PLANT LOCATION

Introduction:
Plant location decisions are very important because they
have direct bearing on factors like, financial, employment
and distribution patterns.
Reasons for plant location study
 Establishment of a new venture.
 Expansion of existing business.
 Significant change in existing demand, supply and
marketing locations.
 Significant change in the cost structure.
 Government policies.
Specific factors
A multinational company, desiring to set up plant should consider
the following in addition to the normal factors.

• The economic stability of the country and the concern of the

country towards outside investment are to be considered.
• The success of operation of the factory depends on the cultural
factors, languages and cultural differences which can present
operating, control and even policy problems.
• Analysis must be based on the factors like wage rate, policy,
duties, etc.
• The company can set up joint ventures with any leading local
giants that will solve many operational problems.
Economic Analysis

BREAK EVEN ANALYSIS

The objective of any location problem is to maximize
profit. In comparing several potential locations on an
economic basis, only revenues and costs need to be
considered.
An economic analysis can be done by using break-
even analysis. This uses fixed costs and variable
costs.
Qualitative Factor Analysis
Qualitative factors related with location analysis are also known as
intangible factors. These are the factors to which cost values cannot
be assigned.
e.g. lack of good schools, union activity, community attitude etc.,
These factors can be termed as adequate or inadequate,
significant or insignificant, good, excellent etc., for respective
locations. The overall contribution of intangible factors for the
choice of a particular location can be evaluated by-
(a) drawing a comparative chart for various locations: Locations
A C
Labour supply adequate excellent
Recreation good very good
Union activity Significant not significant
Education good very good
Evidently in this case location C appears to be better than location A
(b) Ranking and weight method:
Here the various locations are ranked according to the
contribution of the corresponding factors. Various factors
are assigned weights according to their importance in
location analysis. The weights of each factor are
multiplied with corresponding rank of a location and the
total of these products over all the factors for each
location is calculated. The location having maximum total
is considered to be most suitable.
 Classification of Production
Job Production
Products manufactured to meet special requirements of customers for
large projects, e.g. ship building
Batch Production
This involves manufacturing a number of identical products in batches
to meet specific one-time or periodic requirements
Continuous Production
 Mass Production e.g., TV, car, horns, computer etc.
Flow Production e.g., oil, sugar, paper etc.
(product pass from one work centre to another)
 What Is Layout Planning

• Layout planning is determining the best

physical arrangement of resources within a
facility
• Two broad categories of operations:
– Intermittent processing systems
– Continuous processing systems
1) Accumulate basic data
2) Analyse and coordinate basic data
3) Decide the equipment and machinery required
4) Select the material handling system
5) Determine the general flow pattern
6) Design the individual work station
7) Assemble the individual layout into the total layout
8) Calculate storage space required
9) Make flow diagrams for work stations and allocate them to areas
on plot plan
10) Make master layout
11) Check final layout
12) Install the approved layout
 LAYOUT DESIGN PROCEDURES
Manual methods
Under this category, there are some conventional methods
like, travel chart and Systematic Layout Planning (SLP)
Computerized methods
Construction type algorithms
1. Automated Layout Design Program (ALDEP)
2. Computerized Relationship Layout Planning (CORELAP)
Improvement type algorithms
1. Computerized Relative Allocation of Facilities
Technique (CRAFT)
 Input data and activities

A
1.Flow of materials 2.Activity relationship N
A
L
3.Relationship Y
S
diagram I
S

4.Space requirements 5.Space available

S
6.Space relationship E
A
diagram R
7.Modifying 8.Practical C
H
considerations limitations
9.Develop layout
alternatives

SELECTION
10.Evaluation
Computerized Relative Allocation of Facilities Technique
(CRAFT)

It starts with an initial layout and improves the layout by

interchanging the departments pairwise so that the
transportation cost is minimised. The algorithm continues
until no further interchanges are possible to reduce the
transportation cost. The result given by CRAFT is not
optimum in terms of minimum cost of transportation. But,
the result will be good and close to optimum in majority
of applications.
 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
• 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
 Importance of Layout Decisions

• Requires substantial investments of

money and effort
• Involves long-term commitments
• Has significant impact on cost and
efficiency of short-term operations
 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
 Hybrid Layouts
• Cellular layouts
–group machines into machining cells
• Flexible manufacturing systems
–automated machining & material handling
systems
• Mixed-model assembly lines
–produce variety of models on one line
 Process Layout
• Similar processes/functions are grouped
together (job shop). Volume of parts/services
does not warrant product or cellular layout.
• Primary advantages--flexibility, utilization of
machinery/equipment.
• Disadvantages--greater handling of
materials/customers, more complex
scheduling, WIP/waiting lines, departmental
boundaries
Schematic Diagram of PROCESS LAYOUT

1 2 3 4

5 6

7 8

Fig. Process layout showing product movements.

1. Store Room, 2. Inspection Department, 3. Lathe Section,

4. Milling Section 5. Shaping Section, 6. Planning Section, 7. Drilling Section
8. Stock Room
 Manufacturing Process Layout
Milling
Lathe Department Department Drilling Department
L L 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

Grinding Painting Department

L L Department

Receiving and A A A
Shipping Assembly
© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e Ch 7 - 6
Advantages
q   Wide flexibility exists as regards allotment of work to
equipment and workers.
q   Better utilization of the available equipment.
q   Better product quality, because the supervisors and
workers attend to one type of machines and
operations.
q   Varieties of jobs coming as different job orders make
the work more interesting for the workers
q   Workers in one section are not affected by the
nature of the operations carried out in other another
section. Ex: lathe operator is not affected by the rays
of welding as the two sections are separate.
 
 Disadvantages
q       For same amount of production, process layout
needs more space.
q       Automatic material handling is extremely
difficult.
q       Work-in-process and inventory is large.
q       Production control becomes difficult.
q       Raw material has to travel larger distances for
getting processed to finished goods.
q       It needs more inspections and efficient
coordination.
 
It is also known as line (type) layout. It implies that
various operations on a product are performed in a
sequence and the machines are placed along the
product flow line. This type of layout is preferred
for continuous production.
 Designing Product Layouts
• Product layouts or assembly lines
• Develop precedence diagram of tasks
• Jobs divided into work elements
• Assign work elements to workstations
• Try to balance the amount work of each
workstation
 

3
X PRODUCT LAYOUT
4

 
S S
T Y V T
1 2 5 6 9 10 O
O W
R C
E K
 

R R
8 O
O
O 7 O
M M

Z
Raw material from the store is fed to three X, Y
and Z. Material in X line gets processed on
machines 3 and 4 and meets material of Y line after
it has been processed on the main assembly line
machines 1, 2. Products of X and Y lines are
assembled at W and get processed on machines 5
and 6 till another part comes from Z line and
assembles with the main product at V. After that
the total assembly gets worked on machines 9 and
10 then goes to the stock room.
 
Advantages
 Less space requirements for the same volume of production.
 Less in–process inventory.
 Product completes in lesser time.
 Smooth and continuous work flow.
 Better co-ordination and simple production planning and control.
Disadvantages
 Changes in product involves major changes in layout, and thus
layout flexibility is reduced.
 The rate of working depends upon the output of the slowest
machine.
 Difficulty to increase production beyond line capacity.
 Comparison Of Product And Process Layouts

PRODUCT LAYOUT PROCESS LAYOUT

1. Description Sequential arrangement of machines
Functional grouping
of machines
2. Type of Process Continuous, mass Intermittent, job shop
production, mainly batch production,
assembly mainly fabrication
3. Product Standardized Varied,
made to stock made to order
4. Demand Stable Fluctuating
5. Volume High Low
6. Equipment Special purpose General purpose
7. Workers Limited skills Varied skills
A combination of process and product layout combines the
advantages of the both types of layouts

PRODUCT LAYOUT
S GF-1 S
F-1 H-1
T T
O HT-1 O
P C
R L
R K
E A
O
C Y
R R
E O
O O
S U
O O
S T
M M

F-BLANK FORGING H-HOBBING M/C HT-HT FURNACE GF-GEAR FINISHING M/C

 Layout by fixed position of the product is inherent in ship
building, aircraft manufacturing and big pressure vessels
fabrication.

 In this case men and equipment are moved to the

material, which remains at one place and the product is
completed at the place where the material lies.
FIXED POSITION LAYOUT
Advantages
1) It involves least movement of materials.
2) There is maximum flexibility for all sorts of changes in
product and process.
3) A number of quite different projects can be taken with
the same layout.

Disadvantages
4) There appears to be low utilization of labour and
equipment.
5) It involves high equipment handling costs.
MASTER PRODUCTION SCHEDULING
Master Production Scheduling (MPS)
The master Production schedule sets the quantity of each end
item (finished product) to be completed in each time period
(week or month or quarter) of the short-range planning horizon.
Mater production schedules are developed by reviewing market
forecasts, customer orders, inventory levels, facility loading and
capacity information regularly.

Objectives of Master Production Scheduling

(i) To schedule end items to be completed promptly and when
promised to customers.
(ii) To avoid overloading or underloading the production facility, so
that, production capacity is effectively utilized and low
production costs result.
1) Translating aggregate plans into specific end items;
The aggregate is translated into specific number of end products to be
produced in specific time periods. Products are grouped into economic lot
sizes that can be realistically load the firm’s facilities.
2) Evaluating alternative schedules;
Master scheduling is done on a trail and error basis. Trail-fitting of
alternative MPS can be done by simulation using computers.
3) Generating material requirements;
MPS is the prime input to the MRP-I system. The MRP-I system provides for
purchasing or manufacturing the necessary items in sufficient time to meet
the final assembly dates specified, based on MPS for end products.
4) Generating capacity requirements;
Capacity needs, arise for manufacturing the components in the required
time schedule to meet the requirements of end products as per the MPS.
5) Facilitating information processing;
By controlling the work centers, the MPS determines the delivery
schedules for end products both for make-to-stock and make-to- order items.
It co-ordinates other information such as marketing capabilities, financial
resources (for carrying inventory) and personnel policies (for labour supply)
6) Maintaining valid priorities;
The due date and ranking of jobs should correspond with the time the
order is actually needed. MPS should be modified to reflect the changes in
customers change in their orders materials get scrapped some times, shortage
of some materials
7) Utilizing capacity effectively:
By specifying the end item requirements over a time period, the MPS
establishes the load and utilization parameter for labour and equipment (i.e.,
shifts worked or overtime or idle time)
Procedure for developing MPS

As orders are slotted in the MPS, the effects on the loading of the
production work centres are checked. This primary checking of the
MPS is called as “rough-cut capacity planning”. The main goal in
rough-cut capacity planning is to identify any week in the MPS,
when underloading or overloading of the production capacity
occurs and to revise the MPS as required.
MPS Process Chart
MPS Flow Chart