02a Facilities Planning February 2017

Facility Planning
Industrial Engineering BDA40703
Prepared by:
Industrial Systems Engineering Research Group
Universiti Tun Hussein Onn Malaysia
Learning Outcomes
Able to determine the facility location in cost

effective way
Able to discuss the basic layout designs with
its advantages and disadvantages.
Able to propose a simple process layouts for
manufacturing and service industries.
What is Facility
Fixed assets:
Building structures and resources that support
the operations management of
manufacturing/service activities.
Involves humans, money, materials, energy in

the activities.
What is Facility
Production: Discrete parts industry , process industry
Health care: hospitals, clinics
Education: schools, colleges, university
Food: restaurants, fast-food places, banquet halls
Commercial/Residential: shopping malls, office buildings, banks,

houses, hotels, motels
Government/Public Services: court house, post office
Transportation: airports, train stations, bus terminals
Public assembly: stadium, auditoriums, theaters
Religious: mosque, temples, chapels, churches

FP Concepts
Facilities Location
Structural Design
Facilities
Planning
Facilities Design Layout Design
Handling Sys Design
Location the place to locate the facilities

Layout - the way to arrange elements in systems (machine, manpower,
material storage, MHS, etc)
Structural design: building & support faci. - water, power supply

Layout design: space requirements for locating resources.
Handling system design: movement of materials, people, product.
Importance of FP
Minimize Waste due to:
Efficient Material handling System:

- MHS involves (20 ~ 50)% of operating costs in manufacturing
- Effective MHS reduces (10 ~ 30)% costs
Long term plan: expandability, flexibility of industry
Environmental implications: hazardous waste disposal
Safety, convenience, appearance - influence worker morale
Lead to economic development

Facility Location
When to identify Facility Location???
Starting new business
Enlargement
Centralization of operations
Other economic purpose
What factors influence the identification???

Close to market & source of materials
Labor availability
Geographic area for transportation
Social acceptability (hazard control)
State laws / procedures
Facility Location
How to select Facility Location effectively?
Location breakeven analysis

(cost-profit-volume analysis)
Minisum
Transportation method
Assignment technique
Factor Rating, and
The Center of Gravity Method
Location BEA
Formula:
TC = FC + (VC x Q)
FC = Fixed Cost (constant cost regardless of output level such as land,
property taxes, insurance, equipment, building)
VC = Variable Cost (per unit Q) (varies directly to prod. volume such as
labour, materials, transport, and variable overhead)
Q = Quantity/volume of output
Saturday, September 23, 2017 Industrial Engineering 9

Steps for BEA:
1. Determine the fixed and variable cost associated with each

location alternatives.
2. Plot the total-cost lines for all location alternatives on the same
graph.
- Fixed costs are constant for the range of probable output.
- Variable costs are linear for the range of probable output.
- The required level of output can be estimated.
- Only one product is involve
3. Determine which location will have the lowest total cost for the
expected level of output.

Location
Break-Even Analysis
TC = FC + VC(Q) for 20,000 units
Fixed Costs Variable Costs Total Costs

Community per Year per Unit (Fixed + Variable)
A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30

Example 10.3
TC = FC + VC(Q) Location
Break-Even Analysis
for 20,000 units

A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30
Total Variable Costs

Example 10.3
Break-Even Analysis
for 20,000 units

A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30

$62 (20,000)
Example 10.3
Break-Even Analysis
for 20,000 units

A $150,000 $62
B $300,000 $38
C $500,000 $24
D $600,000 $30

$62 (20,000) = $1,240,000
Example 10.3
Break-Even Analysis
for 20,000 units

A $150,000 $62 $1,390,000
B $300,000 $38
C $500,000 $24
D $600,000 $30

$62 (20,000) = $1,240,000
Example 10.3
Break-Even Analysis
for 20,000 units

A $150,000 $62 $1,390,000
B $300,000 $38 $1,060,000
C $500,000 $24 $ 980,000
D $600,000 $30 $1,200,000

Example 10.3
Community
Fixed Costs
per Year
Total Costs
(Fixed + Variable) Location
A
B
$150,000
$300,000
$1,390,000
$1,060,000 Break-Even Analysis
C $500,000 $ 980,000
Annual cost (thousands of dollars)
1600
D $600,000 $1,200,000
1400
1200
1000
800
600
400
200
0
2 4 6 8 10 12 14 16 18 20 22
Saturday, September 23, 2017 Q (thousands ofEngineering

Industrial units) 17
Example 10.3
Community
Fixed Costs
per Year
Total Costs
A
B
$150,000
$300,000
$1,390,000
C $500,000 $ 980,000
1600
D $600,000 $1,200,000 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800
600
400
200
0
2 4 6 8 10 12 14 16 18 20 22

Example 10.3
Community
Fixed Costs
per Year
Total Costs
A
B
$150,000
$300,000
$1,390,000
C $500,000 $ 980,000
1600
D $600,000 $1,200,000 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800
600
Break-even
400
point
200
A best
0
2 4 6 8 10 12 14 16 18 20 22

Example 10.3
Community
Fixed Costs
per Year
Total Costs
A
B
$150,000
$300,000
$1,390,000
C $500,000 $ 980,000
1600
D $600,000 $1,200,000 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
800 Break-even point
600
Break-even
400
point
200
A best B best
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3
Example 10.3
Community
Fixed Costs
per Year
Total Costs
A
B
$150,000
$300,000
$1,390,000
C $500,000 $ 980,000
1600
D $600,000 $1,200,000 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
600
Break-even
400
point
200
A best B best C best
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3
Example 10.3
Location
Break-Even Analysis
1600 A
(20, 1390)
1400
(20, 1200) D
1200 (20, 1060) B
C
1000
(20, 980)
600
Break-even
400
point
200
A best B best C best
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3
Figure 10.2
Location
Break-Even Analysis
1600 A
(20, 1390)
1400
(20, 1200) D
1200 Break-Even Quantities
(20, 1060) B
C
1000
(A) (B)
(20, 980)
800 $150,000 + $62Q Break-even
= $300,000 + $38Q
point
600 Q = 6,250 units
Break-even
400 (B) (C)
point
200 $300,000 + $38Q = $500,000 + $24Q
A best B best C best units
Q = 14,286
0
2 4 6 8 10 12 14 16 18 20 22
6.25 14.3
Example 10.3
Location Minisum Analysis
When to use?
When locating a NEW facility
by minimizing weighted sum of rectilinear distances from
the new facility to existing operation activities
Example
to determine location of photocopy machine in office.
to open medical clinic / shopping center in new area.
to build main factory to replace several small workshops in
different areas.
Minisum Formula
Median wi/2 (First time achieved)
Cost function f(X):

n

f x, y wi x ai y bi
i 1

Where;
f(x,y) = The total of movement cost within the new facility and current facility.
wi = weight or activity frequency
X* = Coordinate x for new facility
Y * = Coordinate y for new facility
ai = Coordinate x for current facility
bi = Coordinate y for current facility

Determine the optimum location for new machine
Example Assume that the costs per unit movement are the same
for all machines.
Generally, grinding is a finishing process after metal cutting (such as

turning/milling). A grinding machine will be fixed at workshop. Five
location of existing lathe/milling machines are: M1(1,1) M2(5,2)
M3(2,8) M4(4,4) and M5(8,6). Number of trips (wi) within new
machine and current machines are shown as follows:
Current mc Coordinate, ai Coordinate, bi No. of trips

(x) (y) wi
M1 1 1 (5)
M2 5 2 (6)
M3 2 8 (2)
M4 4 4 (4)
M5 8 6 (8)

Coordinate, ai (x)
Arrange from
lowest value to
highest value (ai)
Current mc Coordinate, ai No of trips

(X) wi
M1 1 5
M3 2 2
M4 4 4
M2 5 6
M5 8 8
Minisum model
Calculate the median
Median = wi
2
= 25 = 12.5
2

Coordinate-X (ai)
Pi ai wi wj
M1 1 5 5
M3 2 2 7
M4 4 4 11<12.5
M2 5 6 17>12.5
M5 8 8 25
x* = 5
Coordinate-Y (bi).
Pi bi wi wj
M1 1 5 5
M2 2 6 11 < 12.5
M4 4 4 15 > 12.5
M5 6 8 23
M3 8 2 25
y* = 4
Minisum model
Decision
An optimum location for new m/c
[ x* , y* ] = [ 5 , 4 ]

Minisum model
[x*, y*] = [5, 4]
Cost for an optimum location

f(5,4) = 5*( I5-1I + I4-1I ) + 6*( I5-5I + I4-2I ) +
2*( I5-2I + I4-8I ) + 4*( I5-4I + I4-4I ) +
8* ( I5-8I + I4-6I )
= 105
If the cost is RM1.50/distance:
Minisum cost = 105 x 1.5 = RM 157.50
This location can also be determined by plotting the graph f(a) vs

ai and f(b) vs bi. The optimum point is located at the lowest curve.
When to use?
to find the lowest shipment cost for distributing product

(goods or supplies) from multiple supply to multiple
destination of demand.
Saturday, September 23, 2017 Industrial Engineering

Transportation Model
Figure 1:
The transportation
problem involves Demand 2
determining a Supply 1
minimum-cost plan Demand 1
for shipping from
multiple sources to
multiple destination.
Demand 3 Supply 3
Supply 2 Demand 4

Transportation Model
Exercise
Cost to ship one
unit from factory 1 Warehouse
to warehouse A A B C D Supply
4 7 7 1 100
1 0
100
Factory
Factory 2 can
2
12 3 8 8 200 supply 200
90 110 0 units per period
3
8 10 16 5 150
80 10 60 0 Total supply
80 90 120 160 450 capacity per
Demand 0 0 0 0 period
450
Demand from
Warehouse Total demand
per period
Setting up the Initial Table
Create a row for each plant and a column for each warehouse
Warehouse
Plant
1 2 3
Phoenix
Atlanta

Location
Transportation Method
Setting up the Initial Tableau
Add a column for plant capacities and a row for warehouse demand
Warehouse
Plant Capacity
W1 W2 W3
Phoenix (S1) 400
Atlanta (S2) 500
900
Requirements 200 400 300 900

Location
Insert costs into the shipping route option cells
Warehouse
Plant Capacity
1 2 3
$5.00 $6.00 $5.40
Phoenix 400
$7.00 $4.60 $6.60

Atlanta 500
900
Requirements 200 400 300 900

Figure 10.3
Location
Warehouse
Plant Capacity
1 2 3
$5.00 $6.00 $5.40
Phoenix 400
$7.00 $4.60 $6.60 500

Atlanta
400 (100)
200 400 300 900

Requirements 900
(0)

Figure 10.3
Location
Warehouse
Plant Capacity
1 2 3
$5.00 $6.00 $5.40 400
Phoenix (200)
200
$7.00 $4.60 $6.60 500
Atlanta
400 (100)
200 400 300 900

Requirements 900
(0) (0)

Figure 10.3
Location
Warehouse
Plant Capacity
1 2 3
$5.00 $6.00 $5.40 400
Phoenix (200)(0)
200 200
$7.00 $4.60 $6.60 500
Atlanta
400 (100)
200 400 300 900

Requirements 900
(0) (0) (100)

Figure 10.3
Location
Warehouse
Plant Capacity
1 2 3
$5.00 $6.00 $5.40 400
Phoenix (200)(0)
200 200
$7.00 $4.60 $6.60 500
Atlanta
400 100 (100)(0)
200 400 300 900

Requirements 900
(0) (0) (100)(0)
Total Cost = 200(5) + 200(5.4)
Saturday, September 23, 2017 + 400(4.6) + 100(6.6) = $ 4580
Industrial Engineering 42
Figure 10.3
Location
Interpreting the Optimal Solution

Figure 10.4
FACILITY LAYOUT
Facilities Layout
Developing a facilities layout is a critical
step in the facilities planning process.
Facilities Planner must be CREATIVE and
COMPREHENSIVE in generating layout
alternatives.
Material handling system or facilities
layout which one comes FIRST?

Facilities Layout
Layout is influenced by:

Centralized vs. Decentralize Storage of
WIP, Tooling, & Supplies
Fixed Path vs. Variable Path Handling
Unit Load Size
Automation (manual, semi, fully auto)
Level of Inventory (Control of Materials)

Facilities Layout
Handling less is the BEST:

- Frequency of materials are handled
- Not necessarily the handling distance
Layout or MHS First? -- BOTH
- Sequential approach which considers a
number of alternative handling systems
and the corresponding layout alternatives.

Layout Design Objectives:
1. Facilitate attainment of product or service
quality
2. Use workers and space efficiently
3. Avoid bottlenecks
4. Minimize unnecessary material handling costs
5. Eliminate unnecessary movement of workers or
materials
6. Minimize production time or customer service
time
7. Design for safety
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

The Need for Layout
Decisions
Inefficient operations
For Example: Changes in the design
High Cost of products or services
Bottlenecks
Accidents
The introduction of new
products or services
Saturday, September 23, 2017 Industrial Engineering

Safety hazards
50
The Need for Layout
Design (Contd)
Changes in
environmental Changes in volume of
or other legal output or mix of
requirements products
Morale problems
Changes in methods
and equipment

Facilities Layout
Layout: the configuration of departments, work
centers, and equipment, with particular
emphasis on movement of work (customers or
materials) through the system.
Product layouts
Process layouts
Fixed-Position layout
Combination layouts

Basic Layout
Product layout
Utilizes standardized processing operations to
achieve smooth, rapid, high-volume flow
Process layout
Able to handle variety process requirements
Fixed Position layout

Product (or project) remains stationary,
whereas workers-materials-equipment are
moving when needed
Product Layout (sequential)
Utilizes standardized process operations to achieve smooth, rapid,
high-volume flow
Raw materials Station Station Station Station Finished

or customer 1 2 3 4 item
Material Material Material Material

and/or and/or and/or and/or
labor labor labor labor
Used for Repetitive or Continuous Processing
23/09/2017 54
Product Layout (sequential)
Raw materials
or customer
Used for Repetitive or

Continuous Processing
23/09/2017 55
Advantages of Product Layout
High volume production (high prodn rate)
Low cost per unit product
Low cost in material handling
High utilization of labour-equipment
Labour specialization (specific works)
Established routing and scheduling

Disadvantages of Product Layout
Repetitive jobs
Low skill workers may not maintain quality of
output (impair quality)
Not flexible to change in volume.
Impair output rate when breakdown (shutdown)
Preventive maintenance is critical.

Process Layout
Dept. A Dept. C Dept. E

(Stamping) (Milling) (Etching)
Dept. B Dept. D Dept. F

(Lathe) (Grinding) (Coating)
Used for Intermittent processing

Job Shop or Batch Process
Saturday, September 23, 2017 58

Process Layout
Able to handle variety of process requirements
Used for Intermittent processing

Job Shop or Batch Processes
23/09/2017 MDC10203: Modeling and Simulation 59

Advantages of Process Layouts
Able to handle variety of process requirements.

Not affected production rate when machine
failures.
Low cost in equipment utilization.
Possible to create individual (worker) incentive
plans

Disadvantages of Process Layouts
In-process inventory costs can be high

Challenging routing and scheduling
Equipment utilization rates are low
Material handling slow and inefficient
Complexities often reduce span of supervision
Special attention for each product or
customer
Accounting and purchasing are more involved
Fixed Position Layout
Large construction project (in real world)
Nature of product:
Weight
Size
Bulk
Fixed Position Layout

(Simulation)
23/09/2017 MDC10203: Modeling and Simulation 62

Improved Layouts by using Work Cell
23/09/2017 Industrial Engineering 63

U-Shaped Production Line
In 1 2 3 4
Workers
Out 10 9 8 7
Figure 6.6
Cellular Layouts
Cellular Production
Layout in which machines are
grouped into a cell that can process
items that have similar processing
requirements
Group Technology
The grouping into part families of
items with similar design or
manufacturing characteristics
Functional vs. Cellular Layouts
Dimension Functional Cellular

Number of moves many few
between departments
Travel distances longer shorter
Travel paths variable fixed
Job waiting times greater shorter
Throughput time higher lower
Amount of work in higher lower
process
Supervision difficulty higher lower
Scheduling complexity higher lower
Equipment utilization
Saturday, September 23, 2017 lower
Industrial Engineering higher 66
Service Layouts
Warehouse and storage layouts
Retail layouts
Office layouts
Service layouts must be aesthetically pleasing
Conveyor
Truck
Saturday, September 23, 2017 Zones

Industrial Engineering Order Picker 67

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Facility Planning

Industrial Engineering BDA40703

Able to determine the facility location in cost

Involves humans, money, materials, energy in

Health care: hospitals, clinics

Education: schools, colleges, university

Food: restaurants, fast-food places, banquet halls

Commercial/Residential: shopping malls, office buildings, banks,

Government/Public Services: court house, post office

Transportation: airports, train stations, bus terminals

Public assembly: stadium, auditoriums, theaters

Religious: mosque, temples, chapels, churches

Handling Sys Design

Location the place to locate the facilities

Structural design: building & support faci. - water, power supply

Efficient Material handling System:

Long term plan: expandability, flexibility of industry

Environmental implications: hazardous waste disposal

Safety, convenience, appearance - influence worker morale

Lead to economic development

What factors influence the identification???

Location breakeven analysis

Saturday, September 23, 2017 Industrial Engineering 9

1. Determine the fixed and variable cost associated with each

Saturday, September 23, 2017 Industrial Engineering 10

Fixed Costs Variable Costs Total Costs

Saturday, September 23, 2017 Industrial Engineering 11

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Saturday, September 23, 2017 Industrial Engineering 12

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Fixed Costs Variable Costs Total Costs

Saturday, September 23, 2017 Industrial Engineering 16

Saturday, September 23, 2017 Q (thousands ofEngineering

Saturday, September 23, 2017 Q (thousands ofEngineering

Saturday, September 23, 2017 Q (thousands ofEngineering

Median wi/2 (First time achieved)

Cost function f(X):

Saturday, September 23, 2017 Industrial Engineering 25

Generally, grinding is a finishing process after metal cutting (such as

Current mc Coordinate, ai Coordinate, bi No. of trips

Saturday, September 23, 2017 Industrial Engineering 26

Current mc Coordinate, ai No of trips

Saturday, September 23, 2017 Industrial Engineering 28

An optimum location for new m/c

Saturday, September 23, 2017 Industrial Engineering 31

[x*, y*] = [5, 4]

Cost for an optimum location

This location can also be determined by plotting the graph f(a) vs

to find the lowest shipment cost for distributing product

Saturday, September 23, 2017 Industrial Engineering

Saturday, September 23, 2017 Industrial Engineering 34

Saturday, September 23, 2017 Industrial Engineering 36

Phoenix (S1) 400

Atlanta (S2) 500

Saturday, September 23, 2017 Industrial Engineering 37

$7.00 $4.60 $6.60

Saturday, September 23, 2017 Industrial Engineering 38

$7.00 $4.60 $6.60 500

[x, y] = [5, 4]