Some Aspects of FACILITIES LOCATION PLANNING

FACILITIES PLANNING:LOCATION ANALYSISProfessor D.K. Banwet , FIEB.E.(Mech.), M.E. ( Prod. Con), Ph.D. ( Indl. Engg./ Prod. Opers. Mgt) ( IITD )Group Chair- Operations. Project & SCM Former Dalmia Chair Professor, HOD DMS, Coordinators ASRP , Entrep. Program

Department of Management Studies, Indian Institute of Technology, DelhiEmail: dkbanwet@dms.iitd.ac.inDiscussantNPTELDEPARTMENT OF MANAGEMENT STUDIESINDIAN INSTITUTE OF TECHNOLOGY DELHI LECTURE 6,7Module 2.4 : FACILITIES PLANNING: LOCATION (Duration : 2 Hours) DiscussantProfessor D.K.BanwetB.E (Mech), M.E (Indl. Engg.), Ph.D (Indl. Engg / Production Operations Mgt.) [IITD], FIEGroup chair (Operations & supply Chain Management)

Former HOD DMS, Dalmia Chair Professor

Former Coordinator ASRP & Entreprenurship ProgrammeEmail : dkbanwet@dms.iitd.ac.in Some Aspects of FACILITIES LOCATION PLANNINGKey decisions in the LIFE of a Production systemBirth of systemProduct design & Process SelectionProduct design & Process SelectionWhere should fac. be locatedManning of the systemStart up of the systemSystem in steady stateRevisionTerminationOperation Mgt. ActivitiesProblems encountered in production operation management

Long run ProblemsProdn DesignProdn Des. & Process Plg.Fac. Loc.Layout & DesWork & Job DesignProdn PlgShort run ProblemsProdn ControlInventoryControl QualityControl Maint. Repl. & Rel.CostControl PeriodicContinualSelectingProductsProcesses, Eqpt., workforce, Location, Layout

DesigningUpdatingOperating/ControllingFacilities planningIt is complex & broad subject that cuts across several disciplines

It is the composite of facilities location & facilities designFacilities Planning Hierarchy Facilities PlanningFacilities DeignHandling System DesignLayout DesignFacilities System DesignFacilities Location7Hence the objective of facilities planning is to plan a facility that achieves facility location & facility design objectivesHIERARCHY OF LOCATION PROBLEMS

Location of PlantPlant Layout (Location of Depts)Physical Arrangements of M/csWork Place Layout (Location of tools or raw materials)Need for location decisionAt Project Feasibility Analysis stage : Where to locate the new Facility?Significant changes in the level of demand.Significant changes in the geographical distribution of demand.Changes in the costs or quality requirement of critical production inputs.Significant changes in the real-estate value of existing or adjacent sites.Depletion of resources.

Involves the long-term commitment of large amount of capital under conditions of considerable uncertainty.Determines a permanent framework of operating constraints.Significant impact on investment requirements, operating costs, revenues and operations. Has significant consequences on the competitive position of the firm.Facilities Location Problem(FLP)FLP Determination of optimal(!!) location of new facilitiesTraditionally these decision have been taken on the basis of WHIM,INTUITION,HUNCH or even based on a DREAM( Sheer absence of Economic Implications) unfortunately this is still RAMPANT (Ex. Ministers constituencies could dictate Loc. Solution

Strategic importance of location decisionTo become the low cost producer of final products.To increase profits by planning to capture the increased market share.To base location of the facilities based on customer convenience.To base location of a facility based on where it fits in the entire supply chain. (Beginning, Middle or end of the chain)

Location decisions are STRATEGIClong term & taken perhaps once in the life time of production system.

LIABLE TO AFFECT THE ENTIRE ORGANIZATION

OPERATIVE OVER LONG TIME SPANS

DIFFICULT TO REVERSE

CAPITAL INTENSIVEWithout sound & careful location planning in the beginning itself the new facility may spell continuous operating disadvantages for an indefinite future time.

Ex. Similarity of choosing a spouse & site location. while it is possible to change later, the change could be both expensive & unpleasantSOME FACTORS GOVERNING LOCATIONEconomic Reasons (Cost,profit,raw materials, labor, power, transportation, marketability etc.)

Social Reasons (Employee welfare, employment, opportunities, public needs, sanitation, community attitude)

Political Reasons (Govt Policies of decentralization regional & development planning)16Some factors Governing Location contd.Natural calamities(Floods, earthquakes etc.)

Security considerations (Risk of military invasions, sabotage from anti-social elements)

Political matters (Pollution-smell, noise, ecology, habitat etc.)17IMPORTANT FACTORS IN LOCATIONMARKETRAW MATERIALSTRANSPORTATIONPOWERCLIMATE AND FUELLABOUR AND WAGESLAWS AND TAXATIONCOMMUNITY SERVICESWATER AND WASTEGOVT. INCENTIVESLocation optionsExpand existing facilities

Add new facilities while retaining the existing ones.

Move to a new location

Doing nothing

Making Location DecisionsDecide on the criteriaIdentify the important factorsDevelop location alternativesEvaluate the alternativesMake selectionFactors influencing Location Decision

Regional FactorsSite-related FactorsMultiple Plant StrategiesCommunity Considerations

20Location of raw materialsLocation of marketsLabor factorsInfrastructureClimate and taxesRegional FactorsQuality of lifeServices (Medical, police, fire services etc.)Attitudes of the peopleTaxesEnvironmental regulationsUtilities (cost and availability)

Community Considerations

Land (cost, degree of development reqd, soil characteristics etc.)TransportationEnvironmentalLegalSite Related Factors

Product plant strategyMarket area plant strategyProcess plant strategyMultiple Plant Strategies

Comparison of Service and Manufacturing ConsiderationsManufacturing/DistributionService/RetailCost FocusRevenue focusTransportation modes/costsDemographics: age,income,etcEnergy availability, costsPopulation/drawing areaLabor cost/availability/skillsCompetitionBuilding/leasing costsTraffic volume/patternsCustomer access/parkingIssues in global locationsTrading BlocsPolitical RiskForeign Government -Policies on foreign ownership of production facilities-Import restrictions-Currency restrictions-Local product standards-Environmental RegulationsCultural differencesResourcesLabour -Possible regulation limiting no. of foreign employees-Language differencesEvaluating LocationsTransportation ModelDecision based on movement costs of raw materials or finished goodsCost-Profit-Volume Analysis- Decision based on fixed cost, variable cost and the level of output produced at a particular location.Center of Gravity (or Centroid) MethodDecision based on minimum distribution costsFactor RatingDecision based on quantitative and qualitative inputsMulti Criteria /Analytic Hierarchy Process based FLP27Evaluating LocationsCost-Profit-Volume AnalysisDetermine fixed and variable costs at each location alternativePlot total cost lines for all location alternatives on the same graphDetermine the lowest total costs for the expected level of output.28Location Cost-Volume AnalysisAssumptionsFixed costs are constant for the range of probable outputVariable costs are linear for the range of probable outputOutput can be closely estimatedOnly one product involvedExample 1: Cost-Volume AnalysisFixed and variable costs for four potential locations (for 10,000 units)

30Example 1: Solution

31Example 1: Solution8007006005004003002001000Annual Output (000)$(000)8101214166420ABCB SuperiorC SuperiorA SuperiorD32Plant Location Methodology: Centroid MethodThe centroid method is used for locating single facilities that considers existing facilities, the distances between them, and the volumes of goods to be shipped between them.This methodology involves formulas used to compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above3310Plant Location Methodology: Centroid Method Formulas

Where:Cx = X coordinate of centroidCy = Y coordinate of centroiddix = X coordinate of the ith locationdiy = Y coordinate of the ith locationVi = volume of goods moved to or from ith location

3412Plant Location Methodology: Example of Centroid MethodQuestion: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month? Centroid method exampleSeveral mobile phone showrooms are located according to the following grid which represents coordinate locations for each showroom

XYA(100,200)D(250,580)Q(790,900)(0,0)3511Plant Location Methodology: Example of Centroid Method (Continued): Determining Existing Facility Coordinates

To begin, you must identify the existing facilities on a two-dimensional plane or grid and determine their coordinates.XYA(100,200)D(250,580)Q(790,900)(0,0)You must also have the volume information on the business activity at the existing facilities.

3612You then compute the new coordinates using the formulas:Plant Location Methodology: Example of Centroid Method(Continued): Determining the Coordinates of the New Facility

3713

XYA(100,200)D(250,580)Q(790,900)(0,0)ZNew location of facility Z about (443,627)You then take the coordinates and place them on the map:Plant Location Methodology: Example of Centroid Method(Continued): Determining the Coordinates of the New Facility38MECHANICAL ANALOGUE FOR FINDING BEST LOCATION OF A MANUFACTURING PLANT

(ALSO KNOWN AS VARIGNONS FRAME AFTER INVENTOR)R2R1RmM1M2Mn12mm+1m+2m+nP41MULTI-OBJECTIVE CONSIDERATIONS IN LOCATION DECISIONS

FACTORS AFFECTING LOCATION ARE :SUBJECTIVE / OBJECTIVE (labour attitudes)(eg. Costs)

INTANGIBLE / TANGIBLE INCOMMENSURATE UNITSPlant Location Methodology: Factor Rating Method Example

Two refineries sites (A and B) are assigned the following range of point values and respective points, where the more points the better for the site location.1231505424454855Major factors for site locationPt. Range156100639650545020 SitesA BTotal pts. 418 544Best Site is B429Brown & Gibson ModelStep 1: Identify the factors that deserve to be included in the study & determine which of thee absolutely must be satisfied.

Step 2: Collect data for all factors that can be expressed in monitory units. Then determine an objective factor (OF) for each site.

Annual cots in000 Rs/-SiteLabMktingUtilitiesTaxesTotal cost12481817416519*221120282850332301659021506

*519 = 248+181+74+16Step 3: Intangible factors are rated a per a forced choice procedure(i) first applied to rank importance of factors (ii) then applied to each site to rate how well that satisfies the factors such as [(A). Hosing (B). Recreation (C). Competition]These two ratings are combined to obtain a subjective factors (SF) ranking for each site as

Forced choice procedure is now appliedFactorComparison DecisionSum of preferencesFactor rating (IK)subjective

123A (Housing)11-22/4=0.5B (Recreation)0-11=0.25C. competition-011=0.25sum41Factor A: HousingSiteDecisionsRating(SAK)

123110-0.3320-003-110.67Factor B: RecreationSiteDecisionsRating(SBK)123100-021-10.673-100.33Factor C: CompetitionSiteDecisionsRating(SCK)

123110-0.2521-00.253-110.50Summary of subjective factorsFactorSite ratingImpact factor123A0.3300.670.5B00.670.330.25C0.250.250.500.25Subjective factors for SFi each site is got now

Step-4: Now a committee could decide what weightage to be give to objective 7 subjective factors say X=0.67 to objective functionStep-5

TAXONOMY OF FLP No. of fac. [single, multiple, Loc Alloc]Siting restrictions [Anywhere in plane planar /infinite set /discrete /finite set; Constr./Unconstrained]Ancilliary fac. characteristics [static, dynamic, deter/sto]Weight /Interaction [w 0, unrestr., fixed parameter /random with some assoc. disturb.]Capacity Constr. [Capacitated, uncapacitated]Planning horizon [finite /infinite]Commodities handled [single, multiple]Objective cost Fn. nature [convex, concave, linear, non linear etc.]Stage [single /multiple echelon /hierarchy]Distance Norms [Rect., Eucl., sq. Eucl., sq. Rect., Cp, generalised lp, mixed mode, geodesic, multi mode etc]Criterion /Objective [Minisum, Minimax, Maximum, Multiple, Objective]Loc. Policy [private, public, joint sector]Model Families [single /multiple FLP, plant Loc. Prob., center /median prob, round trip travelling salesman prob.]Dimensionality [1-, 2-, 3- dimensional Loc prob.]

Codification scheme of FLPA generalised 6 bit code proposalNo of new fac. Crit./Obj.Dist.Norms Restr./Constr ProbRepr.Music RemarksM (Multi fac)MS(Minisum)MM(Mixed mode)UN(Unconstr.)P(Planar)MMO(Mixture of [Eucl + Rec.])Condensed 3 bit code M/MS/MM more convenient.In fact condensed information regarding the type of problem being modelled/considered can be conveyed through the codification scheme proposed. 56The location solution (decision) could vary depending on the criterion/objective used & also on the distance mode of interactionMinisum Objective

Here location analyst attempts minimizing the handling effort viz.the sum total of the weighted appropriate distance between the reference points (applications-factories, whose components in network etc.)

Minisum gives an Average(!!) effect57Minimax ObjectiveIn some cases the minisum criteria may not be appropriate (an exaggerated eq. of 499 students walk 1 to school whereas 1student walks 100 km to school)Perhaps the mini-max objective would be more appropriate. Here one may wish to minimize the maximum weighted distance.

58Here one attempts to minimize the effect of worst situation (application of mini-max criteria suited for emergency service like fire health/ ambulance services, type of situations.)

59Hybrid multi objective-FLP Realistically speaking is MODMEx. application a public facility, to house fire fighting equipment (mini-max) to house offices (mini-sum)To house schooling services (min-max round trip traveling sales person type)Multi criteria based formulation have started coming of late Above factors some-tangible, intangible.

60Hybrid multi objective-FLP Realistically speaking is MODM contd..Some time they vary in weight and some times in direction also.FLP problem is indeed difficult if viewed in it true scientific perspective.Due to breath & application of location theory. there exists a strong inter disciplinary interest of researchers - Economists, Operation researches, Management sciences, geographers. Regional .Science, System analysts and Industrial Engineers

61To day plant-facility location, apart from factories, manufacturing units like steel, fertilizer, cement plant etc.Facility could refer to schools, hospitals, banks, fire/police stations, milk/polling booth, etc.A facility could connote any physical object relevant to location analysis.

DISTANCE MODE VARIANTSOf critical importance is the MODE of dist. considered between any 2 reference points.

Mode variants investigated are the following :EUCLIDEAN MODE : Shortest straight line dist.

(x, y)(ai, bi) xy RECTILINEAR MODERECTILINEAR MODE : also called Manhattan norm (x, y)(ai, bi) xy ccccThough many alternative path`s (similar to rock`s movt. in chess) dr = [ | x ai | + | y bi | ]Squared Eucl. is (dE)2 = dSE = [(x ai)2 + (y bi)2 ]Squared Rect. is (dR)2 = dSE = [| x ai |2 + | y bi |2 ](These 2 cases above are appropriate norms for emergency type situations)

Generalised lp normIn real life perhaps more of lp norms exist.(x, y)(ai, bi) xy p = 1.2p = 1.8 p = 2 p < 2 lp = [ |x ai|p + |y bi|p ]1/p Genl. lp = [ |x ai |p + |y bi |p ]p/p for p = 1; S = 1; Rect. p = 1; S = 2; Sq. Rect.

for p = 2; S = 1; Eucl. p = 2; S = 2; Sq. Eucl.

MIXED MODEA fac. Could be fed matls. through conveyors/pipes(Eucl) while other matls. supplied by fork truck(Rect)lpi = [ | x ai |pi + |y bi|pi ]pi (x, y)(ai, bi) xy p = 1 p = 1.8 p = 2 p = 0.5 GEODESIC NORMThrough which no travel permissible and where new fac. can not be located(x, y)(ai, bi) xy Forbidden regionMathematical modelling of some FLP(Infinite planar class of FLP) deterministic only.MINISUM CASESingle FLP : Min Fx,y (p) = F(x,y) =

Multi FLP : Min xi,yi F(p) = F(xi, yi) =

B. MINIMAX CASESingle FLP : Min Fx,y (p) = Max1 i m [wi di]

Multi FLP : Min xj, yi = F(xi, yi) = Max

Max [wij dij], Max [njk djk] 1 j < k n

1 i m

1 j n C. HYBRID CASE [Minisum + Minimax case]Single FLP : Min Fx,y (p) = F(x, y) =

Possible ext to multi FLPF(xj yi)(p) = F(xj, yi)

=

D. Constrained WEBER CaseSingle FLP : Min F(p) = F(x, y) = (X, Y) FR (X, Y) FR

Multi FLP : Min F(p) = F(xj, yi) (Xj, Yi) FR (Xj, Yi) FR

=

Note : Common to all the above math model of FLP formulations, is the desire to MINIMIZE F(p) viz.Determining (x* y*) or (xj* yi*) to give Min F(p) (a1, b1)(a2, b2)(a3, b3)(a4, b4)(0, 0)(0, 10)(5, 0)(12, 6)1/41/41/41/4w1w2w3w4m = 4SMSSESingle Fac.; Mini sum; Sq. EUCL. FLP

Gravity Solution :(x*, y*) = (4,25, 4) opt. loc. Of the singleSq. Eucl. Dist. normMedian Soln. RectilinearS/MS/R (Single Fac. Minisum Rectilinear)(ai, bi)(0,0)(3,16)(18,2)(8,18)(20,2)wi522416034x*ai (wts. cum. wi in ascending order)05532227 < 81x* = 86087 > 81184112820341621/2 162 = 81 y*biwiCum.wts0552,241+3480 < 81y* = 1622102 > 8118601621/2 162 = 81 (x*, y*) = (8,16) MEDIAN SOLUTION Rectilinear Minisum Location Problem Contour Construction Method(ai, bi)(4,2)(8,5)(11,8)(13,2)wi1/61/31/31/6Rel.

+12/30-2/3-1320-2-3-3-2023-1-2/302/31XXXX(11 ,8) (8 ,5) (4 ,2) (13 ,2)N3 = +1D3 = 1/3N2 = 1/3D2 = 1/3 N1 = -1/3 D1 = (1/6)+ (1/6) = 1/3 N0 = -1M0 = -1C1= 1/6M1 = -2/3C2= 1/3 C3 = 1/3 C4= 1/6 M2 = 0 M3 = 2/3 M4 = +1 +12/30-2/3-1320-2-3-3-2023-1-2/302/31XXXX(11 ,8) (8 ,5) (4 ,2) (13 ,2)N3 = +1D3 = 1/3N2 = 1/3D2 = 1/3 N1 = -1/3 D1 = (1/6)+ (1/6) = 1/3 N0 = -1M0 = -1C1= 1/6M1 = -2/3C2= 1/3 C3 = 1/3 C4= 1/6 M2 = 0 M3 = 2/3 M4 = +1 Materials Handling (MH)MH deals with the preparation, placing & positioning of MATERIALS to FACILITATES their movement, transportation & storage. In fact right from the time raw materials enters the system, till finished product leaves system, a lot of MH takes place.Some studies reveal 20 60% of total production cost is attributed to MH.(Great scope for cost reduction)

PURPOSE OF MH : To move Raw Materials, WIP, FG tools supplies etc.AIM Perform safely and efficiently. Also function besides moving material is connected with storage, control & retrieval.Also Identification/Verification of material in mechanized handling systems, their routing & scheduling of their moves.Also Information about origin, current location and future destination.

All this implies that MH is Motion (movt.)Time (make material available at the time regd. Quantity of the right qty. Space requirements greatly influence by type & var.of MH Eqpt. All MH results in adding to COSTS & no value

Perhaps best thing would be not to handle material at all & Therefore MH Costs = 0/-. However, this is never possible, some MH is evident.

Though MH adds costs but no value, however MH accounts for place utility & time utility (whereas production conversion process adds form & value utility).

MH is a support/service FN in production process & has direct impact on cycle time, costs etc. Characteristics of MH EQPT. Materials (bulk & packaged.) Movement (vertically{V}, horizontally{H} & combination of {V + H}) Supervision (close, little, Eqpt. automatic or semi automatic.) Path followed (variable, fixed & fixed area.) Speed (variable, fixed, either fixed or variable.) Power required for operation of Eqpt (electricity, internal comb. Eng., manual, & gravity) Classification of MH Eqpt. Industrial Trucks flexible, versatile & most extensively usedManual2 wheeled excellent 3 wheeled for intermillent4 wheeled small distance movements.PoweredDriver walk (driver remains on ground) {Platform type, Pallet lift, High lift fork)Driver ride (driver on the truck){ platform(low & high lift), parallel, telescope fork lift } Cranes Jib craneGantry craneOverhead bridge crane

Hoists chain type(manual)ElectricalPneumatic

ConveyorsBelt conveyorFlat troughedFixed /portable

Roller gravity Spiral portableFixedRoller lineChain driveBelt driveBucketChain or cablePipe line (pneumatic)MonorailTrolleyCarrier

Slides and ChutesStraightSpiralWood/steelVibrating

Lifts (for multi storeyed blags)

Tractors, Trailers. AGY`s, & robot`s

LocationFixed

CostVariable

Cost

A

B

C

D$250,000

100,000

150,000

200,000$11

30

20

35

Fixed

CostsVariable

CostsTotal

CostsA

B

C

D$250,000

100,000

150,000

200,000$11(10,000)

30(10,000)

20(10,000)

35(10,000)$360,000

400,000

350,000

550,000