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Facilities Location, Layout and Planning
FACILITY PLANNINGFACILITY PLANNING• The placement of facility – customers,
suppliers, other links in the supply chain
• Resources
• Strategy – 99cents Only example
• Access to customers
• Government impacts
Objectives of Facility LayoutObjectives of Facility Layout
Minimize material handling costsMinimize material handling costs Utilize space efficientlyUtilize space efficiently Utilize labor efficientlyUtilize labor efficiently Eliminate bottlenecksEliminate bottlenecks Facilitate communication and interaction Facilitate communication and interaction
between workers, between workers and between workers, between workers and their supervisors, or between workers and their supervisors, or between workers and customerscustomers
Reduce manufacturing cycle time or Reduce manufacturing cycle time or customer service timecustomer service time
Objectives of Facility LayoutObjectives of Facility Layout
Eliminate waste or redundant movementEliminate waste or redundant movement Facilitate the entry, exit, and placement of Facilitate the entry, exit, and placement of
material, products, or peoplematerial, products, or people Incorporate safety and security measuresIncorporate safety and security measures Promote product and service qualityPromote product and service quality Encourage proper maintenance activitiesEncourage proper maintenance activities Provide a visual control of operations or Provide a visual control of operations or
activitiesactivities Provide flexibility to adapt to changing Provide flexibility to adapt to changing
conditionsconditions Increase capacityIncrease capacity
Questions on Layout Questions on Layout PlanningPlanning
• How should the facility be laid out?
• Does my layout cause unnecessary movement/excess travel time?
• Does my work flow in a logical manner?
• Does size dictate layout or does layout/product flow dictate the size?
Process LayoutProcess Layout Machines grouped by process they performMachines grouped by process they perform
Product LayoutProduct Layout Linear arrangement of workstations to Linear arrangement of workstations to
produce a specific productproduce a specific product
Fixed Position LayoutFixed Position Layout Used in projects where the product cannot Used in projects where the product cannot
be movedbe moved
Basic Types of LayoutsBasic Types of Layouts
Manufacturing Process LayoutManufacturing Process Layout
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A A AReceiving andShipping Assembly
Painting Department
Lathe DepartmentMilling
Department Drilling Department
Grinding Department
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Manufacturing Process LayoutManufacturing Process Layout
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A A AReceiving andShipping Assembly
Painting Department
Lathe DepartmentMilling
Department Drilling Department
Grinding Department
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Manufacturing Process LayoutManufacturing Process Layout
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A A AReceiving andShipping Assembly
Painting Department
Lathe DepartmentMilling
Department Drilling Department
Grinding Department
P
P
A Product LayoutA Product Layout
InIn
OutOut
Fixed-Position LayoutsFixed-Position LayoutsTypical of projectsEquipment, workers, materials, other
resources brought to the siteHighly skilled laborOften low fixed Typically high variable costs
Designing Process LayoutsDesigning Process Layouts
Minimize material handling costs Block Diagramming
Minimize nonadjacent loads Use when quantitative data
is available
Relationship Diagramming Based on location preference between areas Use when quantitative data is not available
Block DiagrammingBlock Diagramming Create load summary chartCreate load summary chart Calculate composite (two way) Calculate composite (two way)
movementsmovements Develop trial layouts minimizing number Develop trial layouts minimizing number
of nonadjacent loadsof nonadjacent loads
ExampleExample
Relationship DiagrammingRelationship Diagramming(Murther’s Grid)(Murther’s Grid)
Used when quantitative data is not available
Muther’s grid displays preferences
Denote location preferences with weighted lines
Relationship Diagramming Relationship Diagramming ExampleExample
ProductionProduction
OfficesOffices
StockroomStockroom
Shipping and Shipping and receivingreceiving
Locker roomLocker room
ToolroomToolroom
Relationship Diagramming Relationship Diagramming ExampleExample
AA AA
AA OO
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OOOO
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UU UU
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EEXX
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ProductionProduction
OfficesOffices
StockroomStockroom
Shipping and Shipping and receivingreceiving
Locker roomLocker room
ToolroomToolroom
A Absolutely necessaryE Especially importantIImportantO OkayUUnimportantXUndesirable
Relationship Diagramming Relationship Diagramming ExampleExample
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ProductionProduction
OfficesOffices
StockroomStockroom
Shipping and Shipping and receivingreceiving
Locker roomLocker room
ToolroomToolroom
1 Absolutely necessary2 Especially important3 Important4 Okay5Unimportant6Undesirable
Facility Location Facility Location ModelsModels
Types Of FacilitiesTypes Of Facilities
Heavy manufacturingAuto plants, steel mills, chemical plants
Light industrySmall components mfg, assembly
Warehouse & distribution centersRetail & service
Factors in Heavy Manufacturing Factors in Heavy Manufacturing LocationLocation
Construction costsLand costs
Raw material and finished goods shipment modes
Proximity to raw materialsUtilities
Labor availability
Factors in Light Industry Factors in Light Industry LocationLocation
Construction costsConstruction costsLand costsLand costs
Easily accessible Easily accessible geographic regiongeographic region
Education & training capabilitiesEducation & training capabilities
Factors in Warehouse Factors in Warehouse LocationLocation
Transportation costsProximity to markets (Customers)
Service Location Service Location ConsiderationsConsiderations
• Labor
• Cost of Living
• Real Estate
• Construction
• Government Incentives
• Examples – Amoco, Mass St, Tattoo Parlors, Walgreen’s
Global Location FactorsGlobal Location Factors
Government stability Government regulations Political and economic
systems Economic stability and
growth Exchange rates Culture Climate Export import regulations,
duties and tariffs
Raw material availability Number and proximity of
suppliers Transportation and
distribution system Labor cost and education Available technology Commercial travel Technical expertise Cross-border trade
regulations Group trade agreements
Regional Location FactorsRegional Location Factors
Community government
Local business regulations
Government services Business climate Community services Taxes
Availability of sites Financial Services Community
inducements Proximity of suppliers Education system
Site Location FactorsSite Location Factors
Customer baseConstruction/
leasing costLand costSite sizeTransportationUtilities
Zoning restrictionsTrafficSafety/securityCompetitionArea business
climate Income level
Location IncentivesLocation Incentives
Tax credits Wal-Mart in WyandotteRelaxed government regulation
Job training Infrastructure improvement
Money
Locate facility at center of geographic area Based on weight and distance traveled
Establish grid-map of area Identify coordinates and weights shipped
for each location
Center-of-Gravity TechniqueCenter-of-Gravity Technique
Facility SummaryFacility Summary
• Why is it important?
• Location analysis
• Location Criteria – global, local, regional - education
• Location and Strategy
• Location and Customers
• Layout planning
Project ManagementProject Managementand Operationsand Operations
Project Project ManagementManagement
First Essay on Project Management:1697 – “An Essay Upon Projects”
1959 HBR Article – “The Project Manager”
Air Force Manual 1964
Project ManagementProject ManagementIn today’s global marketplace, complexity and speed are certainties. In such an environment, a good axiom for project management is, Do It, Do It Right, Do It Right Now. Creating clear direction, efficiency, timely response, and quality outcomes requires project managers who are agile -- adept at change. The associated disciplinary areas are clearly spelled out in the following PMI definition.
“Project management is the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project. Project management is comprised of five Project Management Process Groups – Initiating Processes, Planning Processes, Executing Processes, Monitoring and Controlling Processes, and Closing Processes.
Source: Project Management Institute - http://www.pmi.org/info/PP_AboutProfessionOverview.asp?nav=0501
Elements of Project Elements of Project ManagementManagement
Project teamProject team Individuals from different departments within Individuals from different departments within
companycompany Matrix organizationMatrix organization
Team structure with members from different Team structure with members from different functional areas depending on skills neededfunctional areas depending on skills needed
Project manager - Leader of project teamProject manager - Leader of project team Project Charter – high level description of what is Project Charter – high level description of what is
to be accomplished in a project and delegates to be accomplished in a project and delegates authority to project manager to implement authority to project manager to implement actions to complete projectactions to complete project
Project PlanningProject PlanningStatement of workStatement of work
Written description of goals, work & Written description of goals, work & time frame of projecttime frame of project
Activities require labor, resources & Activities require labor, resources & timetime
Precedence relationship shows Precedence relationship shows sequential relationship of project sequential relationship of project activitiesactivities
Elements of Elements of Project PlanningProject Planning
Define project objective(s)Define project objective(s) Identify activitiesIdentify activitiesEstablish precedence relationshipsEstablish precedence relationshipsMake time estimatesMake time estimatesDetermine project completion timeDetermine project completion timeCompare project schedule objectivesCompare project schedule objectivesDetermine resource requirements to Determine resource requirements to
meet objectivemeet objective
Work Breakdown Work Breakdown StructureStructure
Hierarchical organization of work to Hierarchical organization of work to be done on a projectbe done on a project
Project broken down into modulesProject broken down into modules Modules subdivided into Modules subdivided into
subcomponents, activities, and taskssubcomponents, activities, and tasks Identifies individual tasks, workloads, Identifies individual tasks, workloads,
and resource requirementsand resource requirements
Project ControlProject ControlAll activities identified and includedAll activities identified and includedCompleted in proper sequenceCompleted in proper sequenceResource needs identifiedResource needs identifiedSchedule adjustedSchedule adjustedMaintain schedule and Maintain schedule and
budgetbudgetComplete on timeComplete on time
A Gantt ChartA Gantt Chart
Popular tool for project schedulingPopular tool for project scheduling Graph with bar for representing the time for Graph with bar for representing the time for
each taskeach task Provides visual display of project scheduleProvides visual display of project schedule Also shows slack for activitiesAlso shows slack for activities
Amount of time activity can be Amount of time activity can be delayed without delaying projectdelayed without delaying project
Around since 1914
Gantt ChartsGantt Charts
Gantt charts were employed on major infrastructure projects including the Hoover Dam and Interstate highway system and still are an important tool in project management.
Gantt described two principles for his charts:
1. measure activities by the amount of time needed to complete them
2. the space on the chart can be used the represent the amount of the activity that should have been done in that time.
A Gantt ChartA Gantt Chart| | | | |
Activity
Design house and obtain financing
Lay foundation
Order and receive materials
Build house
Select paint
Select carpet
Finish work
00 22 44 66 88 1010MonthMonth
MonthMonth11 33 55 77 99
Figure 6.2Figure 6.2
CPM/PERTCPM/PERTCritical Path Method (CPM)Critical Path Method (CPM)
DuPont & Remington-Rand (1956)DuPont & Remington-Rand (1956) Deterministic task timesDeterministic task times
Project Eval. & Review Technique Project Eval. & Review Technique (PERT)(PERT)
US Navy, LockheedUS Navy, Lockheed Multiple task time estimatesMultiple task time estimates
PERT/CPMPERT/CPM
Program Evaluation and Review Technique (PERT): developed in conjunction with the development of the Polaris missile program for submarines – developed by the US Navy with Lockheed as the lead contractor
Critical Path Method (CPM): developed through a joint venture between the DuPont Corporation and the Remington Rand Corporation – the original purpose was to monitor and evaluate plant maintenance management projects.
Project Network for a HouseProject Network for a House
3322 00
11
33
11 1111
1 2 4 6 7
3
5
Lay Lay foundationfoundation
Design house Design house and obtain and obtain financingfinancing
Order and Order and receive receive materialsmaterials
DummyDummy
Finish Finish workwork
Select Select carpetcarpet
Select Select paintpaint
Build Build househouse
Figure 6.4Figure 6.4
Critical PathCritical Path A path is a sequence of connected A path is a sequence of connected
activities running from start to end activities running from start to end node in networknode in network
The critical path is the The critical path is the path with the longest path with the longest duration in the networkduration in the network
Project cannot be Project cannot be completed in less than completed in less than the time of the critical the time of the critical pathpath
The Critical The Critical PathPath
A:A: 1-2-3-4-6-71-2-3-4-6-73 + 2 + 0 + 3 + 1 = 93 + 2 + 0 + 3 + 1 = 9 months months
B:B: 1-2-3-4-5-6-71-2-3-4-5-6-73 + 2 + 0 + 1 + 1 + 1 = 83 + 2 + 0 + 1 + 1 + 1 = 8 months months
C:C: 1-2-4-6-71-2-4-6-73 + 1 + 3 + 1 = 83 + 1 + 3 + 1 = 8 months months
D:D: 1-2-4-5-6-71-2-4-5-6-73 + 1 + 1 + 1 + 1 = 73 + 1 + 1 + 1 + 1 = 7 months months
33
22 00
11
33
11 11
111 2 4 6 7
3
5
Lay Lay foundationfoundation
Design house Design house and obtain and obtain financingfinancing
Order and Order and receive receive materialsmaterials
DummyDummy
Finish Finish workwork
Select Select carpetcarpet
Select Select paintpaint
Build Build househouse
The Critical The Critical PathPath
33
22 00
11
33
11 11
111 2 4 6 7
3
5
Lay Lay foundationfoundation
Design house Design house and obtain and obtain financingfinancing
Order and Order and receive receive materialsmaterials
DummyDummy
Finish Finish workwork
Select Select carpetcarpet
Select Select paintpaint
Build Build househouse
1 2 4 6 7
3
5
3
2 0
1
3
1 1
Start at 3 months
Start at 5 months
1
Finish at 9 months
Start at 8 months
Figure 6.6
Activity Start Times
Project CrashingProject Crashing Crashing is reducing project time by Crashing is reducing project time by
expending additional resourcesexpending additional resources Crash time is an amount of time an activity is Crash time is an amount of time an activity is
reducedreduced Crash cost is the cost of reducing the activity Crash cost is the cost of reducing the activity
timetime Goal is to reduce project duration at minimum Goal is to reduce project duration at minimum
costcost
Crashing costs increase as project duration Crashing costs increase as project duration decreasesdecreases
Indirect costs increase as project duration Indirect costs increase as project duration increasesincreases
Reduce project length Reduce project length as long as crashing as long as crashing costs are less than costs are less than indirect costsindirect costs
Time-Cost Relationship Time-Cost Relationship
Life Cycle ManagementLife Cycle Management
• Long term view of projects to guide decision making – solutions that provide life time success vice short term
• Acquisition; development; production; introduction; sustainment; disposal
• Links system costs to big picture; better use of resources; minimize total cost of ownership
Capacity and Capacity and Aggregate Aggregate Planning Planning
Capacity Outputs: Capacity Outputs: ExamplesExamples
Type of BusinessInput Measures of
CapacityOutput Measures
of Capacity
Car manufacturer Labor hours Cars per shift
Hospital Available beds Patients per month
Pizza parlor Labor hours Pizzas per day
Retail storeFloor space in square feet
Revenue per foot
The goal of capacity planning The goal of capacity planning decisionsdecisions
The goal of capacity planning The goal of capacity planning decisionsdecisions
(1) The capacity of the firm to produce the service or good
(2) The processes for providing the service or making the good
(3) The layout or arrangement of the work space
(4) The design of work processes to enhance productivity
CapacityCapacity• The max output that an organization be
capable of producing• Measure a single facility:
– Design vs. Effective capacity– Capacity Utilization: design vs. efficient utilization
• For systems have more than one facility and flows of product– System capacity and bottleneck– Improve system capacity
Determinants of Effective CapacityDeterminants of Effective Capacity
• Facilities• Human considerations
– Adding people– Increasing employee motivation
• Operations– Improving operating rate of a machine– Improving quality of raw materials and
components
• External forces– Safety regulations
Capacity UtilizationCapacity Utilization
Measures how much of the available capacity is actually being used:
– Always <=1(percentage of usage)– Higher the better– Denominator:
• If effective capacity used: efficient utilization• If design capacity used: design utilization
actual output rateUtilization 100%
available capacity
Aggregate PlanningAggregate Planning• The process of planning the quantity and
timing of output over the intermediate range (3-18 months) by adjusting production rate, employment, inventory
• Master Production Schedule: formalizes the production plan and translates it into specific end item requirements over the short to intermediate horizon
Capacity PlanningCapacity Planning
• The process of determining the amount of capacity required to produce in the future. May be at the aggregate or product line level
• Master Production Schedule - anticipated build schedule
• Time horizon must exceed lead times for materials
Capacity PlanningCapacity Planning• Look at lead times, queue times, set up times, run
times, wait times, move times• Resource availability• Material and capacity - should be in synch• driven by dispatch list - listing of manufacturing
orders in priority sequence - ties to layout planning
• load profiles - capacity of each section
the capacity decisions:the capacity decisions:
• When to add capacity
• How much capacity to add
• Where to add capacity
• What type of capacity to add
• When to reduce capacity
Capacity PlanningCapacity Planning• Rough Cut Capacity Planning -
process of converting the master production schedule into requirements for key resources
• capacity requirements plan - time-phased display of present and future capacity required on all resources based on planned and released orders
Capacity PlanningCapacity Planning• Capacity Requirements Planning (CRP)
- process of determining in detail the amount of labor and machine resources required to meet production plan
• RCCP may indicate sufficient capacity but the CRP may indicate insufficient capacity during specific time periods
Theory of ConstraintsTheory of Constraints• Every system has a bottle neck
• capacity of the system is constrained by the capacity of the bottle neck
• increasing capacity at other than bottle neck operations does not increase the overall capacity of the system
Theory of ConstraintsTheory of Constraints
• What needs to be changed
• What to change to
• How to make the change happen
Theory of ConstraintsTheory of Constraints
• Identify the constraint
• Subordinate
• Inertia
• Walk the process again
• inertia of change can create new bottle necks
Capacity PlanningCapacity Planning
Establishes overall level of Establishes overall level of productive resourcesproductive resources
Affects lead time Affects lead time responsiveness, cost & responsiveness, cost & competitivenesscompetitiveness
Determines when and how Determines when and how much to increase capacitymuch to increase capacity
Capacity ExpansionCapacity Expansion
Volume & certainty of anticipated Volume & certainty of anticipated demanddemand
Strategic objectives for growthStrategic objectives for growthCosts of expansion & operationCosts of expansion & operation Incremental or one-step Incremental or one-step
expansionexpansion
Sales and Operations Sales and Operations Planning (S&OP)Planning (S&OP)
• Brings together all plans for business
• performed at least once a month
• Internal and external
Adjusting Capacity to Adjusting Capacity to Meet DemandMeet Demand
1.1. Producing at a constant rate and using inventory Producing at a constant rate and using inventory to absorb fluctuations in demand (level to absorb fluctuations in demand (level production)production)
2.2. Hiring and firing workers to match demand (chase Hiring and firing workers to match demand (chase demand)demand)
3.3. Maintaining resources for high demand levelsMaintaining resources for high demand levels4.4. Increase or decrease working hours (overtime Increase or decrease working hours (overtime
and undertime)and undertime)5.5. Subcontracting work to other firmsSubcontracting work to other firms6.6. Using part-time workersUsing part-time workers7.7. Providing the service or product at a later time Providing the service or product at a later time
period (backordering)period (backordering)
Demand ManagementDemand ManagementShift demand into other periodsShift demand into other periods
Incentives, sales promotions, Incentives, sales promotions, advertising campaignsadvertising campaigns
Offer product or services with Offer product or services with countercyclical demand patternscountercyclical demand patterns
Partnering with suppliers to reduce Partnering with suppliers to reduce information distortion along the information distortion along the supply chainsupply chain
Remedies for UnderloadsRemedies for Underloads
1. Acquire more work
2. Pull work ahead that is scheduled for later time periods
3. Reduce normal capacity
Remedies for OverloadsRemedies for Overloads
1. Eliminate unnecessary requirements
2. Reroute jobs to alternative machines or work centers
3. Split lots between two or more machines
4. Increase normal capacity
5. Subcontract
6. Increase the efficiency of the operation
7. Push work back to later time periods
8. Revise master schedule
Scheduling as part of the Scheduling as part of the Planning ProcessPlanning Process
• Scheduling is the last step in the planning process?
• It is one of the most challenging areas of operations management.
• Scheduling presents many day-to-day problems for operations managers because of – Changes in customer orders
– Equipment breakdowns
– Late deliveries from suppliers
– A myriad of other disruptions
SchedulingScheduling
Objectives in SchedulingObjectives in Scheduling
Meet customer due dates Minimize job lateness Minimize response time Minimize completion time Minimize time in the system Minimize overtime Maximize machine or labor utilization Minimize idle time Minimize work-in-process inventory Efficiency
Sequencing RulesSequencing Rules
FCFS - first-come, first-served LCFS - last come, first served DDATE - earliest due date CUSTPR - highest customer priority SETUP - similar required setups SLACK - smallest slack CR - critical ratio SPT - shortest processing time LPT - longest processing time
Critical Ratio RuleCritical Ratio Rule
CR considers both time and work remaining
If CR > 1, job ahead of scheduleIf CR < 1, job behind schedule
If CR = 1, job on schedule
time remaining due date - today’s date
work remaining remaining processing time
Ties scheduling to Gantt Chart or PERT/CPM
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