Forecasting

Forecasting is the art and science of predicting future events. Forecasts are
required throughout an organization and at all levels of decision making in order
to plan for the future and make effective decisions. The principal use of forecasts
in operations management is in predicting the demand for manufactured
products and services for time horizons ranging from several years down to 1
day. Depending on the planning horizon, forecasting can be classified in three
ways
Short – range forecasting - (up to 1 year)
Medium – range forecasting - (up to 3 years)
Long – range forecasting - (more than 3 years)

Importance of forecasting
Forecasting plays a very important role in the following areas:
Human resource management – It is very much important in hiring,
training and laying-off workers all depend on anticipated demand.
Capacity planning - When capacity is inadequate, the resulting shortages
can mean undependable delivery, loss of customers, and loss of market share. In
these situations forecasting is important to avoid this.
Supply chain management - Good supplier relations and the ensuing
price advantages for materials and parts depend on accurate forecasts.
Types of forecasts
In general, a contemporary business organization employs three distinct types of
forecasts. These are given under:
1. Economic forecasts
2. Technological forecasts
3. Demand forecasts
Economic forecasts address the business cycle by predicting inflation rates,
money supplies, housing starts, and other planning indicators.
Technological forecasts are concerned with rates of technological progress,
which can result in the birth of exciting new products, requiring new plants and
equipment.
Demand forecasts are projections of demand for a company’s products or
services. These forecasts, also called sales forecasts, drive a company’s
production, capacity, and scheduling systems and serve as inputs to financial,
marketing, and personnel planning.
Steps in forecasting
There are eight steps to a forecasting system. These are:
1. Determine the use of the forecast – (What objectives are we trying to
achieve?)
2. Select the items that are to be forecasted
3. Determine the time horizon of the forecast – (short, medium, or long)
4. Select the forecasting model
5. Gather the data needed to make the forecast
6. Validate the forecasting model
7. Make the forecast
8. Implement the results
Approaches of forecasting
There are numerous approaches to forecasting depending on the need of the
decision maker. Broadly speaking, these can be categorized in two ways.
1) Quantitative forecasting methods
2) Qualitative forecasting methods
Qualitative methods - In general, we should consider using qualitative
forecasting techniques when one or more of the following conditions exist
Little or no historical data on the phenomenon to be forecast exist.
The relevant environment is likely to be unstable during the forecast
horizon.
The forecast has a long time horizon, such as more than three to five
years.
The various Qualitative Methods are listed below
a) Jury of executive opinion - This method takes the opinions of a small
group of high-level managers, often in combination with statistical models, and
results in a group estimate of demand.
 b) Sales force composite - In this approach, each salespeople estimates
what sales will be in his or her region. These forecasts are then reviewed to
ensure they are realistic, then combined at the district and national levels to
reach an overall forecast.
c) Delphi method - This is an iterative group process. There are three
different types of participants in the Delphi process: decision makers, staff
personnel, and respondents. The decision makers usually consist of a group of
five to ten experts who will be making the actual forecast. The staff personnel
assist the decision makers by preparing, distributing, collecting, and summarizing
a series of questionnaires and survey results. The respondents are a group of
people whose judgments are valued and are being sought. This group provides
inputs to the decision makers before the forecast is made.
d) Consumer market survey method - This method takes input from
customers or potential customers regarding their future purchasing plans. It can
help not only in preparing a forecast but also in improving product design and
planning for new products.
e) Naive approach - It assumes that demand in the next period is the
same as demand in the most recent period. In other words, if sales of a product,
say, Reliance WLL phones, were 100 units in January, we can forecast that
February’s sales will also be 100 phones. Does this make any sense? It turns out
that for some product lines, selecting this naïve approach is a cost-effective and
efficient forecasting model.
Quantitative Methods
The chief Quantitative methods are:

The time series models of forecasting predict on the basis of the

assumption that the future is a function of the past. In other words, they look at
what has happened over a period of time and use a series of past data to make a
forecast. If we are predicting weekly sales of washing machine, we use the past
weekly sales for washing machine in making the forecast.
A causal model incorporates into the model the variables or relationships
that might influence the quantity being forecast. A causal model for washing
machine sales might include relationships such as new housing, advertising
budget, and competitors’ prices etc.
Moving Averages method
Moving averages are useful if we can assume that market demands will stay
fairly steady over time. Moving average can be defined as the summation of
demands of total periods divided by the total number of periods.
Both simple and weighted moving averages are effective in smoothing out
sudden fluctuations in the demand pattern in order to provide stable estimates.
Moving averages do, however, have three problems.
First, increasing the size of n (the number of periods averaged) does
smooth out fluctuations better, but it makes the method less sensitive to real
changes in the data.
Second, moving averages cannot pick up trends very well. Since they
are averages, they will always stay within past levels and will not predict a
change to either a higher or lower level.
Finally, moving averages require extensive records of past data.
Causal forecasting models
Causal forecasting models usually consider several variables that are related to
the variable being predicted. It utilizes time series related to the variable being
forecast in an effort to better explain the cause of time series behavior. For
example, sales of a product depend on various factors. Some of these are listed
below:
Firm’s advertisement budget
The price charged
Competitor’s prices
Promotional strategies
Regression analysis is the tool most often used in developing these causal models.
The complete discussion of regression analysis is beyond the scope of this class.
We will discuss a few underlying concepts to get insight about how this technique is
used. First of all, according to the logic and methodology of regression analysis, the
time series value that we want to forecast is referred to as the dependent variable.
The variables that we try to relate to the dependent variable are referred to as
independent variables, and the function that is developed to relate the dependent
variable to the independent variables is called the estimated regression function.
Thus if we can identify a good set of independent or predictor variables, we may be
able to develop an estimated regression function for predicting or forecasting the
time series.
Linear regression analysis
The most common quantitative causal forecasting model is linear regression
analysis. By linear, we mean an equation of degree 1.The equation given below
fulfills this criterion:
Y = a + bx

Comparison of forecasting techniques

Forecasting error
A forecast error is the difference between the actual or real and the predicted or
forecast value of a time series or any other phenomenon of interest.
Forecasting error = Actual demand – Forecasted demand
In simple cases, a forecast is compared with an outcome at a single time-point
and a summary of forecast errors is constructed over a collection of such time-
points. Here the forecast may be assessed using the difference or using a
proportional error. By convention, the error is defined using the value of the
outcome minus the value of the forecast. In other cases, a forecast may consist
of predicted values over a number of lead-times; in this case an assessment of
forecast error may need to consider more general ways of assessing the match
between the time-profiles of the forecast and the outcome. If a main application
of the forecast is to predict when certain thresholds will be crossed, one possible
way of assessing the forecast is to use the timing-error—the difference in time
between when the outcome crosses the threshold and when the forecast does
so. When there is interest in the maximum value being reached, assessment of
forecasts can be done using any of:
The difference of times of the peaks;
The difference in the peak values in the forecast and outcome;
The difference between the peak value of the outcome and the value
forecast for that time point.
Forecasting error types
1) MAD (Mean Absolute Deviation)
2) MSE (Mean Square Error)
3) MFE (Mean Frequency Error)
4) MAPE (Mean Absolute Percentage Error)

Planning
Planning in organizations and public policy is both the organizational process of
creating and maintaining a plan; and the psychological process of thinking about
the activities required to create a desired goal on some scale. A plan can play a
vital role in helping to avoid mistakes or recognize hidden opportunities.
Preparing a satisfactory plan of the organization is essential. The planning
process enables management to understand more clearly what they want to
achieve, and how and when they can do it.
A well-prepared business plan demonstrates that the managers know the
business and that they have thought through its development in terms of
products, management, finances, and most importantly, markets and
competition. Planning helps in forecasting the future, makes the future visible to
some extent. It bridges between where we are and where we want to go.
Strategic planning
Strategic planning is a planning activity carried out by the top level managers of
the organization. It is an organization's process of defining its strategy, or
direction, and making decisions on allocating its resources to pursue this
strategy, including its capital and people. Various business analysis techniques
can be used in strategic planning, including SWOT analysis (Strengths,
Weaknesses, Opportunities, and Threats) and PEST analysis (Political,
Economic, Social, and Technological analysis) or STEER analysis involving
Socio-cultural, Technological, Economic, Ecological, and Regulatory factors and
EPISTELS (Environment, Political, Informatic, Social, Technological, Economic,
Legal and Spiritual).
Tactical planning
Tactical planning is a planning activity carried out by the middle level managers
of the organization. It is a systematic determination and scheduling of immediate
or medium term activities required in achieving the objectives of strategic
planning.
Operational planning
Operational planning is a planning activity carried out by the bottom level
managers of the organization. An operational planning is a subset of strategic
work plan. It describes short-term ways of achieving milestones and explains
how, or what portion of, a strategic plan will be put into operation during a given
operational period, in the case of commercial application, a fiscal year or another
given budgetary term.
Capacity Planning
‘Capacity planning’ is the process of determining the production capacity needed
by an organization to meet changing demands for its products. "Capacity" is the
maximum amount of work that an organization is capable of completing in a
given period of time. Capacity planning concerns determination and acquisition of
productive resource to ensure that their availability matches the demand.
Capacity decisions have a direct influence on performance of the production
system in respect of both resource productivity and customer service.
Capacity planning decisions can be short-term as well as long-term decisions.
Long-term capacity planning decisions concern expansion/contraction of
major facilities require in the conversion process, economics of multi-shift
operation, development of vendors for major components, etc.
Short-term capacity planning decisions concerns issues like overtime
working, shift adjustments, etc. Break-even analysis is valuable tool for capacity
planning.
Demand for an organization's capacity varies based on changes in production
output, such as increasing or decreasing the production quantity of an existing
product, or producing new products. Better utilization of existing capacity can be
accomplished through improvements in overall equipment effectiveness (OEE).
Capacity can be increased through introducing new techniques, equipment and
materials, increasing the number of workers or machines, increasing the number
of shifts, or acquiring additional production facilities.
Capacity can be calculated as
(Number of machines or workers) × (number of shifts) × (utilization) × (efficiency).
Classification of capacity planning
The broad classes of capacity planning are lead strategy, lag strategy, and match
strategy.
Lead strategy is adding capacity in anticipation of an increase in
demand. Lead strategy is an aggressive strategy with the goal of luring
customers away from the company's competitors. The possible disadvantage to
this strategy is that it often results in excess inventory, which is costly and often
wasteful.
Lag strategy refers to adding capacity only after the organization is
running at full capacity or beyond due to increase in demand. This is a more
conservative strategy. It decreases the risk of waste, but it may result in the loss
of possible customers.
Match strategy is adding capacity in small amounts in response to
changing demand in the market. This is a more moderate strategy.
Aggregate planning
Aggregate planning is the process of developing, analyzing, and maintaining a
preliminary, approximate schedule of the overall operations of an organization.
The aggregate plan generally contains targeted sales forecasts, production
levels, inventory levels, and customer backlogs. This schedule is intended to
satisfy the demand forecast at a minimum cost. Properly done, aggregate
planning should minimize the effects of shortsighted, day-to-day scheduling, in
which small amounts of material may be ordered one week, with an
accompanying layoff of workers, followed by ordering larger amounts and
rehiring workers the next week. This longer-term perspective on resource use
can help minimize short-term requirements changes with a resulting cost
savings.
In simple terms, aggregate planning is an attempt to balance capacity and
demand in such a way that costs are minimized. The term "aggregate" is used
because planning at this level includes all resources "in the aggregate;" for
example, as a product line or family. Aggregate resources could be total number
of workers, hours of machine time, or tons of raw materials. Aggregate units of
output could include gallons, feet, pounds of output, as well as aggregate units
appearing in service industries such as hours of service delivered, number of
patients seen, etc.
Aggregate planning does not distinguish among sizes, colors, features, and so
forth. For example, with automobile manufacturing, aggregate planning would
consider the total number of cars planned for not the individual models, colors, or
options. When units of aggregation are difficult to determine (for example, when
the variation in output is extreme) equivalent units are usually determined. These
equivalent units could be based on value, cost, worker hours, or some similar
measure.
Aggregate planning is considered to be intermediate-term (as opposed to long-
or short-term) in nature. Hence, most aggregate plans cover a period of three to
18 months. Aggregate plans serve as a foundation for future short-range type
planning, such as production scheduling, sequencing, and loading. The master
production schedule (MPS) used in material requirements planning (MRP) has
been described as the aggregate plan "disaggregated."
Rough-cut capacity planning
A master production schedule (MPS) is based on forecasts and firm orders.
Before this can be released to production, it must be checked to see if the targets
in the MPS can in fact be achieved. Rough-cut capacity planning is one of the
methods used to check the feasibility of the proposed MPS. RCCP is used to
make a quick check on the capacity of the key resources to meet the proposed
MPS.
During the RCCP process, a bill of resources is attached to each item on the
MPS. A bill of resources is a listing of resources required to produce one unit of
the item (including labour and machines / equipment, and so on). The MPS is
exploded on the key resources (labour hours, machine hours, storage costs,
etc.). It is important to use accurate lead-times in this process.
If the RCCP output indicates that the proposed MPS is not feasible, then either
additional resources are proposed (for example, overtime, new machinery, out-
sourcing), or the MPS is revised.
Master Production Schedule
A Master Production Schedule is a Schedule of the completions of the end items
and these completions are very much planned in nature. Master production
schedule acts as a very distinct and important linkage between the planning
processes. With the help of this schedule, one can know the requirements for the
individual end items by date and quantity. In companies, MPS are generally
produced in order to know the number of each product that is to be made over
some planning horizon. This schedule forms a very unique part of the company’s
sales program which deals with the planned response to the demands of the
market.
Master Production scheduling (MPS) software
Master Production scheduling (MPS) software (manufacturing software) allows
manufacturing staff to generate detailed dispatch lists for individual production
machines, units of labor and other manufacturing resources. Basically, MPS
software or manufacturing software deals with a time frame close into the
present. Usually, it is given released, or soon to be released, shop orders to
schedule. These orders may be supplied via an interface to an MRP or ERP
system which can be done by MRP software or ERP Software respectively or
entered in manually. Typically, it is used in a single facility.
Master production scheduling core benefit
1. Basis for making customer delivery promises
2. Utilizing plant capacity effectively

3. Attaining the firm’s strategic objectives as reflected in the production plan and
4. Resolving trade-off between manufacturing and marketing.
Material requirement planning (MRP-I)
Material requirements planning (MRP) has become a centerpiece for all
manufacturing systems. The key to successful production and operations
management in a manufacturing company is the balancing of requirements and
capacities. It’s that simple and yet very challenging. To understand it is essential
and to practice it can be a lot of fun. Remember what you are trying to do. Meet
the needs of your customers by having the product available when it is wanted.
In production management, we do this by knowing in advance what our
requirements are now and in future and planning ahead to have the capacity
available.
In recent years material requirements planning systems have replaced reactive
inventory systems in many organizations. Managers using reactive systems ask,”
What should I do now?,” Whereas managers using planning systems look ahead
and ask,” What will I be needing in the future? How much and when?” Improved
customer service and other advantages come at a cost, however. They require a
system for accurate inventory and product buildup information. They also require
a realistic master production schedule (MPS) to specify when various quantities
of end items will be completed.
Demand dependency is an important consideration in choosing between reactive
and planning systems. Demand dependency is the degree to which the demand
for some item is associated with the demand for another item. With independent
demand, demand for one item is unrelated to the demand for others. In the
dependent demand situation, if we know the demand for one item, we can
deduce the demand for one or more related items.
Objectives of MRP
1) Inventory reduction: MRP determines how many of a component is
needed and when, in order to meet the master schedule
2) Reduction in production and delivery lead times: MRP identifies
materials and components quantities, timings, availabilities, and procurement
and production actions required to meet delivery dealings.
3) Realistic commitments: Realistic delivery promises can enhance
customer satisfaction. By using MRP, production can give marketing timely
information about likely delivery times to prospective customers.
4) Increased efficiency: MRP provides close coordination among various
work centers as products progress through them.
Components of MRP system Master
Bill of material (BOM)
The BOM identifies how each end product is manufactured, specifying all
subcomponents items, their sequence of buildup, their quantity in each finished
unit, and the work centers performing the buildup sequence.
Inventory status file
The MRP system must retain an up-to-date file of the inventory status of each
item in the product structure. This file provides accurate information about the
availability of every item controlled by the MRP system which can then maintain
an accurate accounting of all inventory transaction, both actual and planned.
Management of MRP
MRP is not state; it is responsive to new job orders from customers and current
shop conditions, as well as changes anticipated for the future.
1. Pegging: The process of tracing through the MRP records and all
levels in the product structure to identify how changes in the records of one
component will affect the records of other components.
2. Cycle counting: Counting on-hand inventories at regular intervals to
verify inventory quantities shown in the MRP
3. Regenerative method: A procedure, used at regular intervals, to
update the MRP by completely reprocessing the entire set of information and
recreating the entire MRP
4. Time fence: A designated length of time that must pass without
changing the MPS, to stabilize the MRP system; afterward, the MPS is allowed to
change.
Lot sizing
The MRP system generates planned order releases, which trigger purchase
orders for outside suppliers or work orders for internal component production.
1) Lot-for-lot ordering: A lot sizing policy in which order quantity equals net
requirements for the period
2) Part-period method: A lot sizing policy in which order quantity varies
according to a comparison of holding versus ordering costs.
Each time the MRP system is updated managers must ask whether shop
capacity is sufficient to implement the current plan. Detailed capacity planning
(also called capacity requirements planning) is a technique that addresses this
question and it does so in more detail than the rough-cut method. New
information from MRP permits refinements that were not possible at the rough-
cut level.
A document that shows the routing of a component, including the work centers
and an operation time, through its production processes is called route sheet.
To visualize the time-phased capacity requirements, we first construct the
operation setback chart for the end item.
Limitations and advantages of MRP
The limitations of MRP stem from the conditions that must be met before it can
be used. A computer is necessary; the product structure must be assembly-
oriented; bill of materials and inventory status information must be assembled
and computerized; and a valid master schedule must be prepared. Another
limitation has to do with data integrity. Unreliable inventory and transactions data
from the shop floor can ruin a well-planned MRP system. Training personnel to
keep accurate records is not an easy task, but it is critical to successful MRP
implementation. In general, the system must be believable, accurate, and directly
useful or else it will become an expensive ornament that is bypassed in favor of
informal, ad hoc methods.
The dynamic nature of the MRP system is a vital advantage. It reacts well to
changing conditions; in fact, it thrives on change. Changing conditions from the
master schedule for several periods into the future can affect not only the end
item but also hundreds, even thousands, of components. Because the
production-inventory data system is computerized, management can make a new
MRP computer run to revise production and procurement plans that react quickly
to changes in customer demands as reflected in the master schedule.
Manufacturing resource planning (MRPII)
Historically, MRP systems typically were developed on a segregated basis,
rather than as part of highly integrated information system. More recently,
however, companies are beginning to logically relate many of their information
subsystems to the MRP system. Bills of materials data, for example, can be
shared with engineering information system data base; order release and order
receipts data can be shared by the order billing and accounts payable
information systems; and inventory status data from MRP can be part of
marketing or purchasing information systems. This type of information
integration, in fact, is exactly the impetus for a new generation of manufacturing
planning and control systems. Manufacturing resource planning (MRP II, or
“closed loop” MRP) is an integrated information system that steps beyond first-
generation MRP to synchronize all aspects (not just manufacturing) of the
business. The MRPII system coordinates sales, purchasing, manufacturing,
finance, and engineering by adopting a focal production plan and by using one
unified data base to plan and update the activities in all the systems.
it is developed by the consensus of executives and becomes their “game plan”
for operations. The production department then is expected to produce at the
committed levels, the sales department to sell at these levels, and the finance
department to ensure adequate financial resources for these levels. Guided by
the production plan, the master production schedule specifies the weekly
quantities of specific products to be built. At this point a check is made to
determine whether the capacity available is roughly adequate to sustain the
proposed master schedule. If not, either the capacity or the master schedule
must be changed. Once settled, the master schedule is used in the MRP logic,
as previously described, to create material requirements and priority schedules
for production. Then, an analysis of detailed capacity requirements determines
whether capacity is sufficient for producing the specific components at each work
center during the scheduled time periods. If not, the master schedule is revised
to reflect the limited available capacity. After a realistic, capacity-feasible
schedule is developed, the emphasis shifts to execution of plan: purchase
schedules and shop schedules are generated. From these schedules, work
center loadings, shop floor control, and vendor follow-up activities can be
determined to ensure that the master schedule is met.
One use of the MRPII system is to evaluate various business proposals. If, for
example, the output of product X increases by 20 percent in weeks 15 to 20 and
that of Y decreases by 15 percent in weeks 10 to 15, how would operations and
profitability be affected? The system can simulate how purchases and, hence,
accounts payable are affected? The system can simulate how purchases and,
hence, accounts payable are affected, when delivers to customers and accounts
receivable occur, what capacity revisions are needed, and so on. The company-
wide implications of the proposed change can be evaluated, and various
departments can be coordinated according to a common purpose.
Materials management brings together under one manager all the planning,
organizing, and control activities associated with the flow of materials into and
through an organization. Physical distribution is even broader, encompassing
managing materials flow into the organization as well as managing materials
storage and transportation flow out as finished products. In the context of
operations management, we focus here on the narrower purchasing function,
which provides materials, supplies, and services from outside vendors
(suppliers). Accordingly, purchasing is an important boundary function that
supports operations by acquiring major resources for the conversion process. For
manufacturing firms involved in assembly, it is not unusual for the cost of
purchased materials to exceed, as a percent of total product cost, the value
added internally to the product through manufacturing and assembly. The
importance of the purchasing function to the firm’s performance and to
operations performance is substantial.
Enterprise resource planning (ERP)
ERP is business management software that allows an organization to use a
system of integrated applications to manage the business. ERP software
integrates all facets of an operation, including development, manufacturing, sales
and marketing.
ERP characteristics
 An integrated system that operates in real time (or next to real time),
without relying on periodic updates.
  A common database, which supports all applications.
 A consistent look and feel throughout each module.
 Installation of the system without elaborate application/data integration by
the Information Technology (IT) department.
Finance/Accounting - General ledger, payables, cash management, fixed
assets, receivables, budgeting, and consolidation
Human resources - Payroll, training, benefits, 401K, recruiting, diversity
management
Manufacturing - Engineering, bill of materials, work orders, scheduling, capacity,
workflow management, quality control, cost management, manufacturing
process, manufacturing projects, manufacturing flow, activity based costing,
product lifecycle management
Supply chain management - Order to cash, inventory, order entry, purchasing,
product configuration, supply chain planning, supplier scheduling, inspection of
goods, claim processing, and commissions
Project management - Costing, billing, time and expense, performance units,
activity management
Customer relationship management - Sales and marketing, commissions,
service, customer contact, call center support
Data services - Various "self–service" interfaces for customers, suppliers and/or
employees
Access control - Management of user privileges for various processes
Facilities
At the level of a manufacturing plant or service facility, operations management is
concerned with determining the level of resources necessary to support strategy
or alternately maximizing the level of outputs at a given level of resources.
Capacity management here will be concerned with both the absolute level at
which the operation can produce outputs and the range and/or mix of outputs
that can be produced. This is important because one of the ultimate goals of a
business organization is to generate profits, not to maximize investment in
assets.
In the long term, organizations match capacity with demand through changing
the number, location and processing capacity of facilities. At the organizational
level, the number and location of facilities is a strategically important decision
that will affect the total output of the organization. At the operational level, a
major influence on the capacity of an individual manufacturing or service facility
is the physical space available.
Facility location
Facility location is important for operations that involve either production facilities
manufacturing physical goods or service facilities that need to serve customers
through direct customer contact. Facility location decisions are influenced by
various factors, including the locations of customers, suppliers and workers, how
local conditions affect business operations, and costs of doing business
(including infrastructure). An organization may decide to centralize the production
of all of its outputs in a single large facility, or to invest in multiple facilities, either
located close to markets or specializing in a particular output or range of outputs.
Organizations may use a ‘hub and spoke’ network for linking facilities; this is a
popular arrangement for airlines and overnight package delivery companies. The
London Underground is an example of a highly centralized system; nearly all the
tube lines are laid out so that it is difficult to go from one point on the periphery to
another without passing through the centre of London (with the exception of
stations on the Circle line).
Physical location is no longer central for some types of operations. The rise of
virtual organizations and the increasing amount of transactions conducted over
the telephone, dedicated communications systems and the Internet means that
availability to customers through electronically-mediated means, rather than
physical location, is becoming increasingly important to customer choice. We
have already discussed the ability of banks to deliver financial services through
multiple channels, including face-to-face transactions, ATMs, telephone banking,
dial-up services, and over the Internet. Support services such as call centers and
data processing can be located anywhere – some remote fishing villages in
Scotland have become major players in call processing, and data processing for
major organizations can be done in India overnight for records updating. Work is
also being done within organizations on a remote basis; teleworking and
telecommuting are becoming popular alternatives to commuting to the office via
crowded roads or railways.
Need for location planning
The location options for any organization are as follows:
1. Expanding the existing facility.
2. Add new locations while retaining existing ones, as is done in many retail
stores.
3. Shut down one location and move to another.
4. Option of doing nothing and maintaining the status quo
Factors influencing facility location selection
1) Availability of Raw Material: Nearness to the place of the raw material
will give advantage on the transportation cost, so that the profitability can
be improved. When the raw material is heavy or is consumed in bulk,
then plant location has to be nearer to the raw material site.
2) Nearness to Market: It reduces the cost of transportation as well as the
chances of the finished products getting damaged and spoiled on the way,
especially the perishable products. Moreover, a plant being nearer to the
market can capture a big market share and can render quick service to the
customers.
3) Transport facilities: A lot of money is spent both in transporting the raw
materials and the finished goods. Depending upon the size of raw
material and finished goods, a suitable method of transportation like road,
rail, water or air is selected and accordingly the plant location is decided.
One point which must be kept in mind is that the cost of transportation
should remain fairly small in proportion to the total cost.
4) Availability of Labour: Stable labour force right kind, of adequate size
and at reasonable rates with its proper attitude towards work are a few
factors which govern plant location to a major extent.
5) Availability of Fuel and Power: The main sources of energy are
electrical power, coal, oil, etc. In the case of power intensive industries
like steel manufacturing units or continuous process industries like
petrochemical and cement, the availability of fuel and power will be one of
the major deciding factors in plant location.
6) Climate: Depending on the type of industry and the products that are
being manufactured, this is a different factor. For instance, in the case of
textile mills climatic conditions with adequate humidity is a basic essential
criterion. That is the reason many textile mills have been put up in
Bombay, Coimbatore region.
7) Water Availability: In industries like textile dying, paper or chemicals, the
requirement of good quality water is one of the basic requirements for
plant location. The water is required for processing or for effluent ejection
into the rivers or specifically for waste disposal.
8) Government Policies: The central and state governments may declare
many taluks as backward and give numerous concessions like tax holiday,
uninterrupted power supply, capital subsidy, easy availability of loans, etc.,
for balanced development of regions in the country.
9) Land: Topography, area, the shape of the site, cost, drainage and other
facilities, the probability of floods and earthquakes will influence the
selection of the location.
10) Community Attitude: Industries like matches, crackers, hosiery and
leather have flourished because of the positive attitude of the community
towards these industries.
11) The presence of related industries will give many advantages like
availability of skilled laborers, standard components.
12) Housing facilities.
13) Security.
14) Local by-laws, taxes, building restrictions
15) Existence of other service facilities like hospital marketing centers,
schools, banks, post offices, clubs.
These factors, depending on the product to be manufactured or the industry, may
separately or collectively have to be given the required weightage. In the
process, many alternatives may emerge. The management decision will be
taken after weighing all the alternatives and selecting the best among them.
Cost factor
In plant location, apart from the availability of technology, etc., the major deciding
factor will be the cost of the final product. The ideal plant location is the one
which results in lowest cost of production and distribution of the items in the
market. For some production facilities, the basic necessity itself may be that it
has to be located nearer to the market, that is, the facility has to be created in the
urban area. For some others, it can be located at remote rural areas. Cost is
associated with each decision.
Plant Layout or Facility Layout
The objective of every management is to ensure economical and efficient use of
material and human resources for realizing the predetermined targets of output
consistent with market demand. Production is now primarily an engineering
function. Therefore, it has to be planned in all its technical details. Appropriate
machines, suitable tools and equipment have to be provided with installation and
servicing facilities, plant layout refers to the scientific arrangement of machines
and tools to secure smooth conduct of manufacturing process as designed and
scheduled. The costs of production would depend to a large extent on physical
arrangement of machines, tools etc, and their proper handling in the course of
manufacturing processes. If the arrangement of production apparatus is
unscientific or haphazard there would be wastage from the point of time and
resources besides higher maintenance and handling costs.
Therefore, it should be the best endeavor of every management to build up a
well-knit plant complex with all auxiliary facilities, so that production processes
are conducted without delay, interruption and wastages. This would reduce the
possibility of higher overhead costs implied in operation of machines and
handling of tools and materials after careful analysis of the operations, targets
location, cost factors, future plans etc.
Need for Plant Layout
Plant layout has become inevitable function of management due to far-reaching
development in the field of science, technology and their application to wide
range of industrial and commercial activities. “Plant layout is applied by
management in order to attain consistently profitable operation and to avoid
commercial and technological obsolescence.”
Proper plant layout is necessitated by the following factors:
 Establishment of new plant to manufacture newly designed and
developed products.
 Major expansion of the capacity of existing plants to meet
additional load of demand.
 Incorporation of latest changes in technology, plant design,
equipment etc.
 Need for increasing the efficiency of operations through radical
as well as routine changes in design and method of production.
Every year new manufacturing units come into existence involving substantial
investment of money in plant machinery and ancillary equipment. Shifts in
location of industries, technological innovation, growth of demand due to
increasing population, change in tastes of consumers have been the broad
reasons for development of new units in diverse production activities. Obviously
layout engineering assumes importance in designing and installing new plants as
a prelude to their economical and efficient operation.
Thus, plant layout engineering has to be adopted while installing new plant,
expanding or revising the existing plant and for eliminating bottlenecks of in
efficiency in the different phases of manufacturing process.
Meaning and objectives of Plant layout
The term ‘Plant Layout’ has been defined by many authors in many ways. A few
of these definitions are given below:
“Plant Layout is the arrangement and location of production machinery, work
centers and auxiliary facilities and activities (Expectation, handling of material
storage and shipping) for the purpose of achieving efficiency in manufacturing
products or supplying consumer services.”
Keith and Gubellini. “Plant layout deals with the arrangement of the physical
facilities and the manpower which are required to manufacture a product or
perform a service.” J. Lundy. “Plant Layout ideally involves the allocation of
space and the arrangement of equipment in such a manner that overall
operations costs be minimized”.
Objectives of Layout
Systematic arrangement of plant and its ancillaries in accordance with the nature
of the job to afford maximum convenience for the workers to operate the
activities assigned to them is the basic objectives of plant layout. Since
production is nothing but the movement of materials in different stages for
conversion into finished products, plant layout is intended to fulfill the following
fundamental objectives, which are also the criteria for an ideal layout:
(a) Providing facilities to receive the materials intended to be used in the
manufacturing processes.
(b) Proper arrangement of machinery and equipment in each department
to provide ample room to place materials within easy reach of the
workers.
(c) Near accessibility (through proper routing) to stores, centers and
ensuring direct and continuous movement of stores materials to initial
and subsequent operations.
(d) Free access to machines and assembly lines for quick delivery of
material within each department and fast pick up of out bound
material and wastes.
(e) Adequate storage facilities for materials in process between
consecutive operations.
(f) Grouping of machines and departments in such a manner that
movement of materials or job on hand between the successive
operations is as short as possible with minimum of back-tracking and
needless handling.
 (g) Stock-rooms and tools cabins with facilities for storing, recording and
handling of materials, tools, etc. with minimum delay.
(h) Arrangement for packing and crating finished products instantly and
automatically moving them to warehouses or different corners bound
for different market destinations.
(i) Arrangement of plant, tools and physical facilities consistent with
maximum convenience, safety and health of the workers.
Benefits of Plant Layout
Plant layout planned according to the above noted objectives will help in attaining
high productivity in the use of plant, equipment, labour and materials. Its benefits
can be summarized as under:
1. Useful in planning and control. Good plant layout facilities accurate
planning and control of production. A study quantity of layout is assured by
proper layout of the productive capacity and its utilization. Idleness of
Machinery and man would be reduced to the minimum and production
capacity would be maintained intact as per schedule.
2. Efficient utilization. A sound layout ensures more efficient utilization of
machinery and man. It avoids congestion of production areas over crowding
of personnel at the production sports and then six to avoid delay in flow of
product or eliminates bottlenecks that cause slow down of the product
schedule. Thus overhead costs are reduced by continuous or uninterrupted
use of Machines and Personnel
3. Proper arrangement of plant. The proper arrangement of occupment and
plant operations would also minimize the effort and cost of materials
handling.
4. Proper utilization of floor. Ideal plant layout secures better utilisation of
available floor space. Well-designed plant layout economises the space
required for production and reduces the unit cost and at the same time
makes, provision for additional floor space that may be felt necessary for
expansion of productive capacity or diversification of product lines.
 5. Lesser working hours. Proper machine arrangement and service facilities
will reduce “The overall time of work in process” by securing a smooth flow
of work over the shortest routes of production. The works in process, the
hold of stock, costs of inventory are all minimized by sound layout of plant
operations in logical sequence.
6. Useful in efficient supervision. A well designed layout is regarded as a
prerequisite to effective supervision.” Good layout makes it easy for the
workers to carry out their assigned activities without the need for elaborate
instructions and supervision. Since the ideal plant layout involves
standardized sequence operations with greater degree of automatic
movement of materials and operational processes, supervisory efforts and
costs are obviously reduced to the minimum possible.
7. Safety to executives. Good plant layout ensures safety to the operating
personnel. The risks or hazards in mechanical operations at work centers
are eliminated by safety devices built into the design of the plant and the
allied layout of the equipment. Plant layout which incorporates safety
element will result in lesser accident and lesser loss of man hours.
8. Improve in morale. A good plant layout butteressed by wholesome service
facilities, better working conditions like lighting, ventilation, noise control etc.
improves employee-morale and enhance their efficiency in performance.
Factors Influencing Layout
As pointed out earlier, the pattern of layout varies from industry to industry,
location to location and plant to plant. Different types of layout are in use; and
the selection of a particular type to suit the requirements of a plant depends on a
number of factors. Primarily the layout of a plant is influenced by the relationship
among materials, machinery and men. Other factors such as the type of product,
the type of workers, the type of industry and management policies – also
influence the layout. Some of the factors which influence layout are explained in
the following paragraphs:
i) Materials: When it is said that materials influence plant layout, what is meant
is that there is a need to provide for the storage and movement of raw materials
in a plant until they are converted into finished products. Every factory should
buy raw materials economically when they are available; they should be stored
properly and moved through production centers efficiently for manual or
mechanical operations or chemical processing. The storage and movement of
raw materials require properly placed storage rooms and materials movement or
handling equipment. These involve initial investment and recurring costs. The
type and size of storage, as also the type of materials, equipment, cranes,
trolleys and pipelines depend upon:
(a) The type of raw materials used, i.e., whether the raw
Materials are liquid or solid, light or heavy, small or large; and
(b) The availability or scarcity of materials even when this is
affected by seasonal variations and market conditions.
In certain manufacturing concerns which use heavy raw materials, as in the
manufacture of road-rollers, heavy overhead cranes are required. Pipelines are
used to transport iron ore, crude oil, wheat and salt. For example, a 67 km slurry
pipeline carries iron ore from the Kudremukh Iron Ore Project to Mangalore Port.
Gravity or airflow moves the materials ahead in the pipelines. Similarly, roller
conveyors, belt conveyors and chain conveyors are used to move materials
during various stages of production. It is, therefore, essential that, a plant layout
should be planned after bearing in mind the particular handling or moving
equipment which may be required in the manufacturing process.
The usual way of taking the raw material factor into account is to draw flow charts
to visualize the paths of materials flow or movements, and then to eliminate
cross-covers, long distances and back tracking. The best path is thus
determined, around which the layout is planned.
ii) Product: A layout is designed with the ultimate purpose of producing a
product. The type of product – that is, whether the product is heavy or light, big
or small, liquid or solid – and its position in relation to the plant location influence
the layout. In a majority of cases, the product moves from work station to work
station. In some cases, as in the manufacture of locomotives and in ship-
building, the product is stationary; but machinery and men are moved to the
product. Thus, the position of the product in relation to the other factors of
production deserves consideration in planning the layout of a plant. The
requirements of a layout meant for a heavy product are different from the
requirements of that for a light product. Again, the layout requirements for
assembling a watch are different from those for the assembly of an aeroplane.
The manufacture of certain products involves wet operations, as in leather
tanning or textile dyeing.
The sales demand also exercises some influence on the plant layout. The sales
demand for a product determines the volume of production and therefore the
quality and size of the equipment, the area of the storage space, and other
facilities which, in turn, determine the type of layout. A product with a relatively
inelastic demand should be produced on a mass scale by using specialized
equipment in contract to a luxury article which is produced on a small-scale with
less specialized equipment. For these reasons, experts are of the opinion that a
plant layout should begin with the product.
A plant layout must be the expression of a purpose. This purpose is the efficient
and effective production of a product or product line. The purpose, then, dictates
that the point at which the analyst for layout must start is with the product to be
produced.
iii) Worker: The layout designer should also consider the type, position and
requirements of employees. If women workers are employed, the layout must be
planned after keeping in mind their particular requirements. The position of
employees, that is, whether they remain stationary or moving, also influences the
layout.
Employee facilities, such as health and related services, feeding and related
services, locker rooms and public facilities influence the layout significantly.
Employee safety, too, must receive due consideration.
Iv) Machinery: The type of product, the volume of its production, the type of
process and management policy determines the size and type of the machinery
to be installed which, in turn, influences the plant layout. Production is the
combination and manipulation of men, materials and machines. These elements
may be combined in various ratios and in various ways in the course of the
production activity. The ratio in which, these elements are used depends on their
relative costs and on the production processes selected. Before laying out a
plant, it is necessary to determine which of these elements are to be stationary or
fixed as to location in the plant and which will be mobile during the process of
production. Various alternatives are available in determining which factor to
move:
(a) To move the product and the workers from work station to work station;
(b) To move the product from work station to work station, keeping the
machines and workers stationary; or
(c) To move the worker and the machine to the product, which is held at
the location. The layout or arrangement of machines should be
planned to suit the alternatives used in a plant.
v) Type of Industry: The type of industry and the method of the manufacturing
process exercise a significant influence on plant layout.
Industries in this context may be broadly classified into four types:
(a) Synthetic;
(b) Analytical;
(c) Conditioning; and
(d) Extractive.
(vi) Location: The site selected for the location of a plant influences its layout in
more than one way. First, the size and the terrain of the site determine the type
of building which, in turn, influences the layout. Second, the location of the plant
determines the mode of transportation, depending upon the distances from the
source of raw materials and market to the plant. In some cases, railroads are
used, in some others, trucks are pressed into service. In a few cases, water
loading and unloading facilities are required. The layout plan should provide for
the exact type of transportation required. Third, a plant location may be
determined in part by the fuel requirements of the concern. The plant layout
must provide for the storage of this fuel, whether it be coal, oil or gas. Also, the
layout must consider the requirements of power generation. Fourth, the demand
for future expansion influences the plant layout. If a village site is selected,
expansion may be effected by adding one more wing to the existing single-storey
construction. If an urban site is selected, expansion may be effected by adding
more storeys to the present structures. The number of storeys determines the
type of materials handling equipment which would be required and which, in turn,
influences the plant layout.
(vii) Managerial Policies: Management policies significantly influence plant
layout. The following are some managerial policies:
(a) The volume of production and provision for expansion;
(b) The extent of automation;
(c) Making or buying a particular component;
(d) Desire for rapid delivery of goods to customers;
(e) Purchasing policy;
(f) Personnel policies.
It is obvious that many top management policies determine the plant layout
objectives and the scope of the plant activities. The layout engineer must have a
clear and complete understanding of those top management policies that have a
bearing on plant layout objectives.
Principles of good Layout
The factors discussed above, influence the choice of a particular type of layout.
While accepting the selected layout, the layout engineer should be guided by
certain principles. The layout selected in conformity with layout principles should
be an ideal one.
These principles are:
 The Principle of Minimum Travel: Men and materials should
travel the shortest distance between operations so as to avoid
waste of labour and time and minimize the cost of materials
handling.
 Principle of Sequence: Machinery and operations should be
arranged in a sequential order. This principle is best achieved
 in product layout, and efforts should be made to have it adopted
in the process layout.
 Principle of Usage: Every foot of available space should be
effectively utilized. This principle should receive top
consideration in towns and cities where land is costly.
 Principle of Compactness: There should be a harmonious
fusion of all the relevant factors so that the final layout looks well
integrated and compact.
 Principle of Safety and Satisfaction: The layout should
contain built in provisions for safety for the workmen. It should
also be planned on the basis of the comfort and convenience of
the workmen so that they feel satisfied.
 Principle of Flexibility: The layout should permit revisions with
the least difficulty and at minimum cost.
 Principle of Minimum Investment: The layout should result in
savings in fixed capital investment, not by avoiding installation
of the necessary facilities but by an intensive use of available
facilities.
Types of Layout
The layout design can be carried out on the basis of:
 Work flow
 The function of the production system
Classification by work flow
There are four basic types of layout based on the work flow format and
they are:
1) Product layout
2) Process layout
3) Cellular layout
4) Fixed position layout
Product layout
A product layout is one in which the components are arranged according to the
progressive steps by which the product is made. The flow is an unbroken line
from raw material to the finished good.
Example: Automobile Manufacturing.
Food Processing
Process Layout
This is one is which the processing facilities are grouped according to the general
function they perform, without regard to any particular product.
Example: Job shops
Hospitals
Departmental Stores
Cellular Layout
This is a layout that derives the advantages of both product and process layouts.
Interlinked processing facilities required for certain group of products are coupled
together and brought under a ‘cell’. There will be many cells in this layout.
Example: Custom built job shops
Specialty hospitals, Beauty Parlors
Fixed Position Layout
This is a types of layout in which the product, by virtue of its bulk or weight,
remains at one location. The required equipments and machineries are moved
to the work spot and the conversion process is carried out. This layout is
characterized by a fixed facility that is designed to turn out more than one of a
given product.
Example: Ship building
Aircraft Assembly
Classification by productive system functions
There are three common types under this classification. They are:
 Storage layout
 Marketing layout
 Project layout
STORAGE LAYOUT
This layout depicts the relative positioning of the layout components in a
warehouses or storeroom. It is designed to fulfill an inventory function rather
than operate directly on the product or service being created.
Example: Warehouse, Store room.
MARKETING LAYOUT
The layouts whose components are arranged in such a fashion as to facilitate the
sale of product rather than its’ production is known as marketing layouts.
Example: Retail stores
Super market
Exhibitions
PROJECT LAYOUT
This refers to the one time arrangement of components in specific situations,
called Project. A project layout must be planned around the particular terrain
where the work is being carried out.
Example: Dam construction, R & D Project
PRODUCT LAYOUT or (ASSEMBLY LINE LAYCOUT) IN DETAIL
The product layout is preferred under situations where it is required to achieve a
smooth and rapid flow of large volume of products (in the case of goods
production) and customer (in case of services) through a system. This layout is
ideal for product focused systems.
The highly standardized product or service which requires highly standardized,
repetitive processing operations uses this type of layout. In the product layout,
only one product or one type of product is produced in the specified place or
shop floor.
If product is assembled in the product layout, it is called as Assembly line.
Figure depicts the product layout consisting of many operations leading to the
realization of a product. There are six operations to be performed are identified
with their precedence – succedence relationship. The sequence cannot be
altered. The machineries and equipments in adequate quantity are procured and
installed to form the flow line.
The raw material enters from one end (X) and value addition takes place at each
and every stage of the operation. Finally it comes out of the shop floor (y) as
finished goods. Then it is moved over to the market directly or to the storage
yard. The large volumes handled by these systems usually make it economical to
invest substantial sums of money in machineries, equipments and job design.
Because only one or few very similar items are involved, it is feasible to arrange
an entire layout to correspond to the technological processing requirements of
the product or service involved.
PRODUCT LAYOUT: ADVANTAGES
 Layout corresponds to sequence of operations, resulting in smooth
and logical flow lines.
 Better utilization of facilities
 Reduced materials handling, since the machines are so located as
to minimize distance between consecutive operations.
 Specialized labour
 Small amounts of work – in – process, as the work from one process
are directly fed into the next.
 Effective supervision and control
 Less space is occupied by work in transit and for temporary storage.
 Total throughout time per unit is short.
 Simple production planning and control system and simplified
supervision.
 Little skill is usually required operators at the production line; hence
training is simple, short and inexpensive.
 Automatic materials handling is quite common and materials
handling cost per unit is less.
DISADVANTAGES
 Layout is determined by the product and leaves little room for
flexibility. A change in product design may need major alterations in
layout.
 The pace is determined by the slowest machine; hence speed of
machines is deliberately reduced or machine has excessive idle
time.
 A breakdown of one machine may lead to a complete stoppage of
the line that follows that machine.
 Comparatively high investments are required, as identical machines
(a few not fully utilized) are sometimes distributed along the line;
also, machines may be required to use as stand by in case of
breakdowns.
 Supervision is general but not specialized.
 It is difficult to increase production beyond the capacity of production
line.
PROCESS LAYOUT (FUNCTIONAL LAYOUT) IN DETAIL
The process layout is developed for process focused systems. These layouts
are designed to accommodate various products or services that use all or few of
the processes available in the shop floor. The processing units are organized by
functions into departments on the assumption that certain skills and facilities are
available in each department. Similar equipments and operations are grouped
together. For example, turning, milling, foundry and heat treatment.
Product or services which require all or few of these operations are converted
into batches and moved in. The sequences of operations are not a straight line
as in product layout; but zig-zag. This is dictated by technical considerations.
Different products may call for different processing requirements and their
operations sequence is unique. This calls for variable path material handling
equipments. The use of general purpose machines provides flexibility necessary
to handle a wide range of processing requirements. Workers who operate the
equipments are usually skilled or semi-skilled. The example of process layout
includes hospitals, colleges and universities, banks, airlines and public libraries.
For instances, hospitals have many department like surgery, maternity,
emergency, etc., Similarly universities have separate departments that
concentrate on different areas of study as engineering, business management,
mathematics, physics. In business organization, there will be departments like
accounts, personnel, systems.
Because process layouts arrange equipments by type rather than according to
processing sequence, the system is much less vulnerable to shut-down caused
by either mechanical failure or absenteeism. Material handling is inefficient, and
unit handling costs are generally much higher than in product layouts. The
investment in work-in-process is high and material movements will take a zig-zag
route. The equipment utilization comparatively will be less. Hence, this layout is
more suited for low volumes of production and particularly when the product is
not standardized. It is economical when flexibility is the basic system
requirement.
The process layout, due to the functional departmentation of various facilities, is
also known as FUNCTIONAL LAYOUT.

PROCESS LAYOUT: ADVANTAGES

1. Flexibility in equipment or manpower allotment for specific tasks. Thus
load distribution can be controlled and this is particularly of importance in
 case of breakdowns, for maintenance schedules and for multi products
manufacturer.
2. Better utilization of machines available time, consequently fewer machines
are required.
3. Comparatively low investment in machines is required.
4. Each section can be benefited from specialized supervision.
5. The diversity of tasks offers a more interesting and satisfying occupation
for the operator.
6. Better product quality because of effective supervision
7. Workers in one section are not affected by the nature of operations carried
out in another section.
PROCESS LAYOUT: DISADVANTAGES
1. Long flow lines; hence more expensive handling
2. Comparatively large amounts of work – in - process, waiting for the next
operation.
3. Space and capital are tied up by work – in – process.
4. Production, planning and control systems are more complicated
5. Total production time is longer, owing to time consumed in materials
handling and in waiting times.
6. Because of the diversity of the jobs in specialized departments, higher
grades of skill are required.
7. For the same amount of production, process layout needs more space.
8. Automatic material handling is extremely difficult.
CELLULAR (OR) GROUP LAYOUT IN DETAIL
This is a special type of functional layout. In this cellular layout, the facilities are
clubbed together so as to form a cell. The layout will have a number of such
cells. This can be better explained through an example.
Consider the layout in the following Figure. It consists of six cells. Each cell is
clubbed with the frequency used adjacent facilities. Cell – 1 consists of turning,
milling and drilling facilities: Cell – 2 has turning grinding and milling facilities and
so on. Cell – 6 is a common inspection and packing facilities.
The cellular layout is suitable for systems designed to use the concepts,
principles and approaches of Group Technology. It is a layout that tries to derive
the advantage of both product and process layout.
CELLULAR LAYOUT: ADVANTAGES
1. Suitable for mass production also.
2. Higher degree of flexibility than product layout in handling variety of
products.
3. Employs high degree of automation, but still posses flexibility.
4. Can serve a fluctuating market demand
5. Better supervision and control
6. Skill requirement is skewed towards specialization.
7. Capacity utilization is between product and process layouts.
Analyzing Layouts with Computers
As in other fields, computers have entered the field of layout engineering in a big
way. Various techniques have been developed and used in layout planning. For
example, in designing process layout, the analyses used are – ALDEP
(automated layout design programs), CORELAP (Computerized
relationship layout planning) and CRAFT (Computerized relative allocation
of facilities technique).
These and other computer programs can save time and effort in large and
complex layout problems, but the plans they offer are only the beginning of a final
layout. The layouts given by computers must be fine-tuned by hand and checked
for logic, and machines and other elements of the layout must usually be hand-
fitted with templates.
LAYOUT DESIGN PROCEDURES
Layout design procedures can be classified into manual methods and
computerized methods.
Manual methods - Under this category, there are some conventional methods
like, travel chart and Systematic Layout Planning (SLP).
Computerized methods - Under this method, again the layout design
procedures can be classified into constructive type algorithms and improvement
type algorithms.
Construction type algorithms
 Automated Layout Design Program (ALDEP)
 Computerized Relationship Layout Planning (CORELAP)
Improvement type algorithms
 Computerized Relative Allocation of facilities Technique (CRAFT).
Systematic Layout Design Procedure
An organized approach to layout planning has been developed by Muther and
has received considerable publicity due to the success derived from its
application in solving a large variety of layout problems. This approach is
referred to as systematic layout planning or simply SLP. Once the appropriate
information is gathered, a flow analysis can be combined with an activity analysis
to develop the relationship diagram. The space-relationship diagram is
constructed by combining space considerations with the relationship diagram.
Based on the space – relationship diagram, modifying considerations and
practical limitations, a number of alternative layouts are designed and evaluated.
In comparison with the steps in the design process, SLP begins after the problem
is formulated.