Plant Layout and its Types

Layout?
Plant layout ideally involves allocation of
space and arrangement of equipment in
such a manner that overall operating
costs are minimized.

Dr. Zargari

Objectives of Layout
1. Efficient utilization of available floor
space
2. To ensure that work proceeds from
one point to another point without
any delay
3. Provide enough production capacity.
4. Reduce material handling costs
5. Reduce hazards to personnel
6. Utilize labor efficiently
7. Increase employee moral.
Dr. Zargari

Objectives of
Layout.Cont..
8. Reduce accidents
9. Provide for volume and product
flexibility
10.Provide ease of supervision and
control
11.Provide for employee safety and
health
12.Allow ease of maintenance
13.Allow high machine or equipment
utilization
14.Improve productivity
Dr. Zargari

Types of Layout
1. Manufacturing units
a. Product;
b. Process;
c. Fixed Position
d. Combined

Dr. Zargari

1.Manufacturing Layout

a. Product layout(line
Layout):
The materials move form one
workstation to another sequentially
without any backtracking or deviation.
Materials are fed into 1st machine and
semi-finished goods travel automatically
from machine to machine.
The output of one machine becoming
input of the next.
Eg: Food Processing Unit; Paper mill
Dr. Zargari

a. Product layout(line
Layout):
Eg: Paper mill

Dr. Zargari

1.Manufacturing Layout

a. Product layout(line
Layout):

Dr. Zargari

Advantage

Disadvantage

1.Low material
handling cost
2.Continuous work
3.Optimum floor
space

1.Initial cost is very

high
2.Repetitive
process

1.Manufacturing Layout
b. Process

(functional)layout:
In this type of layout machines of a
similar type are arranged together at
one place.
The work has to be allocated to each
department in such a way that no
machines are chosen to do as many
different job as possible.

Dr. Zargari

Eg: Process oriented layout for an

hospital

b. Process

(functional)layout:
Eg: Process oriented layout for an
hospital
Patient A - broken leg
ER
triage
room
Surgery

Emergency room admissions

Patient B - erratic heart
pacemaker

Laboratories

Radiology

Dr. Zargari

ER Beds

Pharmacy

Billing/exit

Process Layouts
Process layouts are designed to process items or
provide services that involve a variety of processing
requirements.

11
Dr. Zargari

 Process oriented plant layout (Functional

Layout)
This type of plant layout is useful when the
production process is organized in batches.
Personnel and equipment to perform the same
function are allocated in the same area.
The different items have to move from one area to
another one, according to the sequence of
operations previously established.
The variety of products to produce will lead to a
diversity of flows through the facility.
The variations in the production volumes from one
period to the next one (short periods of time) may
lead to modifications in the manufactured quantities
as well as the types of products to be produced.

Dr. Zargari

1.Manufacturing Layout

b. Process layout:

Dr. Zargari

Advantage

Disadvantage

1.Low capital
2.Overhead cost
are relatively low.
3.Effective
supervision

1.High material
handling cost
2.Time lag is higher

1.Manufacturing Layout
c. Fixed (position)

layout:
Here, Major products being produced
is fixed at one location.
All other facilities are brought and
arranged around the work center.
Eg: Ship building, Dam construction,
flyover construction.

Dr. Zargari

1.Manufacturing Layout
c. Fixed (position) layout:
Eg: Ship building, Dam & flyover
construction.

Dr. Zargari

1.Manufacturing Layout
c. Fixed (position) layout:

Dr. Zargari

Advantage

Disadvantage

1.Save cost, as
customization is
necessary

1.Lengthy
production period,
heavy investment
cost
2.Several
operations are
carried out
simultaniously.

1.Manufacturing Layout
d. Combined layout:
In many manufacturing units, several
products are produced in repeated
numbers with no likelihood of
continuous production, combined
layout is followed.

Dr. Zargari

Eg: Soap industry, all inputs are almost

manufactured in separate units viz
glycerin, water treatment, fragrance
etc.

1.Manufacturing Layout
d.Combined layout:
Eg: Soaps

Dr. Zargari

Factors affecting Plant Layout

1. Plant location and building
2. Nature of Product
3. Type of Industry
4. Plant Environment
5. Spatial Requirements
6. Repairs and Maintenance
7. Balance
8. Management Policy
9. Human Needs
10.Types of machinery and equipment

Location Planning
and Analysis

Need for Location Decisions

Marketing Strategy
Cost of Doing Business
Growth
Depletion of Resources

Dr. Zargari

Nature of Location Decisions

Strategic Importance

Long term commitment/costs

Impact on investments, revenues, and
operations
Supply chains

Objectives

Profit potential
Identify several locations from which to
choose

Options

Dr. Zargari

Expand existing facilities

Add new facilities
Move

Types of Facilities
Heavy Industry Facilities
Light Industry Facilities
Retail And service facilities

Dr. Zargari

Making Location Decisions

Dr. Zargari

Decide on the criteria

Identify the important factors
Develop location alternatives
Evaluate the alternatives
Make selection

General Factors affecting

location decision
Availability of basic infrastructure
Basic amenities
Proximity to raw material and
markets
Residential complexes, schools,
hospitals, clubs etc.
Availability of cheap labour
Govt. policies
Env. And community
Cheap land
Dr. Zargari

Locating Foreign operations

Dr. Zargari

Trade barriers
International Customers
International Competition
Regulations
Additional Resources
Low Costs
Offensive in Competitors home country

Factors at country level

Political Risks, Govt. Regulations,
attitudes, incentives
Cultural and economic issues
Labour talent, productivity, cost
Availability of supplies, infrastructure
Exchange rates and currency risks

Dr. Zargari

Location Decision Factors

Dr. Zargari

Regional Factors

Community
Considerations

Multiple Plant
Strategies

Site-related
Factors

Regional Factors
Attractiveness of region(culture,
taxes, climate)
Labour availability
Location of raw materials
Location of markets
Availability of utilities
Govt. Incentives andpolicies
Climate and taxes

Dr. Zargari

Community Considerations

Dr. Zargari

Quality of life
Services
Attitudes
Taxes
Environmental regulations
Utilities
Developer support

Site Related Factors

Dr. Zargari

Land
Transportation
Environmental
Legal

Multiple Plant Strategies

Product plant strategy
Market area plant strategy
Process plant strategy

Dr. Zargari

Comparison of Service and

Manufacturing Considerations
Manufacturing/Distribution

Service/Retail

Cost Focus

Revenue focus

Transportation modes/costs

Demographics: age,income,etc

Energy availability, costs

Population/drawing area

Labor cost/availability/skills

Competition

Building/leasing costs

Traffic volume/patterns
Customer access/parking

Evaluating Locations
Cost-Profit-Volume Analysis

Dr. Zargari

Determine fixed and variable costs

Plot total costs

Determine lowest total costs

Location Cost-Volume Analysis

Assumptions

Dr. Zargari

Fixed costs are constant

Variable costs are linear
Output can be closely estimated
Only one product involved

Example 1: Cost-Volume Analysis

Fixed and variable costs for
four potential locations
L o c a tio n
A
B
C
D

Dr. Zargari

F ix e d
C o s t
$ 2 5 0 ,0 0
1 0 0 ,0 0
1 5 0 ,0 0
2 0 0 ,0 0

0
0
0
0

V a r ia b le
C o s t
$ 1 1
3 0
2 0
3 5

Example 1: Solution

A
B
C
D

Dr. Zargari

F ix e d
C o s ts

V a r ia b le
C o s ts

T o ta l
C o s ts

$ 2 5 0 ,0 0 0
1 0 0 ,0 0 0
1 5 0 ,0 0 0
2 0 0 ,0 0 0

$ 1 1 (1 0 ,0 0 0 )
3 0 (1 0 ,0 0 0 )
2 0 (1 0 ,0 0 0 )
3 5 (1 0 ,0 0 0 )

$ 3 6 0 ,0 0 0
4 0 0 ,0 0 0
3 5 0 ,0 0 0
5 5 0 ,0 0 0

Factor-Rating Method
Six steps:

Dr. Zargari

1. Develop a list of relevant factors.

2. Assign a weight to each factor reflecting its
relative importance to the firm.
3. Develop a rating scale for the factors.
4. Score each location on each factor based on the
scale.
5. Multiply the scores by the weights for each factor
and total the weighted scores for each location.
6. Make a recommendation based on the maximum
point score, considering other [quantitative?]
factors.

Factor Rating Example

Dr. Zargari

Evaluating Locations
Center of Gravity Method

Decision based on minimum distribution

costs

Load Distance model

Dr. Zargari

Decision based on evaluating potential

locations based on load distance value.