Facilities Planning

Chapter 2
Facilities Planning
Delivered by:
Mohd Shahir Yahya
Tuesday, April 16, 2019 Industrial Engineering 1

Learning Objectives
 List some reasons for redesign of

layouts.
 Describe the basic layout types.
 List the main advantages and
disadvantages of product layouts and
process layouts.
 Develop simple process layouts.
Facilities Planning
 Determines how an activity's tangible fixed

assets best support achieving the activity's
objectives.
 Planning determines course of action ahead
of time so subsequent decisions can be
made efficiently
 Design more technical details that with a
use of model, describe the implementation
of the plan
Facilities Planning Hierarchy
Facilities
Location
Structural
Facilities Design
Planning
Facilities Layout
Design Design
Handling System
Design

Facilities Planning
 Structure design: building and support

services - gas, water, light, air,…
 Layout design: space requirements
and location of resources in available
space.
 Handling system design: movement of
material, people, information and
equipment.
Let us thinking…
 What is the Importance of facilities

planning ??

Importance of facilities planning
 Reasons for facilities planning/design

1st phase in facility's life cycle, significant savings
can accrue
 Majority of an organization's capital investment is in facilities -- 8%
of gross national product (GNP) ($250 billion) spent annually of
facilities.
 Single most important cause of high material handling costs is lack
of strategic facilities planning
 Material handling account for 20 - 50% of operating costs in
manufacturing
 Effective material handling can reduce costs by 10 - 30%
 Long term effect: versatility, expandability, flexibility
 Environmental implications: hazardous waste disposal
 Safety, convenience, appearance - influence worker morale
 Lead to economic development
Definition
 Location – A place or position of allocating the

facilities, buildings, equipment etc.
 Layout - The way that something is physically

arranged such as the space of material
handling, storage, labor, support activity
& services and equipment.

Factors contribute to
improper facilities utilization
 Management does not understand
facilities utilization concepts because lack
of on-the-floor experience
 Because of more basic misapprehension
is difficult to decide.

The most common
scheduling errors:
 Overloading facilities. (This invariably leads
to large in-process inventories and an
abundance of missed due dates.) At the root
of this error seems to be a
misunderstanding of product flows.
 It may be that management simply does not
understand its production capacities. Or it
may be a lack of knowledge of aggregate
planning.
Let Focus……
 Facilities Location
 Facilities Layout

Facility Location
 Facilities:
– Fixed assets like building structures and
inanimate resources that support the
operations of a given activity.
– Facilities put together with humans, $
and/or materials, energy result in the
activity.

Facility Location
 Facilities Examples
 Production: any discrete parts or process industry
facilities
 Health care: hospitals, clinics, rehab. centers, nursing
home
 Education: schools, colleges, day care centers,
libraries
 Food: restaurants, fast-food places, banquet halls
 Commercial/Residential: shopping malls, office
buildings, banks, houses, hotels, motels
 Government/Public Services: court house, IRS, INS,
post office,
 Transportation: airports, train stations, bus terminals
 Public assembly: stadium, auditoriums, theaters
 Religious: temples, chapels, churches

Facility Location
 When the problems of location

identification occurs?
 Starting the new Business

 Business Enlargement
 Centralization
 Economics

Facility Location
 The factors effecting the location
identification?
 Closed to market & raw material
suppliers
 Ease of getting labor
 Geographical factor
 Social acceptability
 Ease of getting other utilitie
 Procedures & laws

Evaluating Location
Alternatives
 There are a number of techniques
that are helpful in evaluating location
alternatives:
– Location breakeven analysis
– Assignment technique
– Transportation method
– Factor Rating, and
– The Center of Gravity Method

Locational Cost-Profit-
Volume Analysis
 The economic comparison of location
alternatives is facilitated by the use of
this method.
 The analysis can be done numerically
or graphically.

Variable Costs
“The portion of the total cost

that varies directly with the
volume of output.”
e.g. labor, materials, transportation, and
variable overhead
Fixed Costs
“The portion of the total cost

that remains constant
regardless of output levels.”
e.g. land, property taxes, insurance,
equipment, and building
Total Costs
“The sum of variable and fixed

costs.”
or
TC = VC + FC
Volume Analysis Exercise 2
 For cost analysis, the total cost

are given as:
Total Cost = FC + VC(Q)

Where:
FC = Fixed Cost
VC = Variable Cost per unit
Q = Quantity/volume of output

Volume Analysis
 The procedure for this analysis involves
these steps:
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.
3. Determine which location will have the lowest total cost for
the expected level of output.
4. Fixed costs are constant for the range of probable output.
5. Variable costs are linear for the range of probable output.
6. The required level of output can be closely estimated.
7. Only one product is involves
 Assumption
1. Only one product is involved
2. What have been produced are sold out.
3. Variable cost/unit is constant regardless
of how many quantity produced.
4. Fixed cost remains unchanged when
output quantity changed
5. Sale price is fixed regardless of sale
quantity

Location
Break-Even Analysis
TC = FC + VC(Q)
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
Tuesday, April 16, 2019 Q (thousands ofEngineering

Industrial units) 31
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
Minisum
Model

The Single-Facility Rectilinear
Distance Location Problem
 Minisum model
Objective: to locate the new
facility to minimize a weighted
sum of the rectilinear distances
from the new facility to existing
facilities
1) Minisum model
 Objective: to locate the new facility to

minimize a weighted sum of the rectilinear
distances from the new facility to existing
facilities
 Example: to determine the location of
photocopy machine in the office

1) Minisum model
Background of the problems
 To identify the optimum location for

new facility X, (x*,y*) that have
activity relationship with current
facility Pi, ( ai,bi).
 The optimum location must satisfy
the median and cost function f(X).
Minisum model
Median
 Median ≥ ∑ wi (First time achieved)

2

Minisum model
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
x = Coordinate x for new facility
y = Coordinate y for new facility
ai = Coordinate x for current facility
bi = Coordinate y for current facility
Minisum model
Example 1
A new machine will be fixed at shop

machine workshop. The five (5) location of
the current machines are given as P1 (1,1),
P2 (5,2), P3 (2,8), P4 (4,4) and P5 (8,6).
The daily number of trips estimation (wi)
within new machine and current machine
are shown in table below:

Minisum models
Example 1
Current m/c, Pi Coordinate, ai Coordinate, bi Number of
(x) (y) trips,wi
1 1 1 5
2 5 2 6
3 2 8 2
4 4 4 4
5 8 6 8
Total 25
Minisum model
Example 1
 Assume that, the costs per unit

movement are the same within both
machines. Determine the optimum
location for this new machine.

Coordinate, ai (x)
Arrange from
lowest value to
highest value
Current m/c, Pi Coordinate, ai Number of

trips,wi
1 1 5
3 2 2
4 4 4
2 5 6
5 8 8
Minisum models
Solution 1
Median ≥ ∑ wi
2
= 25 = 12.5
2
Coordinate-X (ai)
Pi ai wi ∑ wj
1 1 5 5
3 2 2 7
4 4 4 11<12.5
2 5 6 17>12.5
5 8 8 25
x* = a2 = 5
Coordinate-Y (bi).
Pi bi wi ∑ wj
1 1 5 5
2 2 6 11 < 12.5
4 4 4 15 > 12.5
5 6 8 23
3 8 2 25
y* = b4 = 4
Minisum model
Solution 1
Therefore the optimum location

for new machine, X(x*, y*) = (5,4)

X(x*, y*) = (5,4)
The cost for this 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)
= 35+12+14+4+40
= 105

Minisum models
Solution 1
If the cost is RM1.50/distance,

therefore the total cost for this optimum
location is RM 157.50 (105 x 1.50).
This optimum location also can be
determined by plotting the graph f(a) vs
ai and f(b) vs bi. The optimum point is
located at the lowest curve.
The Transportation Model
 Involves finding the lowest-cost plan for

distributing stocks of goods or supplies from
multiple destinations that demand the
goods.
 Used to determine how to allocate the
supplies available from the various factories
to the warehouses that stock or demand
those goods, in such way that total shipping
cost is minimized.
Demand
Supply
Demand
Figure 1:
The transportation
problem involves Demand Supply
determining a
minimum-cost plan
for shipping from
multiple sources to
Supply Demand
multiple destination.
Exercise 1
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
Total demand
per period
Location
Transportation Method
Setting up the Initial Tableau
Create a row for each plant and a column for each warehouse
Warehouse
Plant
1 2 3
Phoenix
Atlanta

Location
Add a column for plant capacities and a row for warehouse demand
Warehouse
Plant Capacity
1 2 3
Phoenix 400
Atlanta 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)
Tuesday, April 16, 2019 + 400(4.6) + 100(6.6) = $ 4580
Industrial Engineering 65
Figure 10.3
Location
Interpreting the Optimal Solution

Figure 10.4
FACILITIES 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.
 Which comes FIRST, the material handling
system or the facilities layout?

Facilities Layout
 Layout is effected by:

 Centralized vs. Decentralize Storage of
WIP, Tooling, & Supplies
 Fixed Path vs. Variable Path Handling
 Unit Load Size
 Degree of Automation
 Type and Level of Inventory and
Control of Materials
Facilities Layout
 Handling less is BEST:

- Number of times material is 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.

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

Objective of Layout
Design
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
Tuesday, April 16, 2019 Industrial Engineering

Safety hazards
74
The Need for Layout
Design (Cont’d)
Changes in
environmental Changes in volume of
or other legal output or mix of
requirements products
Morale problems
Changes in methods
and equipment

Basic Layout Types
 Product layouts
 Process layouts
 Fixed-Position layout
 Combination layouts

Basic Layout Types
 Product layout
– Layout that uses standardized processing
operations to achieve smooth, rapid, high-
volume flow
 Process layout
– Layout that can handle varied processing
requirements
 Fixed Position layout
– Layout in which the product or project
remains stationary, and workers, materials,
and equipment are moved as needed
Product Layout
Raw
Station Station Station Station Finished
materials 1 2 3 4 item
or customer
Material Material Material Material
and/or and/or and/or and/or
labor labor labor labor
Used for Repetitive or Continuous Processing

Figure 6.4
Advantages of Product
Layout
 High rate of output
 Low unit cost
 Labor specialization
 Low material handling cost
 High utilization of labor and equipment
 Established routing and scheduling
 Routing accounting and purchasing
Disadvantages of Product
Layout
 Creates dull, repetitive jobs
 Poorly skilled workers may not maintain
equipment or quality of output
 Fairly inflexible to changes in volume
 Highly susceptible to shutdowns
 Needs preventive maintenance
 Individual incentive plans are impractical
A U-Shaped Production
Line
In 1 2 3 4
Workers
Out 10 9 8 7
Figure 6.6
Process Layout
Process Layout
(functional)
Dept. A Dept. C Dept. E
Dept. B Dept. D Dept. F
Used for Intermittent processing

Job Shop or Batch Processes
Figure 6.7
Product Layout
Product Layout
(sequential)
Work Work Work

Station 1 Station 2 Station 3
Figure 6.7 (cont’d)
Used for Repetitive Processing

Repetitive or Continuous Processes

Advantages of Process
Layouts
 Can handle a variety of processing
requirements
 Not particularly vulnerable to equipment
failures
 Equipment used is less costly
 Possible to use individual 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 Layouts
 Fixed Position Layout: Layout in which the
product or project remains stationary, and
workers, materials, and equipment are moved as
needed.
 Nature of the product dictates this type of layout
– Weight
– Size
– Bulk
 Large construction projects
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 Table 6.3
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
Tuesday, April 16, 2019 lower
Industrial Engineering higher 88
Service Layouts
 Warehouse and storage layouts

 Retail layouts
 Office layouts
 Service layouts must be aesthetically
pleasing as well as functional

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Chapter 2

Tuesday, April 16, 2019 Industrial Engineering 1

 List some reasons for redesign of

 Determines how an activity's tangible fixed

Tuesday, April 16, 2019 Industrial Engineering 4

 Structure design: building and support

 What is the Importance of facilities

Tuesday, April 16, 2019 Industrial Engineering 6

 Reasons for facilities planning/design

 Location – A place or position of allocating the

 Layout - The way that something is physically

Tuesday, April 16, 2019 Industrial Engineering 8

Tuesday, April 16, 2019 Industrial Engineering 9

Tuesday, April 16, 2019 Industrial Engineering 11

Tuesday, April 16, 2019 Industrial Engineering 12

Tuesday, April 16, 2019 Industrial Engineering 13

 When the problems of location

 Starting the new Business

Tuesday, April 16, 2019 Industrial Engineering 14

Tuesday, April 16, 2019 Industrial Engineering 15

Tuesday, April 16, 2019 Industrial Engineering 16

Tuesday, April 16, 2019 Industrial Engineering 18

“The portion of the total cost

“The portion of the total cost

“The sum of variable and fixed

 For cost analysis, the total cost

Total Cost = FC + VC(Q)

Tuesday, April 16, 2019 Industrial Engineering 22

1. Determine the fixed and variable cost associated with each

Tuesday, April 16, 2019 Industrial Engineering 24

Fixed Costs Variable Costs Total Costs

Tuesday, April 16, 2019 Industrial Engineering 25

Fixed Costs Variable Costs Total Costs

Total Variable Costs

Tuesday, April 16, 2019 Industrial Engineering 26

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

Tuesday, April 16, 2019 Industrial Engineering 30

Tuesday, April 16, 2019 Q (thousands ofEngineering

Tuesday, April 16, 2019 Q (thousands ofEngineering

Tuesday, April 16, 2019 Q (thousands ofEngineering

Tuesday, April 16, 2019 Industrial Engineering 39

 Objective: to locate the new facility to

Tuesday, April 16, 2019 Industrial Engineering 41

Background of the problems

 To identify the optimum location for

 Median ≥ ∑ wi (First time achieved)

Tuesday, April 16, 2019 Industrial Engineering 43

Cost function f(X):

A new machine will be fixed at shop

Tuesday, April 16, 2019 Industrial Engineering 45

 Assume that, the costs per unit

Tuesday, April 16, 2019 Industrial Engineering 47

Current m/c, Pi Coordinate, ai Number of

Therefore the optimum location

Tuesday, April 16, 2019 Industrial Engineering 52

The cost for this optimum location;

f(5,4) = 5(I5-1I+I4-1I) + 6(I5-5I+I4-2I) +

Tuesday, April 16, 2019 Industrial Engineering 53