MODULE-2

FACILITY LOCATION (PLANT LOCATION)

Q.Why we need plant location? What are the factors affecting to location study?
Also mention the methods used in Plant Location study?
Plant location may be understood as the function of determining for the plant should be
located for the maximum operating economy and effectiveness.
Need of Plant Location
Need for the selection of the location may arise due to the following conditions.
1. When the business is newly started.
2. The existing business unit has out grown his original facilities and expansion is
not possible. Hence a new location has to be found.
3. The volume of business may necessities the establishment of branches.
4. A lease expires and the land lord has not renewed the lease.
5. When the company thinks that there is a possible of reducing manufacturing
cost by shifting from one location to other.
6. Other social or economic reason i.e. inadequate of labor supply, shifting of
market.
Factors affecting location study
1. Within the country /outside.
2. Selection of the region.
3. Selection of locality/community.
4. Selection of the exact site.
 Within the country
First step in plant location is to decide whether the facility should be located
domestically or internationally. The choice of a particular country depends on the
factors like political stabilities, currency and exchange rate, cultural and economical
factors, natural and physical conditions.
 Selection of the region
Selection of the region depends on the sub factors like
 Availability of raw material
 Proximity to the market
 Availability of power
 Transport facility
 Suitable of climate
 Competition between states
 Selection of locality or community
It depends on the sub factors like
 Availability of labor
 Civic amenities to workers
 Existence of complementary and competing industries
 Finance and research facility
 Availability of water and fire fighting facility
 Personal factors
 Selection of the exact site
It depends on the following sub factors
 Soil size and topology
 Disposal of waste
 Site selected should as far as possible be in the middle of good scenario
 The question of beauty should not be ignored

Methods used in location study

The methods used in location study are
i. Factor rating method
ii. Point study method
iii. Breakeven analysis
iv. Qualitative factor analysis
*For Problem refer to note: Single facility Tech. and Multifacity tech.

PLANT LAYOUT (FACILITY LAYOUT)

Plant layout refers to the arrangement of machinery, equipment and other industrial facilities-like
receiving and shipping dept., toolrooms, maintenanceroom, employeeamenities etc. - for the
purpose of achieving the quickest and smoothest production at the least cost.

It is a floor plan of the physical facilities which are used in production, which refers to the
generation of several possible plans for the special arrangement of physical facilities and select
the one which minimizes the distance between the depts...

OBJECTIVES OF PLANT (GOOD) LAYOUT

 Provide enough production capacity
 Minimize investment in equipment.
 Minimize overall production time.
 Minimize material handling cost.
 Reduce accident.
 Provide for employee convenience, safety and comfort.
 Utilize labor efficiently.
 Utilize existing space most effectively.
 Facilitate co-ordination and face to face communication among the employees.
 Improve productivity.

FACTORS INFLUENCING FACILITY LAYOUT

The factors which may influence the plant layouts are material, product, worker , machinery,
industry, location ,managerial policies etc.
MATERIAL:
 There is a need to provide the storage and movement of raw material in a plant until they
are converted into finished product.
 The type of raw materials used i.e. whether the raw materials are liquid or solid, light or
heavy, small or large.
 The availability or scarcity of materials affected by seasonal variations and market
conditions.

PRODUCT:
A layout is designed with the ultimate purpose of producing a product. The type of product, i.e.
whether:
 The product is heavy or light, big or small, liquid or solid
 It’s position in relation to plant location.

WORKER:
It also influences the plant layout. The type, position, and requirement of employees also
influence the layout. If women workers are employed, then the must be designed keeping in
mind their particular requirement. The position of employees i.e. whether they remain stationary
or moving, which influence the layout.

MACHINERY:
The type of raw materials, products, volume of its production, the type of process, the
management policies etc. determines the size and type of machinery to be installed which also
influence the layout.

LOCATION:
The site selected for the location of a plant influences its layout in different ways. The size of the
site determines the type of building, which influences the plant layout. The location of the plant
determines the mode of transportation, depending upon the source of raw materials and market
to the plant.
As plant need fuel in part, so there should be a space for fuel storage. The demand for future
expansion also influences the layout.

MANAGERIAL POLICIES:
The following managerial policies significantly influence the plant layout is:
 The volume of production and provision for expansion.
 Making or buying a particular component.
 Desire for rapid delivery of goods to customer
 Personnel policies etc.

TYPES OF LAYOUT:
 Process layout/Functional layout/Job shop layout.
 Product Layout/line processing layout/flow-line layout.
 Fixed position layout/Static layout.
 Combined/Hybrid Layout.

PROCESS LAYOUT:
In this layout similar machines and services are located together. Different spaces are fixed for
different operation dept... Therefore (below figure) all drills will be located in one area of the
plant. It is normally used when the production volume is low.
 Turning Shaping Drilling

Milling Grinding

ADVENTAGES OF PROCESS LAYOUT:

 Reduce investment of machine as they are general purpose machines.
 A high degree of flexibility in terms of task allocation to existing machines.
 Better utilization of men and machines.
 Better and efficient supervision is possible through specialization.
 The investment on equipment comparatively lower.
 There is a greater incentive to individual worker to increase his performance.
DISADVENTAGES:
 It requires more floor space.
 There is a difficulty in production control.
 Higher grade of skill are required.
 Large amount of in-process inventory will produce.

PRODUCT LAYOUT:
It is used only when machines and auxiliary services are located together according to
processing sequence of the product. It is normally when the production vol. is high .All the
operations should be included in one line.

Turning Shaping Milling Drilling

shaping Grinding Adhesive Packing

ADVANTAGES OF PRODUCT LAYOUT:

 The flow of product will be smooth and logical in flow line.
 In-process inventory is less.
 Operators need not be skilled.
 It requires less floor area per unit of production.
 There is a greater incentive to a group of worker s to raise their level of performance

DISADVENTAGES:
  Any breakdown of equipment/machine along a production line can disrupt the whole
system.
 Difficulty in supervision.
 Expansion is difficult.
 A change in product design may require major changes in the layout.

FIXED POSITION LAYOUT:

It is also called static product layout or layout by fixed position, where the physical characteristic
of the product dictate as to which type of machine and men are to be brought to the product.
The ship building industry, aircraft assemblies etc. employs this type of layout.

RAWMATERIAL
S
MACHINE & AIRCRAFT FINISHED
EQUIPMENTS PRODUCT
ASSEMBLY (Aircraft)
LABOUR

ADVENTAGES OF FPL:
 Men and Machines can be used for variety operations for different product.
 The investment on this layout is very small.
 The high cost and difficulty in transporting a bulky product are avoided.
DISADVENTAGES:
It has a limited scope.

HYBRID LAYOUT:
It is the combination of both product and process layout. It combines the advantages of both
layout systems. If there are ‘m’ machines and ‘n’ components, in this layout the no. of machines
and component will be divided into distinct no. of machine-component cells(groups) such that all
the component assigned to a cell are almost processed within the cell itself and objective is to
minimize inter cell movement.

MILLING PAINTING
BORING FITTING

DRILLING WELDING

SLOTTING TURNING WELDING

GRINDING

Group Layout with Two Cells

ADVENTAGES:
 Reliability of estimates increases.
 Effective machine operation increases.
 Improve productivity.
 More costing accuracy.
 Planning effort decreases.
 No/less need of Paper work.
  Down time decreases.
 WIP decreases.
 Work movement decrease.
 Overall production time decreases.
DISADVENTAGES:
 This type of layout may not be feasible for all situations and basically when the product
mix is dissimilar.
 More expenditure.

INVENTORY MANAGEMENT

The term ‘Inventory’ originates from French word ‘Inventaire’ and Latin word
‘Inventariom’, which implies a list of things found. The term inventory includes material -
raw, in process, finished packing, spares and other parts in stock in order to meet an
unexpected demand or distribution in future.
The term inventory includes the following categories of items
1. Production inventories: Raw materials, parts, and components which enter the
firm’s product into production process. These may consist of two general types: (a)
special items a manufactured to company specifications, and (b) standard industrial
item purchased ‘off the shelf’.
2. MRO Inventories:Maintenance, repair and operating supplies which are consumed
in the production process but which does not become part of product.
3. In-process inventories: Semi-finished goods found at various stages in the
production operation.
4. Finished goods inventories: Completed products ready for shipping.

INVENTORY COST
Inventory cost money. The cost factor must be considered while taking any decision
regarding inventories. Inventory cost includes ordering cost, carrying cost, out of the
stock or shortage cost, and capacity cost.
1. Ordering cost:
A. Cost of placing an order with a vendor of materials
i. Preparing purchase order
ii. Processing payment
iii. Receiving and inspecting materials
B. Ordering from the plant
i. Machine setup
ii. Start-up scrap generated from getting a production run started

2. Carrying cost
A. Cost of connected directly with material
i. Obsolescence
ii. Deterioration
iii. Pilferage
B. Financial cost
i. Taxes
 ii. Insurance
iii. Storage
iv. Interest
(Capital cost, storage space cost, inventory service cost, handling equipment cost,
inventory risk cost)
3. Out of stock cost
A. Back ordering
B. Lost sales
4. Capacity cost
A. Overtime payment when capacity is small
B. Lay-offs and idle time when capacity is too large

Inventory management involves the ‘development and administration of policies, system, and
procedures which will minimize special costs relative to inventory decisions and related
functions such as customer service requirements, production scheduling, and purchasing and
traffic”.

INVENTORY CONTROL TECHNIQUES

The inventory control techniques that are used most commonly are:
1. Always Better Control (ABC) analysis
2. High, medium, and low (HML) technique
3. Vital, essential and desirable (VED) analysis
4. Scarce, difficult and easy to obtained (SDE)
5. Fast, sloe and non-moving (FSN)
6. Economic order quantity (EOQ)
7. Max-Minimum system
8. Two bin system
9. Material Requirement Planning (MRP)

Economic order quantity

EOQ or Q Opt (Optimum Quantity) is the order size at which the total cost comprising ordering
cost and plus carrying cost, is the least.
2 DS
EOQ¿ √ ( )
H
Where D=Annual Demand;S=Ordering cost per order;H=Holding cost or carrying cost /unit/year

 ASSUMPTIONS
EOQ can be carrying with the help of a mathematical formula. Following are and the
implemented assumptions:
1. Demand for the product is constant and uniform through the period.
2. Lead time (time from ordering to receipt) is constant.
3. Price per unit of the product is constant
4. Inventory holding cost is based on average inventory
5. Ordering costs are constant
6. All demands for the product will be satisfied

MATERIAL REQUIREMENT PLANNING(MRP)

MRP is a computer-based system in which the given MPS is exploded into required amounts of
raw materials, parts and sub assembles, needed to produce the end items in each time period
(week or month) of the planning horizon.
 Objectives of MRP
 To improve customer service by meeting delivery schedules promised and
shortening delivery lead time.
 To reduce inventory cost by reducing inventory level.
 To improve plant operating efficiency by better use of provides resources.
 Purpose of MRP
The main purpose of MRP system are to control inventory level, assign operating
priorities for the item and plan capacity to load the production system. These are
classified under three broad areas:
1. Inventory: order the right item in right quantity and at right time to receive the
order at right time.
2. Priorities: order with the right due date and keep the due date valid.
3. Capacity: plan for a complete load, plan an accurate load and plan for an
adequate time to view road.
 ADAVANTAGES
I. Reduced inventory
II. Reduced idle time
III. Reduced set up time
IV. Ability to change MPS
V. Ability to price competitively
 DISADVANTAGES
I. Lack of top management acceptance
II. Presented and perceived as a standalone system
III. The issue is how MRP can be made to function with JIT production system.