbound goods volume
of 2,500 units
• Warehouse 2 has a daily outbound goods volume
of 1,300 units
• Warehouse 3 has a daily outbound goods volume
of 5,000 units
• And the current coordinates of the existing
facilities are given in graph:
 Locational Cost–Volume Analysis
• The total cost of producing a product is the sum
of its fixed costs and variable costs.
• Fixed cost: Fixed cost is the cost which remains
same, regardless of the volume produced.
Example: Building cost, Machinery cost, Rent.
• Variable cost: Variable cost is the cost which vary
directly with the amount of units produced.
Example: Material Consumed, Packing, Fuel
costs, electricity charge.
 Locational Cost–Volume Analysis
• Locational Cost–volume analysis is a technique
to identify most economical location by making
an economic comparison of location alternatives.
• By identifying fixed and variable costs and
plotting them for each location, we can determine
which location provides the lowest cost.
• Step1: For each Location, determine the total cost
equation (which will be straight line equation).
• Step 2: Plot the total cost equation for each location,
with costs on the vertical axis of the graph and annual
volume on the horizontal axis.
• Step 3: Solve algebraically to identify the Break-
Even Points.
• Step 4: Identify ranges of production for which each
Location has the lowest total cost.
 Problem: 10
• Clean-Clothes Cleaners is a dry cleaning business
that is considering four possible sites for its new
operation. The annual fixed and variable costs for
each site have been estimated as follows:

(a) Plot the total cost curves for each location on the
same graph and identify the range of output for
which each location provides the lowest total cost.
(b) If demand is expected to be 10,000 units per year,
which is the best location?
 Q1 Q2

From Graph it is clear that depending on the range of

product produced, Location C, B, A are the best location.
D is never a best option
 Problem: 11
• Ismail Mohebbi, owner of European Ignitions
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 conducts locational cost-
volume analysis. To do so, he determines that 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, respectively. Helps Mohebbi to
identify best location.
 Problem: 12
• Hyundai Motors is considering three sites A, B, and C
at which to locate a factory to build its new-model
automobile, the Hyundai Sport C150. The goal is to
locate at a minimum-cost site, where cost is measured
by the annual fixed plus variable costs of production.
Hyundai Motors has gathered the following data:
• Identify:
a) For what values of volume site C is
recommended?
b) What volume indicates site A is optimal?
c) Over what range of volume is site B optimal?
Plant Layout
 What is Layout?
• Layout is the way in which the parts of
something are arranged or laid down.
 What is Plant Layout?
• Plant layout refers to the physical arrangement of
production facilities in order to optimise all your
resources.
• These resources might include
– Desk,
– Work centre,
– Cabinet,
– Office, or even
– Department.
• The arrangement of resources in a facility can
significantly affect the productivity of a business.
• Poor layout can results wastage of time, energy, and
can create confusion among work force.
• Definition: Plant layout refers to the arrangement of
resources, processes, departments, workstations,
storage areas, and common areas within an facility
location.
• Example: Opening of New Hospital
 Objectives of Plant Layout
• Minimize product movement and material handling costs.
• Utilize space efficiently.
• Utilize labour efficiently.
• Facilitate better communication and interaction.
• Minimize overall production time.
• Provide employee safety and comfort.
• Facilitate the entry, exit, and placement of material,
products, and people.
 Types of Layout
• Process Layouts
• Product Layouts
• Hybrid Layouts
• Fixed position Layout
• Cellular Layout
 Process Layouts
• Process Layouts also known as functional layouts.
• All machines performing similar type of
operations are grouped at one location in the
process layout.
• For example, in a machine shop,
– all drills would be located in one work centre,
– lathes in another work centre, and
– milling machines in still another work centre.
• In a departmental store, women’s clothes, men’s
clothes, children’s clothes, cosmetics, and shoes
are located in separate departments.
• Example: Departmental store, Grocery store,
Hospital, Furniture manufacturing unit.
 Characteristic of Process layout
• Process layouts produce many different products, and
there is greater movement between workstations.
• Highly skilled labour require, having the capacity to do
a variety of operations on a machine.
• Many orders in process at a time.
• Sufficient storage space require around machines.
• Material handling costs are higher.
• Process layout is recommended for Job shop
production.
• Higher utilization of production facilities.
 Product Layouts
• Product Layouts is also known as assembly line
layouts.
• Product layout refers to a production system
where the work stations and machines are
located along the line of production.
• This type of layout is used by companies that
have repetitive processing systems and produce
one or a few standardized products in large
volume.
• Examples of product layouts can be seen on
assembly lines of Car Manufacturing unit.
• In product layouts the material moves
continuously and uniformly through a series of
workstations until the product is completed.
• Product layouts are suitable for mass production
in which demand is stable and volume is high.
In this figure we can see that car bodies are moving
down in a assembly line with workers following along
completing their tasks
 Characteristic of Product layout
• In product layout material moves in one direction along
the assembly line and always in the same pattern.
• Conveyors are the most common material handling
equipment for product layouts.
• Material handling costs are lower.
• Product layout recommended for mass production.
• Required specialized machines for the operations
(robots).
• Semi-skilled workers can learn and manage the
production, because most of the operations are done by
the robots.
 Issue Mass Production Batch Production Job shop Production
Volume Too much Moderate Low

Variety Low Moderate Too much

Production Most easy to control Little bit difficult Difficult to control
planning & the production
control
Labour Semi-skilled labour Skilled Highly skilled required
required
WIP (work in Very low Moderate Very large
progress
inventory)
Worker learning Very fast (because Low Very low
work is repetitive in
nature
Example household appliances, Electrical goods, jigs Gear manufacturing,
cold drinks, and fixtures production, Cake manufacturing,
canned goods Cloth production, Unique technology
Computer chips
used in R&D
 Hybrid Layouts
• Hybrid Layouts are the combine aspects of both
process and product layouts.
• Hybrid layouts are often created to take the
advantages of a product layout and process layout
environment.
• For example: retail stores and grocery stores use
hybrid layouts.
 Fixed position Layout
• Fixed position Layout is also called Project-type
layout.
• In fixed-position layouts product produced is too
bulky or heavy and it is difficult to move them.
• Ships, houses, aircraft, operating room of
hospital are examples.
• In this layout, the product remains stationary for
the entire manufacturing cycle.
• Equipment, workers, materials, and other
resources are brought to the production site.
 Cellular Layouts
• It is also called Group Technology Layouts.
• Some company produces many different
products, we may find that some products are
similar to each other in the way they are made
and the resources they require.
• It is the layout in which similar kind of product
manufacture in one unit (cell).
• The production of a group, or family of items
would be done very efficiently because all the
resources required would be similar.
 1 7
6

3
5 9

8
Cell 1 Cell 2 Cell 3
 Designing the Process Layout
• While the designing the process layout, the most
important thing is to arrange departments or
work centres in such a way that the material
handling costs should be minimum.
• Material handling cost is a function of
– the amount of material moved between work stations.
– And the costs of moving unit load between
departments.
• It means that departments with large flows of
materials between them should be placed next to
one another.
• While designing the process layout, our objective
is to minimize the material handling costs
between departments.
Where
n = total number of work centres or departments.
i, j = Individual departments.
= Amount of load moved from department i to
department j.
= Cost to move a unit load between department i
and department j.
 Example: 1
• Walters Company management wants to arrange
the six departments of its factory in a way that
will minimize inter-departmental material-
handling costs. They make an initial assumption
that each department is 20 × 20 feet and that the
building is 60 feet long and 40 feet wide. Draw
the process layout to minimize overall material
handling cost. Load Summary Chart is given in
following Matrix. The cost of moving one load
between adjacent departments is estimated to
be $1. Moving a load between non-adjacent
departments costs $2.
 Steps to solve this problem
• Step 1: Identify Space Needed for each work station.
• Step 2: Identify Available Space.

Available space Space required

• Step 3: Construct from-to-matrix from the

information of daily load travel between departments.
• Step 4: Develop an initial schematic diagram.
• Step 5: Determine the cost of this layout by using the
material-handling cost equation.
• Step 5: By trial and error try to improve the layout.
 How to Construct from-to-matrix
• Consider we have 6 work-stations (A,B,C,D,E,F). Load
transportation information are given in following Table.
Construct from-to-Matrix.
Departments Loads moving between
departments
From A to B 10
From A to C 15
From A to F 50
From B to D 20
From B to E 10
From B to F 20
From C to D 45
From C to F 10
From C to B 35
From D to F 20
From D to A 25
 Example 2

• Jeff-Co Industries is a metalworking shop that is

redesigning its layout. The from–to-matrix of the
numbers of trips between departments is shown
in Table.
• The current layout is shown in Figure 2. Find an
improved layout using trial and error. Which
departments should you locate close together? The
cost of moving is as follows:
• The cost of moving one load between face-to-face
adjacent departments is estimated to be $1.
• The cost of moving one load between diagonally
adjacent departments is estimated to be $2.
• The cost of moving one load between face-to-face
non-adjacent departments is estimated to be $2.
• The cost of moving one load between diagonally
non-adjacent departments is estimated to be $3.
Figure 2:
 Designing the Product Layout (Line balancing)

• In the product layout, material moves

continuously and uniformly in a straight line
through a sequence of operations until the work is
completed.
• Line balancing is method to design the Product
Layout.
• In Line Balancing we design all work stations in a
Assembly Line fashion.
• While designing the product layouts two things
we have to keep in our mind:
1. Identify the sequence of tasks to be performed
for the production of finished product.
2. Maximum amount of time the product is
allowed to spend at each workstation is fixed
because product move along a conveyor belt.
That time is called cycle time.
 Steps for designing the Product Layout
• Step 1: To produce any finished product; Identify
tasks, completion times for each task and their
Immediate Predecessors.
• Immediate predecessor: A task that must be
completed before another task start.
• Step 2: Draw the sequence diagram.
• Step 3: Determine Cycle Time
• Cycle time: The maximum time that a product is
allowed at each workstation.
• For example consider to produce a certain product
we have to perform six tasks. Tasks and their
immediate predecessors are shown in Table. Draw
the sequence diagram.

Activity Predecessor Time (Hours)

A --- 2
B A 3
C A 1
D B 2
E C 3
F D,E 1
• Step 4: Calculate the theoretical (minimum)
number of workstations: This is the total task
duration time (the time all tasks take to make the
product) divided by the cycle time.

• Step 5: Assign Tasks to Workstations (Balance the

Line): Assign tasks, one at a time, to the first
workstation.
• To assign task following point should be consider.
1. Assign task based on sequence relationship.
2. amount of time required to perform assigned task at
work station should be less than or equal to cycle
time.
• Repeat the process for workstation 2, workstation
3, and so on until all tasks are assigned.
• Step 6: Compute Efficiency of the Assembly Line
 Example: 3
• Boeing producing electrostatic wing component
that requires a total assembly time of 65 minutes.
Staff gather tasks, assembly times, and sequence
requirements for the component in Table. 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 be produced as output from the
assembly line each day. Develop the assembly line
layout and identify the efficiency of layout.
 Example: 4
• The MS 800 car is to be assembled on a conveyor
belt. Five hundred cars are required per day.
Production time per day is 420 minutes, and the
assembly steps and times for the wagon are given
below. Find the balance that minimizes the
number of workstations, subject to cycle time and
precedence constraints.
 Example: 5
• Real Fruit Snack Strips are made from a mixture of
dried fruit, food colouring, preservatives, and
glucose. The mixture is pressed out into a thin
sheet, imprinted with various shapes, rolled, and
packaged. The precedence and time requirements
for each step in the assembly process are given
below. To meet demand, Real Fruit needs to
produce 6000 fruit strips every 40-hour week.
Design an assembly line with the fewest
number of workstations that will achieve the
production quota without violating precedence
constraints.
 Material Handling
• Material handling is the basic operations in
connection with the movement of materials by
means of manually or power-actuated equipment
from one place to another place.
• Materials handling occurs whenever a material is
moved may be inside the manufacturing plant,
inside the warehouse, or at retail-outlets.
• Materials handling also occur during preparation
for shipment, transportation may be by sea, air or
land, and moving material in and out of carriers.
 Objectives of using material handling equipment

• Reducing material handling labour.

• Reducing damage of materials during handling.
• Increasing productivity.
• Minimise delays and interruptions.
• Reduce accident rates.
• Easy working condition.
 Material handing equipments
• Conveyors
• Industrial Trucks
• Cranes
• Hoists
• Containers
• Robots
• AGV (automated guided vehicle)
• Forklift
Conveyors
Industrial Trucks
Cranes
Hoists
Containers
Robots
AGV (automated guided vehicle)
Forklift
 Product development process
• Product development process is a process of
designing, developing, producing and lunching a
new product in the market.
• The process consists a series of stages that new
products typically go through:
– Beginning with ideation,
– Concept generation,
– Production
– Testing and
– Ending with the product's introduction (Lunching) to
the market.
 Stages in the product development process
• Key stages in the product development process:
1. Idea generation – brainstorming and coming up
with innovative ideas.
2. Idea evaluation - filtering out if any ideas not
worth taking forward.
3. Strategic analysis - ensuring your ideas fit into
your business' strategic plans and determining
the demand, the costs and the profit margin.
4. Product development and testing - creating a
prototype product or pilot service.
5. Market testing - modifying the product or
service according to user‘s feedback.
6. Developing marketing plans – determining the
price for your product and finalising marketing
plans.
7. Product launch – a detailed launch plan can
help ensure smooth introduction to market.