FACILITY LOCATION AND LAYOUT

Prepared by , Guided By,

Piyush bhatt Madhuri mam

Swati parmar

Dipak mer

Submitted to,

Department Of Business Administration,

MK Bhavnagar University,

Bhavnagar.

PLANT LOCATION

Every entrepreneur is faced with the problem of deciding the best site for location of his plant or factory.

Plant location refers to the choice of region and the selection of a particular site for setting up a business or factory.

An ideal location is one where the cost of the product is kept to minimum, with a large market share, the least risk and the maximum social gain.

Reason for firm should look for additional or alternate location

To establish new venture

Expansion of existing business

Changes in demand and supply

Company policy on diversification and change of working condition

Changing in government policy

Alternate options open for management

Make or Buy decision

Sub-contract instead of expansion

Expand existing organization

Dispose of the existing plant and build new one

Location analysis

Demographic Analysis

Trade Area Analysis

Competitive Analysis

Traffic analysis

Site economics

Cost Site- A (Rs) Site- B (Rs)

Cost of establishments:

Land and Buildings

350000 250000

Transport facilities

20000 30000

Cost of operations:

Taxes 10000 8000

Labour 100000 70000

Water, power and fuel

10000 80000

Total 490000 438000

Two sites A and B are evaluated in terms of above mentioned two costs as follows:

Factors influencing plant location/facility location

1. General locational factors, which include controllable and uncontrollable factors for all type of organisations.

2. Specific locational factors specifically required for manufacturing and service organisations.

General Locational Factors

1. Proximity to markets

2. Supply of materials

3. Transportation facilities

4. Infrastructure availability

5. Labour and wages

6. Capital

Controllable factors

Uncontrollable factors

1. Government policy

2. Climate conditions

3. Supporting industries and services

4. Community and labour attitudes

Specific Locational Factors for Service Organisation

1. Favorable labor climate

2. Proximity to markets

3. Quality of life

4. Proximity to suppliers and resources

5. Utilities, taxes, and real estate costs

LOCATION MODELS

Various models are available which help to identify the ideal location. Some of the popular models are:

1. Factor rating method

2. Weighted factor rating method

3. Load-distance method

4. Centre of gravity method

5. Break even analysis

1. Factor rating method

The process of selecting a new facility location involves a series of following steps:

1. Identify the important location factors.

2. Rate each factor according to its relative importance,

i.e., higher the ratings is indicative of prominent factor.

3. Assign each location according to the merits of the

location for each factor.

4. Calculate the rating for each location by multiplying

factor assigned to each location with basic factors

considered.

5. Find the sum of product calculated for each factor

and select best location having highest total score.

ILLUSTRATION 1: Let us assume that a new medical facility, Health-care, is to be

located in Delhi. The location factors, factor rating and scores for two potential sites are

shown in the following table. Which is the best location based on factor rating method?

Sl. No. Location factor Factor rating

Rating

Location 1

Location 2

1 Facility utilization 8 3 5

2 Total patient per month 5 4 3

3 Employee preferences 5 5 3

Sl. No. Location factor

Factor rating (1)

Location 1 Location 2

Rating Total Rating Total

1 Facility utilization

8 3 24 5 40

2 Total patient per month

5 4 20 3 15

3 Employee preferences

5 5 25 3 15

Total 69 Total 70

SOLUTION:

2. Weighted Factor Rating Method

In this method to merge quantitative and qualitative

factors, factors are assigned weights based on relative

importance and weight age score for each site using a

preference matrix is calculated. The site with the highest

weighted score is selected as the best choice.

ILLUSTRATION 2: Let us assume that a new medical

facility, Health-care, is to belocated in Delhi. The location factors, weights, and scores

(1 = poor, 5 = excellent) fortwo potential sites are shown in the following table. What is

the weighted score for thesesites? Which is the best location?

Sr No. Location factor Weight Scores

L-1 L-2

1 Facility utilization 25 3 5

2 Total patient per month 25 4 3

3 Average time per emergency trip 25 3 3

4 Land and construction costs 15 1 2

5 Employee preferences 10 5 3

The weighted score for this particular site is calculated by multiplying each factor’s weight by its score and adding the results:

Weighed score location 1 = 25 × 3 + 25 × 4 + 25 × 3 + 15 × 1 + 10 × 5= 75 + 100 + 75 + 15 + 50 = 315

Weighed score location 2 = 25 × 5 + 25 × 3 + 25 × 3 + 15 × 2 + 10 × 3= 125 + 75 + 75 + 30 + 30 = 335

Location 2 is the best site based on total weighted scores.

SOLUTION:

3. Load-distance Method

The load-distance method is a mathematical model used to evaluate locations based on proximity factors. The objective is to select a location that minimizes the total weighted loads moving into and out of the facility. The distance between two points is expressed by assigning the points to grid coordinates on a map. An alternative approach is to use time rather than distance.

Centre of gravity is based primarily on cost considerations. This method can be used to assist managers in balancing cost and service objectives. The centre of gravity method takes into account the locations of plants and markets, the volume of goods moved, and transportation costs in arriving at the best location for a single intermediate warehouse.

4 Centre of Gravity

5. Break Even Analysis

Break even analysis implies that at some point in the operations, total revenue equals total cost. Break even analysis is concerned with finding the point at which revenues and costs agree exactly.

PLANT LAYOUT

Point to consider

1. Meaning

2. Objectives of Plant Layout

3. Principles of Plant Layout

4. Classification of layout

1.Meaning of plant lay-out

According to Moore “Plant layout is a plan of an optimum arrangement of facilities including

Personnel operating equipment storage space material handling equipment and all other supporting services along with the

design of best structure to contain all these facilities”.

2. Objectives of Plant Layout

1.Streamline the flow of materials through the plant.

2. Facilitate the manufacturing process.

3. Maintain high turnover of in-process inventory.

4. Minimize materials handling and cost.

5. Effective utilization of men, equipment and space.

6. Make effective utilization of cubic space.

7. Flexibility of manufacturing operations and arrangements.

8. Provide for employee convenience, safety and comfort.

9. Minimize investment in equipment.

10. Minimize overall production time.

11. Maintain flexibility of arrangement and operation.

12. Facilitate the organizational structure.

3. Principles of Plant Layout

1. Principle of integration

2. Principle of minimum distance

3. Principle of cubic space utilization

4. Principle of flow

5. Principle of maximum flexibility

6. Principle of safety, security and satisfaction

7. Principle of minimum handling

4.Classification of layout

Layouts can be classified into the following five categories:

1. Process layout

2. Product layout

3. Combination layout

4. Fixed position layout

1. Process Layout

Model of process Layout

Advantages of process Layout Flexibility better utilization of production facility Lower investment Increase knowledge of supervisors

Limitation of process Layout

Reduce material handling efficiency Increase in cost Decrease productivity

2. Product Layout

Model of product Lay-out

Advantages of product Layout In-process inventory is less Decrease handling cost Mechanized handling systems Unskilled workers can learn and manage the

production. Manufacturing cycle is short due to

uninterrupted flow of materials.

Limitation of product Layout

Stop entire production Difficult to change product design Required high investment Lack of flexibility

3. Combination Layoutcombination

type of layout for manufacturing different sized gears

4. Fixed Position Layout

Fixed type of position Layout

Advantages of Fixed position Layout interest and pride in doing the job enlargement and upgrades the skills Flexibility Layout capital investment is lower.