Location and Layout

Chapter 7
Location
and Layout
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen 2004 Pearson Education Canada Inc.
Managing Global Operations
Other Languages
Different Norms and Customs
Workforce Management
Unfamiliar Laws and Regulations
Unexpected Cost Mix
7-2
Location Decisions Manufacturing
Favourable Labour Climate

Proximity to Markets
Quality of Life
Proximity to Suppliers
Proximity to Parent Company
Utilities, Taxes, & Real Estate Costs
7-3
Location Decisions - Services
Proximity to Customers
Transportation Costs & Proximity to
Markets
Location of Competitors
Site-Specific Factors

7-4
Location
Erie
Weighted Score
Location Factor
North
Health-Watch
Scranton
Weight
Score
WS patient
= (25 x 4)
Total
miles per month
25
4
State College
Facility utilization
20
3
Pittsburgh
Average time per emergency trip
20
3
Harrisburg
Expressway accessibility
15
4
Philadelphia
Land andUniontown
construction costs
10
1
Employee preference
10
5
Example 7.1
7-5
Location
Erie
Weighted Score
Location Factor
North
Health-Watch
Scranton
Weight
Score
WS patient
= (25 x 4)
+ (20
x 3)
Total
miles
per
month
25
4
State College
20
3
Pittsburgh
20
3
Harrisburg
15
4
Philadelphia
Land andUniontown
construction costs
10
1
Employee preference
10
5
Example 7.1
7-6
Location
Erie
Weighted Score
Location Factor
North
Health-Watch
Scranton
Weight
Score
WS patient
= (25 x 4)
+ (20
x 3)
+
Total
miles
per
month
25
4
State College
x 3)
Facility (20
utilization
20
3
Pittsburgh
20
3
Harrisburg
15
4
Philadelphia
Land andUniontown
construction costs
10
1
Employee preference
10
5
Example 7.1
7-7
Location
Erie
Weighted Score
Location Factor
North
Health-Watch
Scranton
Weight
Score
WS patient
= (25 x 4)
+ (20
x 3)
+
Total
miles
per
month
25
4
x 3) + (15 x 4) + State College
Facility (20
utilization
20
3
Pittsburgh
(10
x 1)per
+ (10
x 5)
Average time
emergency
trip
20
3
Harrisburg
15
4
Philadelphia
Land andUniontown
construction costs
10
1
Employee preference
10
5
Example 7.1
7-8
Location
Erie
Weighted Score
Location Factor
North
Health-Watch
Scranton
Weight
Score
WS patient
= 340 miles per month
Total
25
4
State College
20
3
Pittsburgh
20
3
Harrisburg
15
4
Philadelphia
Land andUniontown
construction costs
10
1
Employee preference
10
5
Example 7.1
7-9
Center of Gravity Approach
Health-Watch
North
6
Location
(5.5, 4.5)
[10]
C
E
A
(8, 5)
[10]
(2.5, 4.5)
4
Census
Population
Census
Population
[2]
Tract
(x,
(l)
lx
Tract
(x, y)
y)
(l)
lx
3
B
A
(2.5,
5
A
(2.5, 4.5)
4.5) G 22
F 2.5)
DB
(2.5,
55
(2.5, 2.5)
B
(2.5,
2.5) (9, 2.5)
12.5
2
[5]
(5,C
4.5)
10
C2) (5.5,
(5.5,
4.5) [14]
10
55
(7, 2)
[7]
[20]
D
(5,
77
D
(5, 2)
2)
35
1
E
(8,
10
E
(8, 5)
5)
10
80
FF
(7,
20
(7, 2)
2)
20
140
0
1 2 3 4 G
5G 6 (9,
7 2.5)
8 9 14
10
(9,
2.5)
14
126
x (miles)
East 453.5
Totals
Example 7.2
Foundations of Operations Management,
Canadian68
Edition
y (miles)
ly
ly
9
12.5
45
14
50
40
35
205.5
7-10

North
Location
Health-Watch
y (miles)
(5.5, 4.5)
[10]
E
5
C
A
(8, 5)
453.5
Census
Population
[10]
(2.5,
4.5)
x* =
4
68lx
Tract
(x,
y)
(l)
[2]
A
(2.5, 4.5)
2
5
3
B
B
(2.5, 2.5) G 5 205.5
12.5
F 4.5) y* =
DC
(2.5, 2.5)
(5.5,
10
55
(9, 2.5)
2
68
[5]
(5,D2)
[14]7
(5,2)
2)
35
(7,
[7]
[20]
E
(8, 5)
10
80
1
F
(7, 2)
20
140
G
(9, 2.5)
14
126
0
1 2 3 4 5 6 7 Totals
8 9 68
10
453.5
x (miles)
East
Example 7.2
ly
9
12.5
45
14
50
40
35
205.5
7-11

North
Location
Health-Watch
y (miles)
(5.5, 4.5)
[10]
E
5
C
A
(8, 5)
Census
Population
[10]
(2.5,
4.5)
x* = 6.67
4
Tract
(x,
y)
(l)
lx
[2]
A
(2.5, 4.5)
2
5
3
B
B
(2.5, 2.5) G 5
12.5
F 4.5) y* =
DC
(2.5, 2.5)
(5.5,
10 3.02 55
(9, 2.5)
2
[5]
(5,D2)
[14]7
(5,2)
2)
35
(7,
[7]
[20]
E
(8, 5)
10
80
1
F
(7, 2)
20
140
G
(9, 2.5)
14
126
0
1 2 3 4 5 6 7 Totals
8 9 68
10
453.5
x (miles)
East
Example 7.2
ly
9
12.5
45
14
50
40
35
205.5
7-12
Location
Health-Watch
North
6
5
A
(2.5, 4.5)
[2]
4
y (miles)
(5.5, 4.5)
[10]
C
B
D
(5, 2)
[7]
1
1
Example 7.2
= 6.67
(2.5, 2.5)
[5]
E
(8, 5)
[10]x*
y*2.5)
= 3.02
(9,
[14]
F
(7, 2)
[20]
5 6 7
x (miles)
10
East

7-13
Location
Break-Even Analysis
for 20,000 units
Community
Fixed Costs
per Year
A
B
C
D
$150,000
$300,000
$500,000
$600,000
Variable Costs
Total Costs
per Unit
(Fixed + Variable)
$62
$38
$24
$30
Total Variable Costs

Example 7.3
$62 (20,000)

7-14
Location
Break-Even Analysis
for 20,000 units
Community
Fixed Costs
per Year
A
B
C
D
$150,000
$300,000
$500,000
$600,000
Variable Costs
Total Costs
per Unit
(Fixed + Variable)
$62
$38
$24
$30
$1,390,000
Total Variable Costs

$62 (20,000) = $1,240,000
Example 7.3
7-15
Annual cost (thousands of dollars)
Community
Fixed Costs
per Year
Total Costs
(Fixed + Variable)
$150,000
$300,000
$500,000
$600,000
$1,390,000
$1,060,000
$ 980,000
$1,200,000
A
B
C
1600
D
Location
Break-Even Analysis
A
(20, 1390)
1400
(20, 1200)
1200
D
B
C
(20, 1060)
1000
(20, 980)
800
600
Break-even
point
400
200
0
Figure 7.1
A best
2
10 12 14
16 18 20 22
Q (thousands of units)
7-16
Community
A
B
C
1600
D
Fixed Costs
per Year
Total Costs
(Fixed + Variable)
$150,000
$300,000
$500,000
$600,000
$1,390,000
$1,060,000
$ 980,000
$1,200,000
Location
Break-Even Analysis
A
(20, 1390)
1400
(20, 1200)
1200
D
B
C
(20, 1060)
1000
(20, 980)
800
Break-even point
600
Break-even
point
400
200
0
Figure 7.1
A best
2
B best
6
8
6.25
10 12 14 16 18 20 22
14.3
of units)Canadian Edition
FoundationsQ
of(thousands
Operations Management,
7-17
Community
A
B
C
1600
D
Fixed Costs
per Year
Total Costs
(Fixed + Variable)
$150,000
$300,000
$500,000
$600,000
$1,390,000
$1,060,000
$ 980,000
$1,200,000
Location
Break-Even Analysis
A
(20, 1390)
1400
(20, 1200)
1200
D
B
C
(20, 1060)
1000
(20, 980)
800
Break-even point
600
Break-even
point
400
200
0
Figure 7.1
A best
2
B best
6
8
6.25
C best
10 12 14 16 18 20 22
14.3
Q (thousands of units)

7-18
Location
Break-Even Analysis
1600
A
(20, 1390)
1400
(20, 1200)
Break-Even Quantities
1200
(20, 1060)
1000
(A)
800
Break-even
(B)
point
400
0
Figure 7.1
(B)
(20, 980)
$150,000 + $62Q Break-even

= $300,000
+ $38Q
point
Q = 6,250 units
600
200
D
B
C
(C)
$300,000 + $38Q = $500,000 + $24Q

A best
B best
C best units
Q = 14,286
2
6
8
6.25
10 12 14 16 18 20 22
14.3
of units)Canadian Edition
FoundationsQ
of(thousands
Operations Management,
7-19
Location
Transportation Method
Setting up the Initial Tableau
Insert
costs
into
the
shipping
route
option
cells
Add
Create
a column
a row
for
for
plant
each
capacities
plant and
and
a column
a row for
warehouse
each warehouse
demand
Warehouse
Plant
1
Phoenix
Atlanta
Requirements
Figure 7.2
Capacity
3
5.0
6.0
5.4
7.0
4.6
6.6
200
400
300
400
500
900
900

7-20
Location
Transportation Method
Interpreting the Optimal Solution
Figure 7.3

7-21
Layout Planning Issues

1. What centres should the layout Include?
2. How much space and capacity does each
centre need?
3. How should each centre be configured?
4. Where should each centre be located?

7-22
Absolute Locations
Frozen
foods
Meats
Dry
groceries
Bread
Vegetables
(a) Original layout

Figure 7.4

7-23
Absolute Locations
Frozen
foods
Meats
Dry
groceries
Vegetables
Bread
(b) Revised layout

Figure 7.4

7-24
Layout Types
Grinding
Grinding
Forging
Forging
Lathes
Lathes
Painting
Painting
Welding
Welding
Drills
Drills
Office
Office
Milling
Milling
machines
machines
Foundry
Foundry
(a) Layout of a job shop

Figure 7.5
7-25
Layout Types
Station 1
Station 2
Station 3
Station 4
(b) Layout of a production line
Figure 7.5
7-26
Pre-Group Technology
Figure 7.6
(continued)
Lathing
Lathing
Lathing
LLL
LL
L
Milling
Milling
Milling
LLL
LL
L
M
M
M
M
M
M
Drilling
Drilling
Drilling
M
M
M
M
M
M
DD
D
DD
D
DD
D
DD
D
Grinding
Grinding
Grinding
LL
L
LL
L
LLL
LLL
Receivingand
and
Receiving
Receiving
and
shipping
shipping
shipping
M
M
M
M
M
M
G
G
G
G
G
G
Assembly
Assembly
Assembly
AA
AA
A
A
G
G
G
G
G
G
A
A
A
G
G
G
G
G
G
A
A
A
(a) Jumbled flows in a job shop without GT cells

7-27
Group Technology
LL
LL
M
M
LL
G
G
G
G
G
G
Cell
Cell 22
Cell
Cell 11
Receiving
Receiving
D
D
M
M
Assembly
Assembly
area
area
A
A
A
A
Cell
Cell 33
LL
M
M
D
D
Shipping
Shipping
(b) Line flows in a job shop with three GT cells

Figure 7.6
7-28
Designing Process Layouts

Step # 1: Gather Information
Step # 2: Develop A Block Plan
Step # 3: Design a Detailed Layout

7-29
Longhorn Machine
Department
Area Needed (ft2)
1. Burr and grind

2. NC equipment
3. Shipping and receiving
4. Lathes and drills
5. Tool crib
6. Inspection
110
105
85
130
90
80
Total
600
2
3
60'
90'
7-30
Longhorn Machine
2
60'
90'
Trips between
between Departments
Departments
Trips
Department
Department
1. Burr
Burr and
and grind
grind
1.
NC equipment
equipment
22..NC
3. Shipping
Shipping and
and receiving
receiving
3.
4. Lathes
Lathes and
and drills
drills
4.
5. Tool
Tool crib
crib
5.
11
22
33
20
44
55
20
10
66
80
75
15
90
70
6. Inspection
Inspection
6.

7-31
Longhorn Machine
3
60'
90'
Closeness Rating between Departments

Department
A
Absolutely necessary
E
Especially important
I
Important
6. Inspection
O
Ordinary closeness
U
Unimportant
Foundations ofX
OperationsUndesirable
Management, Canadian Edition
1. Burr and grind

2. NC equipment
Closeness Rating
Rating
Definition
5. Tool crib
7-32
Longhorn Machine
60'
90'
Closeness Rating between Departments

Department
E
(3,1)
I
(2,1)
A
(1)
O
(1)
E
(1)
I
(6)
O
(1)
A
(1)
Explanation Codes
E
(1)
X
(5)
1
Materials handling
2
Shared personnel
3
Ease of supervision
6. Inspection
4
Space utilization
5
Noise
attitudes
Foundations of6OperationsEmployee
Management, Canadian
Edition
1. Burr and grind

2. NC equipment
Code
Meaning
5. Tool crib
7-33
Longhorn Machine
60'
90'
Departments 3 and 6 close together

3
60'
Figure 7.7
90'

7-34
Longhorn Machine
60'
90'

3
60'
6
Example 7.5
90'

7-35
Longhorn Machine
60'
90'

3
60'
Example 7.5
90'

7-36
Longhorn Machine
60'
90'

3
60'
Example 7.5
90'
7-37
Longhorn Machine
60'
90'
Load Distance Analysis

Load
Analysis
LoadDistance
Distance
Analysis
Load
Distance
Analysis
Trips
between
Departments
Current Plan
Proposed
Plan
Current
Plan
Proposed
Plan
Current
Plan
Proposed
Plan
Current
Plan
Proposed
Department
1
2
3
4
5
6Plan
Dept Closeness Distance
Distance
Dept
Closeness
Distance
Distance
Dept
Closeness
Distance
Distance
1.Dept
BurrFactor,
and
grind
Score
20
80
Pair
l
d
ld
d20
ld Score
Closeness
Distance
Distance
Pair
Factor,
l
d
ld
Score
d
ld
Pair
Factor, ll
d
ld Score
Score
d
ldScore
Score
Pair
Factor,
d
ld
d
ld
Score
2. NC equipment
10
75
1,2
20
1,2
2020
33
1,2
60 151
20
1,4
20
1,2
20
3
60
3.1,4
Shipping20
and receiving
90
22
1,4
20
40
1
20
1,61,4
80 20
2
40
8080drills
22
4.1,6
Lathes and
1 70
1,6
160
80
2,31,6
10 80
2
160
1010
22
2,3
20
3
30
5.2,3
Tool crib
2,5
75 10
2,3
2
20
2,5
7575
22
2,5
150
1
75
3,4
15
2,5
75
2
150
6.3,4
Inspection
1515
11
3,4
15
1
15
3,63,4
90 15
1
15
3,6
9090
33
3,6
270
1
90
4,53,6
70 90
3
270
4,5
7070
11
4,5
70
1
70
4,5
70
1
70
ld =
= 785
785
ld = 400
Example 7.6
ld
7-38
Line Balancing
Work
Element
A
B
C
D
E
F
G
H
I
Total
Description
Bolt leg frame to hopper
Insert impeller shaft
Attach axle
Attach agitator
Attach drive wheel
Attach free wheel
Mount lower post
Attach controls
Mount nameplate
Big Broadcaster
Time
(sec)
Immediate
Predecessor(s)
40
30
50
40
6
25
15
20
18
None
A
A
B
B
C
C
D, E
F, G
244
7-39
Line Balancing
Big Broadcaster
D
B
40
30
F
25
50
I
G
Figure 7.9
20
6
A
40
18
15

7-40
Line Balancing
Big Broadcaster
D
B
40
30
20
E
6
A
40
C
50
F
25
Desired
Desired
Desiredoutput
output
outputrate
rate
rate===2400/week
2400/week
2400/week
Plant
Plant
Plantoperates
operates
operates40
40
40hours/week
hours/week
hours/week
r = r2400/40
= 60
= 2400/40
=I units/hour
60 units/hour
c = 1/60 = 1 18
minute/unit
Line Balancing
Big Broadcaster
c = 60 seconds/unit
D
B
40
30
20
E
6
A
40
C
50
F
25
Desired
Desired
Desiredoutput
output
outputrate
rate
rate===2400/week
2400/week
2400/week
Plant
Plant
Plantoperates
operates
operates40
40
40hours/week
hours/week
hours/week
TM
TM == 244
244 seconds/60
seconds/60
seconds
seconds
I
== 4.067
4.067 or
or 55 stations
stations
18
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
Big Broadcaster
D
B
40
30
20
E
6
A
40
C
50
F
25
Desired output rate = 2400/week

Plant operates 40 hours/week
TM = 244 seconds/60
seconds
I
= 4.067 or 5 stations
18
Line Balancing
= 60 seconds/unit
M = 5 stations
fficiency = 81.3%
Big Broadcaster
D
B
40
30
20
E
6
A
40
F
25
50
I
G
18
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
Big Broadcaster
40
20
30
A
40
F
25
Cumm. Idle
Idle
Cumm
Station Candidate
Candidate Choice
Choice Time
Time Time
Time
Station
S1
50
I
G
18
40
20
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
40
20
30
S1
E
6
A
40
Big Broadcaster
C
50
F
25
Cumm Idle
Idle
Cumm
Station Candidate
CandidateChoice
Choice Time
Time Time
Time
Station
S1
S1
AA
AA
40
40
20
20
S2
B,C
CI
50
10
18
15

7-46
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
Big Broadcaster
D
B
40
20
30
S1
A
S2
40
C
50
E
6
F
25
Cumm Idle
Station Candidate Choice Time Time
S1
40
20
S2
B,C
C
I
50
10
S3
B,F,G
30
30
18
15

7-47
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
Big Broadcaster
D
B
40
20
30
S1
A
S2
40
C
50
E
6
F
25
Cumm
Station Candidate Choice Time
Idle
Time
S1
40
20
S2
B,C
C
I
50
10
S3
B,F,G
E,F,G
B
18
F
30
55
30
5

7-48
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
Big Broadcaster
D
B
40
20
30
S3
S1
A
S2
40
C
50
F
25
E
6
Cumm
Station Candidate Choice Time
Idle
Time
S1
40
20
S2
B,C
C
I
50
10
S3
B,F,G
E,F,G
B
18
F
30
55
30
5
G
15

7-49
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
Big Broadcaster
D
B
40
30
S3
S1
A
S2
40
H
20
E
6
F
25
50
I
G
18

7-50
Line Balancing
c = 60 seconds/unit
TM = 5 stations
Efficiency = 81.3%
D
B
30
S3
S1
A
40
S2
C
Big Broadcaster
40
20
E
S4
F
25
6
S5
50
I
G
Figure 7.10
18
15

7-51
Location cost (in millions of dollars)
Fizzy Beverage Company

Solved Problem 2
10
8
Grafton
Breakeven
point
Break-even
point
4
2
Farber
Deerfield
Boulder
0
1
2.67
Figure 7.11
Cases per year (in hundred thousands)

7-52
Arid Company Solved

Problem 4
Destination
Source
Worchester
Battle Creek
$4.37
Rochester
$4.25
Capacity
Dorchester
$4.89
12,000
12,000
Cherry Creek
$4.00
6,000
Dee Creek
Demand
Figure 7.12
$4.13
6,000
$5.00
$5.27
10,000
4,000
$4.50
$3.75
6,000
12,000
22,000
12,000

18,000
40,000
7-53
Solved Problem 5
E
F
Figure 7.14
D
E
Figure 7.13

Solved Problem 6
D
25
B
80
20
50
40
115
15
120
Figure 7.15
145
130


Location and Layout

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Location and Layout

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Chapter 7

Managing Global Operations

Location Decisions Manufacturing

Favourable Labour Climate

Location Decisions - Services

Foundations of Operations Management, Canadian Edition

Center of Gravity Approach

Ritzman, Krajewski, Klassen 2004 Pearson Education Canada Inc.

Center of Gravity Approach

Center of Gravity Approach

Center of Gravity Approach

Foundations of Operations Management, Canadian Edition

Total Variable Costs

Foundations of Operations Management, Canadian Edition

Total Variable Costs

Annual cost (thousands of dollars)

Annual cost (thousands of dollars)

Annual cost (thousands of dollars)

Foundations of Operations Management, Canadian Edition

$150,000 + $62Q Break-even

$300,000 + $38Q = $500,000 + $24Q

Foundations of Operations Management, Canadian Edition

Foundations of Operations Management, Canadian Edition

Layout Planning Issues

Foundations of Operations Management, Canadian Edition

(a) Original layout

Foundations of Operations Management, Canadian Edition

(b) Revised layout

Foundations of Operations Management, Canadian Edition

(a) Layout of a job shop

(b) Layout of a production line

(a) Jumbled flows in a job shop without GT cells

(b) Line flows in a job shop with three GT cells

Designing Process Layouts

Foundations of Operations Management, Canadian Edition

Area Needed (ft2)

1. Burr and grind

Foundations of Operations Management, Canadian Edition

Closeness Rating between Departments

1. Burr and grind

Ritzman, Krajewski, Klassen 2004 Pearson Education Canada Inc.

Closeness Rating between Departments

1. Burr and grind

Ritzman, Krajewski, Klassen 2004 Pearson Education Canada Inc.

Departments 3 and 6 close together

Foundations of Operations Management, Canadian Edition

Departments 3 and 6 close together

Foundations of Operations Management, Canadian Edition

Departments 3 and 6 close together

Foundations of Operations Management, Canadian Edition

Departments 3 and 6 close together

Load Distance Analysis

Foundations of Operations Management, Canadian Edition

Desired output rate = 2400/week

Foundations of Operations Management, Canadian Edition

Foundations of Operations Management, Canadian Edition

Foundations of Operations Management, Canadian Edition

Foundations of Operations Management, Canadian Edition

Foundations of Operations Management, Canadian Edition

Foundations of Operations Management, Canadian Edition

Location cost (in millions of dollars)

Fizzy Beverage Company

Cases per year (in hundred thousands)

Arid Company Solved