ACHARYA N.G.

RANGA AGRICULTURAL UNIVERSITY

B.Tech (Food Technology)
Course No. FDEN-323
Course Title: FOOD PLANT DESIGN AND LAYOUT
Credits:
3 (2 + 1)
Prepare !"
Er. #. SREENIVASULA REDDY
Assistant Professor (Food Engineering)
College of Food Science and Technology
Chinnarangapura! Puli"endula # $%&'()
*S+ (,A-APA) -istrict! Andhra Pradesh
DEPART$ENT OF FOOD ENGINEERING
% Course No : FDEN - 323
. Title : F%% P&a'( De)*+' a' La"%,(
' Credit hours : 3 (2+1)
/ 0eneral 123ecti"e : To ipart 4no5ledge on plant layout and design of
food industries
$ Specific 123ecti"es :
a) Theory : By the end of the course! the students 5ill ac6uire
4no5ledge on theoretical aspects to 2e considered
for site selection! layout selection and design
considerations for a food plant
2) Practical By the end of the course! the students 5ill de"elop
s4ills and ac6uaint in pro3ect preparations!
estiations and cost estiates of different
e6uipent and utilities of "arious food industries
A) T-e%r" Le.(,re O,(&*'e)
% 7ntroduction : Plant design concepts 8 situations gi"ing rise to plant design
pro2les 8 differences in design of food processing and non8food processing
plants
. 0eneral design considerations! Food Processing 9nit 1perations! Pre"ention
of Containation! Sanitation! -eterioration! Seasonal Production
' Flo5 Chart for Plant -esign! 7dentification Stage! :oo4ing for a need! Finding
a product! Preliinary Screening of ideas
/ Coparati"e rating of product ideas: Present ;ar4et! ;ar4et 0ro5th
potential! Costs! +is4s
$ Pre Selection < Pre feasi2ility stage! Analysis Stage: ;ar4et Analysis!
Situational analysis related to ar4et
& Technical analysis! Financial Analysis! Sensiti"ity and ris4 analysis! Feasi2ility
cost estiates
= Brea4 E"en Analysis: 7ntroduction! Brea48E"en Chart! Fi>ed Costs! ?aria2le
costs! Brea4 e"en point calculation
@ Plant location :7ntroduction! :ocation -ecision Process! Factors in"ol"ed in
the plant location decision!
( Territory selection and Site< counity selection
%
)
Su23ecti"e! Aualitati"e and Sei8Auantitati"e Techni6ues! E6ual Beights
;ethod! ?aria2le Beights ;ethod! Beight8cu8+ating ;ethod! Another
5eight8cu8rating ethod
%
%
Coposite ;easure ethod! :ocational Brea48E"en analysis
%
.
Food Plant 9tilities: Process Bater! Stea! Electricity! Plant Effluents
% Plant SiCe and Factors
2
'
%
/
The enterprise and its En"ironent! The total re"enue function! the total cost
function
%
$
Brea48e"en and shutdo5n points! Production! econoics of ass production!
Production anageent decision
%
&
Plant layout : 7portance! Flo5 Patterns
%
=
Basic Types of plant layouts! Product or line layout! Process or functional
layout! Cellular or group layout! and Fi>ed position layout! Plant :ayout
factors! :ayout design Procedure
%
@
0eneral guide lines for plant layout! Typical clearances! areas and
allo5ances! Plant layout! :ayout of e6uipent! Space deterination
%
(
Sy2ols used for food plant design and layout: 7ntroduction! "al"es! line
sy2ols! fluid handling! heat transfer! ;ass transfer
.
)
Sy2ols used for food plant design and layout: Storage "essels! con"eyors
and feeders! separators! i>ing and counition and process control and
instruentation sy2ols.
.
%
E>perientation in pilot layout : SiCe and structure of the pilot plant! iniu
and a>iu siCe! types and applications
.
.
Engineering Econoy : 7ntroduction! Ters: Tie "alue of oney! inflation!
7nterest! 7nterest rate! copound interest! rate of return! payent! receipt !
cash flo5! present "alue! E6ui"alence! sun4 costs! opportunity costs! Asset!
:ife of an asset! depreciation! 2oo4 "alue of an asset! sal"age "alue!
retireent! replaceent! defender and challenger.
.
'
;ethods of econoic e"aluation of engineering alternati"es
%. 9ndiscounted cash flo5 ethods 8pay 2ac4 period ethod
.. -iscounted cash flo5 ethods
a) Net present "alue ethod
2) E6ui"alent annual ethod
c) +ate of return ethod
'.Cost8 2enefit analysis! Social costs! social 2enefits
.
/
Process scheduling
.
$
:inear Prograing: 7ntroduction! Salient features of :inear prograing
(Terinology)
.
&
Forulation of linear prograing odel! Ad"antages! liitations and
applications of linear prograing! solution of linear prograing pro2les.
.
=
Aueuing theory : 7ntroduction! Eleents of 6ueuing syste! %) 7nput source!
.) Aueue
. Aueuing theory: Characteristics of 5aiting lines! ser"ice discipline! Ser"ice
3
@ echanis! syste out put! custoer 2eha"ior.
.
(
;aterials of construction of Food E6uipent : Characteristics of suita2le
construction aterial : Stainless steel! Aluinu! Nic4el and ;onel! Plastic
;aterials
'
)
7lluination and "entilation
'
%
Cleaning D sanitiCation
'
.
;aintenance of Food Plant Building : Safety Color Code! +oof 7nspection!
Care of Concrete floors
#) Pra.(*.a& C&a)) O,(&*'e)
% Preparation of pro3ect report
. Preparation of feasi2ility report
' :ayout of Food storage 5ares and godo5ns
/ :ayout and design of cold storage
$ :ayout of preprocessing house
& :ayout of ;il4 and ;il4 product plants
= -esign and layout of lo5 shelf life product plant
@ -esign and layout of fruits processing plants
( -esign and layout of "egeta2le processing plants
%
)
:ayout of ulti product and coposite food plants
%
%
E"aluation of gi"en layout
%
.
Baste treatent and anageent of food plant
%
'
-esign and layout of odern rice ill
%
/
-esign and layout of ango pulp canning industry
%
$
-esign and layout of spices anufacturing unit
%
&
-esign and layout of Ba4ery and related product plant
Re/ere'.e)
% ; ;oor! ;ac ;illan! Plant :ayout D -esign. :aes! Ne5 *or4.
. E.S. Eall D *.S. +osen! ;il4 Plant :ayout. FA1 Pu2lication! +oe.
' F.B. Farrall! -airy D Food Engineering. Fohn Billy D Sons! Ne5 *or4.
/ Food Plant -esign 2y Antonio :GpeC. 0GeC
$ Food plant engineering systes 2y Theunis C. +o22erts! C+C Press! Bashington
& Food plant econoics 2y Hacharias B. ;aroulis and 0eorge -. Sara"acos
pu2lished 2y Taylor and Francis 0roup! ::C
= Fundaentals of Production Systes Engineering! 0.S.Se4hon and A.S.Sachde"!
Pu2lished 2y -hanpat +ai and Copany Pri"ate :iited! -elhi (Chapter N1. %()
@ 1perations +esearch 2y ;anohar ;aha3an! Pu2lished 2y -hanpat +ai and
4
Copany Pri"ate :iited! -elhi
( Food Process -esign 2y Hacharias B. ;aroulis pu2lished 2y ;arcel -e44er! 7nc !
Ciarron +oad! ;onticello! Ne5 *or4 %.=)%! 9 S A
5
LECTURE NO. 1
INTRODUCTION0 PLANT DESIGN CONCEPTS - SITUATIONS GIVING RISE
TO PLANT DESIGN PRO#LE$S - DIFFERENCES IN DESIGN OF FOOD
PROCESSING AND NON-FOOD PROCESSING PLANTS
INTRODUCTION
Plant design refers to the o"erall design of a anufacturing enterprise <
facility. 7t o"es through se"eral stages 2efore it is copleted. The stages
in"ol"ed are : identification and selection of the product to 2e anufactured!
feasi2ility analysis and appraisal! design! econoic e"aluation! design report
preparation! procureent of aterials including plant and achinery construction!
installation and coissioning. The design should consider the (e.-'*.a& and
e.%'%1*. /a.(%r)! 2ar*%,) ,'*( %pera(*%') *'2%&2e3 e4*)(*'+ a' p%(e'(*a&
1ar5e( .%'*(*%') etc.
P&a'( e)*+' )pe.*/*e)0
(-e e6,*p1e'( to 2e used
per/%r1a'.e re6,*re1e'() for the e6uipent
*'(er.%''e.(*%') a' ra7 1a(er*a& /&%7) in ters of flo5 charts
and plant layouts
the p&a.e1e'( of e6uipent! storage spaces! shop facilities! office
spaces! deli"ery and shipping facilities! access 5ays! site plans and
ele"ation dra5ings
re6uired *')(r,1e'(a(*%' a' .%'(r%&)! and process onitoring
and control interconnections
utility and 7a)(e (rea(1e'( re6,*re1e'()! connections and
facilities
the rationale for site selection
the 2asis for )e&e.(*'+ a' )*8*'+ .r*(*.a& p*e.e) %/ e6,*p1e'(
5ays in 5hich the design 5as optiiCed and the engineering 2asis
for such optiiCation
They also often pro"ide econoic analyses of plant profita2ility in ters of
"arious product deand and price and aterial cost scenarios.
P&a'( De)*+' S*(,a(*%')
6
Plant design situations ay arise due to one or ore of the follo5ing:
design and erection of a copletely 'e7 p&a'(
design and erection of an a*(*%' (% (-e e4*)(*'+ p&a'(
the facility or plant operations and su2se6uent e>pansion restricted 2y a
p%%r )*(e3 (-ere!" 'e.e))*(a(*'+ (-e )e((*'+ ,p %/ (-e p&a'( a( a 'e7
)*(e
a*(*%' %/ )%1e 'e7 pr%,.( to the e>isting range
adoption of )%1e 'e7 pr%.e)) <replaceent of soe e>isting e6uipent
1%er'*8a(*%' 9 a,(%1a(*%' of the e>isting facility
e4pa')*%' of the plant capacity
re&%.a(*'+ the e>isting plant at a ne5 site 2ecause of ne5 econoic!
social! legal or political factors
D*//ere'.e) *' (-e De)*+' %/ F%% Pr%.e))*'+ a' N%'-F%% Pr%.e))*'+
P&a'()
;any of the eleents of plant design are the sae for food plants as they
are for other plants particularly those processing industrial cheicals. Eo5e"er!
there are any significant differences! 2asically in the areas of e6uipent
selection and siCing! and in 5or4ing space design. These differences ste fro
the 5ays in 5hich the processing of foods differ fro the processing of industrial
cheicals.
S,.- *//ere'.e) %..,r !e.a,)e %/ (-e /%&&%7*'+ .%')*era(*%')0
The storage life of foods is relati"ely liited and strongly affected 2y
teperature! pE! 5ater acti"ity! aturity! prior history! and initial icro2ial
containation le"els.
?ery high and "erifia2le le"els of product safety and sterility ha"e to 2e
pro"ided.
Foods are highly suscepti2le to icro2ial attac4 and insect and rodent
infestation.
Ferentations are used in producing "arious foods and 2io cheicals.
Successful processing re6uires the use of conditions! 5hich ensure the
doinance of desired strains of icroorganiss gro5th or acti"ity.
EnCye8catalyCed processes are used or occur in any cases. These! li4e
icro2ial gro5th and ferentation are "ery sensiti"e to teperature! pE! 5ater
acti"ity and other en"ironental conditions.
7
;any foods are still li"ing organiss or 2iocheically acti"e long after
har"est or slaughter.
7n soe cases foods (e.g. ripening cheeses) contain acti"e li"ing icro8
organiss! 5hich induce cheical transforations for long periods of tie.
Crop82ased food ra5 aterials ay only 2e a"aila2le in usa2le for on a
seasonal 2asis. Therefore! plant design ay in"ol"e the odeling of crop
a"aila2ility.
Food ra5 aterials are highly "aria2le and that "aria2ility is enhanced 2y
the ageing of ra5 aterial and uncontrolla2le "ariations in cliatic conditions.
The 2iological and cellular nature and structural cople>ity of foods causes
special heat8transfer! ass8transfer and coponent separation pro2les.
Foods are fre6uently solid. Eeat and ass8transfer pro2les in solids ha"e
to 2e created in 5ays that are different than those used for li6uid and gas
streas. The 4inetics of icro2e and enCye inacti"ation during therally
induced steriliCation and 2lanching and heat8transfer in the solids 2eing steriliCed
or 2lanched are strongly lin4ed.
Food processing generates 5astes 5ith high B1- loads.
Foods are often cheically cople> systes 5hose coponents tend to
react 5ith one another. Certain types of reactions! e.g. ;aillard reactions!
o>idati"e rancidification! hydrolytic rancidification and enCyatic 2ro5ning tend to
occur 5ith a high degree of fre6uency.
The engineering properties of foods and 2iological aterial are less 5ell
4no5n and ore "aria2le than those of pure cheicals and siple i>tures of
cheicals.
?aguely defined sensory attri2utes often ha"e to 2e preser"ed! generated
or odified. These re6uire sensory testing. +a5 aterial "ariation! inor
processing changes and trace containants leached fro processing e6uipent
and pac4ages can often cause significant changes in these attri2utes. Fre6uently!
5e do not ha"e echanistic 2ases for lin4ing these attri2utes to processing
conditions and e6uipent design. ;uch current food engineering and food
science research acti"ity at uni"ersities is designed to pro"ide such lin4ages.
7n the case of foods! prototype products ha"e to 2e consuer tested so as
to assure ar4et accepta2ility 2efore plants for large scale production are 2uilt.
8
;echanical 5or4ing is soeties used to induce desired te>tural changes.
E>aples include 4neading and sponge i>ing during the a4ing of 2read! the
calendaring of pastry dough! shearing during e>trusion te>turiCation.
Pac4aging in sall containers is often used or re6uiredI and strong8
pac4age8product interactions e>ist. Pac4aging often re6uires care to aintain
integrity of closure! reproduci2ility of fill eliination of air fro head spaces and
pre"ention of su2se6uent oisture and o>ygen transfer. Segregation often causes
pro2les in the pac4aging of po5dered foods. Aseptic pac4aging is starting to 2e
5idely used.
Food processing techni6ues and forulations are soeties constrained
2y standards of identity and good anufacturing practice regulations and codes.
Food processing is an art to a certain e>tent. Engineers and technologists
are fre6uently uncertain as to 5eather portions of that art are really 3ustified or
necessary. 7t is soeties difficult for the to translate the necessary portions of
that art into 6uantifia2le heat8transfer and cheical reaction processes on 5hich
rational designs can 2e 2ased.
9
LECTURE NO. 2
GENERAL DESIGN CONSIDERATIONS3 FOOD PROCESSING UNIT
OPERATIONS3 PREVENTION OF CONTA$INATION3 SANITATION3
DETERIORATION3 SEASONAL PRODUCTION
Ge'era& De)*+' C%')*era(*%')
Food plant designs ust pro"ide necessary le"els of sanitation! eans of
pre"enting product and aterial containation and eans of pre"enting or
liiting product! ra5 aterial! and interediate product deterioration due to
naturally occurring processes. 0reat care ust 2e e>ercised to achie"e high
le"els of product purity and preser"e product integrity. A 2rief description of soe
of the design considerations follo5s.
F%% pr%.e))*'+ ,'*( %pera(*%')
Food processing in"ol"es any con"entional unit operations 2ut it also
in"ol"es any 5hich differ greatly fro those usually encountered in the
production of industrial cheicals. These include: freeCing and tha5ing and other
teperature8induced phase transitions or phase transition analogs! freeCe drying!
freeCe concentration! curd and gel foration! de"elopent of structured gels!
cleaning and 5ashing (the operation 5hich occurs 5ith the greatest fre6uency in
food processing plants)! lea"ening! puffing! and foaing! slaughtering! carcass
disasse2ly! coponent e>cision! slicing and dicing! peeling and triing!
grading! cell disruption and aceration! pasteuriCation and steriliCation! 2lanching!
2a4ing! coo4ing (for purposes of tenderiCation or te>tural odification)! roasting
(for purposes of fla"our generation)! radiation steriliCation! echanical e>pression!
structure82ased coponent separation! filling and pac4aging! canning and
2ottling! coating and encapsulation! sausage and fle>i2le casing! stuffing!
controlled atosphere storage! fuigation and so4ing! churning! artificially
induced ripening! ferentation! pureeing! eulsification and hoogeniCation!
2iological 5aste treatent! and controlled feeding of confined anials! poultry and
fish.
Pre2e'(*%' %/ .%'(a1*'a(*%'
Pre"ention of containation 5ill in"ol"e the pro"ision or use of filtered air!
air loc4s! piping layouts that ensure coplete drainage and present cross8strea
containation (particularly containation of finished products 2y unsteriliCed or
10
unpasteuriCed ra5 aterial and cleaning solutions)! solid aterial and huan
traffic flo5 layouts that also pre"ent such containation! suita2ly high cur2s 5hen
pipes! con"eyors or e6uipent pass through floors and 5here gang5ays pass
o"er processing areas! 2actericides in cooling 5ater! culinary (i.e. containant8
free) stea 5hene"er direct contact 2et5een a product and stea is used!
iperea2le co"ers for insulation! dust co"ers o"er con"eyors and clear plastic
co"ers for electric lights! ethods for 5ashing 2ottles and containers! suita2le
2arriers against pest entry! 5indo5less construction! solid instead of hollo5 5alls!
or copletely tight enclosure of hollo5 spaces in 5alls! air circulation syste and
e>ternal roof and 5all insulation that pre"ent the foration of condensate 5hich
can drip into products or fa"or old gro5th! ultra8"iolet irradiation of tan4 head
spaces! electric light traps for flying insects! ipactors for 4illing insect eggs!
lar"ae! pupae and adults in grain! car2on dio>ide and nitrogen fuigation of dry
food storage 2ins! screening syste to reo"e insects and insect parts! agnetic
traps! iron screens for sie"ing e6uipent (so that screen fragents can 2e pic4ed
up 2y agnetic traps)! etal detectors for re3ecting pac4aged product that
contains un5anted etal! and ethods for storing and 4eeping trac4 of
segregated 2atches of ra5 aterials and finished goods until necessary 6uality
assurance tests ha"e 2een carried out.
Sa'*(a(*%'
Sanitation! 5hich helps pre"ent containation! should 2e facilitated 2y
pro"iding or using: iperea2le coated or tiled floors and 5alls! at least one floor
drain per e"ery /)
.
of 5et processing area! special traps for such drains!
pitched floors that ensure good drainage! polished "essels and e6uipent that do
not contain dead spaces and 5hich can 2e drained and autoatically cleaned in
place! sanitary piping! clean8in8place (C7P) systes! plate heat e>changers and
other types of e6uipent 5hich can 2e readily disasse2led for cleaning if
necessary! clearances for cleaning under and around e6uipent! grouting to
eliinate cre"ices at the 2ase of e6uipent support posts and 2uilding coluns!
tu2ular pedestals instead of support posts constructed fro 2eas! and ethods
for reo"ing solid particles 5hich fall off con"eyors. Air flo5 and huan traffic
flo5 patterns should 2e aintained to eliinate possi2ilities of containent
transfer fro dirty areas to clean ones. ?ery high le"els of sanitation ust 2e
pro"ided for foodstuffs that pro"ide good su2strates for the gro5th of icro8
organiss and 5hen processing teperatures and conditions fa"or such gro5th.
11
De(er*%ra(*%'
To iniiCe product and ra5 aterial deterioration! pro"isions should 2e
ade for: refrigerated and controlled en"ironent storage areas! space and
facilities for product inspection and for carrying out 6uality assurance tests! surge
"essels for processed aterial 2et5een different operations (particularly
operations 5hich are su23ect to 2rea4do5n)! e6uipent for pre8cooling aterial
stored in such "essels! eans of cooling! turning o"er or rapidly discharging the
contents of 2ins and silos 5hen e>cessi"e teperature rises! occur! and stand2y
refrigeration and utility arrangeents 5hich are ade6uate to pre"ent product and
ra5 aterial deterioration in case of po5er interruptions or unusual cliatic
conditions.
Sea)%'a& pr%,.(*%'
Food plants ha"e to 2e siCed to accoodate pea4 seasonal flo5s of
product 5ithout e>cessi"e delay! and in soe cases! ha"e to 2e highly fle>i2le so
as to handle different types of fruits and "egeta2les. ;odeling of crop and anial
gro5th processes can 2e of great help in scheduling production and ade6uately
siCing plants.
12
LECTURE NO. 3
FLO: CHART FOR PLANT DESIGN3 IDENTIFICATION STAGE3 LOO;ING
FOR A NEED3 FINDING A PRODUCT3 PRELI$INARY SCREENING OF IDEAS
Fig. Flo5 chart for plant design
FEASIBILITY STUDY
Technical
Coe!cial " #a!$e%
Econoic
Financial
Social
A&an'on
(o
Ye)" Fa*o!a&le
+!eliina!,
in*e)%en% 'eci)ion
E(-I(EE.I(- DESI-("+LA(T DESI-(
+lan% loca%ion
+lan% )i/e " Ca0aci%,
+!o'1c% 'e)i2n " )0eci3ica%ion
+!oce)) )elec%ion " 'e)i2n
E41i0en% )elec%ion " 'e)i2n
#a!$e% 'e)i2n " anal,)i)
E41i0en% " 0lan% la,o1%
+i0in2 an' in)%!1en%a%ion 'e)i2n " )elec%ion
U%ili%ie) an' )e!*ice)
+lan% &1il'in2 an' )1!!o1n'in2)
Co)% an' &ene3i% anal,)i)
+.56ECT IDEA
A&an'on
(o
Ye)
Final In*e)%en%
'eci)ion
+!o7ec% .e0o!%
+!oc1!een% o3 .a8 #a%e!ial an' E41i0en%
B1il'in2 Con)%!1c%ion
In)%alla%ion9 Coi))ionin2 an' )%a!% 10
Uni% in +!o'1c%ion " 50e!a%ion
13
Ca0i%al Ac41i)i%ion
#a!$e%in2
FEASI#ILITY STUDY
The 2asis for the success of the design of any food processing plant is a
coprehensi"e feasi2ility study and e"aluation. The feasi2ility study in"ol"es an
analysis and e"aluation of the design concept fro all the rele"ant angles. The
study pro"ides an iediate indication of the pro2a2le success of the enterprise
and also sho5s 5hat additional inforation is necessary to a4e a coplete
e"aluation. 7t gi"es an insight in to: re6uireents of huan! financial and aterial
resourcesI plant and achinery! technologyI and econoic gains or profita2ility of
the proposed "enture.
The feasi2ility analysis in"ol"es a certain nu2er of stages during 5hich
"arious eleents of the plant design are prepared and e>ained to arri"e at
appropriate decision. The feasi2ility study can! therefore! 2e seen as a series of
acti"ities culinating in the esta2lishent of a certain nu2er of study eleents
and docuents! 5hich perit decision a4ing. 7dentification stages! preliinary
selection stage! analysis stage and e"aluation and decision stage are the
iportant stages.
Ie'(*/*.a(*%' S(a+e
1nce a product idea occurs! the starting point of analysis is the
esta2lishent of the o23ecti"es to 2e attained. The o23ecti"e ay 2e to pro"e that
it is possi2le and desira2le to anufacture a certain product or group of products!
to add a piece of e6uipent to the e>isting plant or to utiliCe certain resources.
The ideas for ne5 products or di"ersification can 2e generated in an
inforal and spontaneous anner fro custoers! distri2utors! copetitors!
sales people! and others! or the entrepreneur can rely on a systeatic process of
idea generation.
T5o 4ey approaches for product identification and selection could 2e:
i) :oo4 for a need and then the product to satisfy that need! or
ii) Find a product idea and then deterine the e>tent of the need.
L%%5*'+ /%r a 'ee
?enture ideas can 2e stiulated 2y inforation 5hich indicates possi2le
need. This approach re6uires access to data and considera2le analysis. Eo5e"er!
if the percei"ed need is real! the product idea has a 2etter than a"erage chance of
leading to a successful "enture. The need ay 2e one no5 2eing ser"ed
inefficiently at high cost! or it ay 2e presently unser"ed. The second iplies that
14
a considera2le aount of creati"e design and de"elopent ay 2e re6uired to
arri"e at a product that appears to satisfy the need. The follo5ing is suggested for
identification of the need.
study e>isting industries for 2ac45ard and for5ard product integration to
indicate input and output needs
analyCe population trends and deographic data for their affect on the
ar4et
study de"elopent plans and consult de"elopent agencies for
de"elopent needs and "enture opportunities
e>aine econoic trends in relation to ne5 ar4et needs and
opportunities .
analyCe social changes
study the effects of ne5 legislations in relation to creation of ne5
opportunities
F*'*'+ a pr%,.(
Each of the preceding suggestions for idea generation centers on the
recognition of a need in order to arri"e at a product idea. The suggestions that
follo5 are product oriented. They are intended to stiulate product ideas 5hich
ay eet one or ore of the criteria pre"iously discussed. Their use should result
in a large nu2er of ideas 5hich can 2e su2se6uently e>ained 5ith regard to
need. The follo5ing list should 2e useful in conducting such an e>ercise.
in"estigate local aterials and other resources for their current utiliCation
pattern! utiliCation potential and con"erti2ility into ore "alue added
products
e>aine iport su2stitutions for indigenous production
study local s4ills for production and ar4eting of "alue added products
study iplications of ne5 technologies for ipro"eent of e>isting
products or to create < produce ne5 ones
study and analyCe pu2lished sources of ideas
Pre&*1*'ar" S.ree'*'+ %/ Iea)
By follo5ing the a2o"e approaches! it should 2e possi2le to de"elop a long
list of potential "enture opportunities. 12"iously! it 5ould not 2e realistic to
conduct a detailed feasi2ility analysis for each idea. Bhat is needed is a
15
preliinary screening to eliinate the any ideas that ha"e little or no hope for
success and to pro"ide! if possi2le! a ran48ordering of the reaining fe5. The
screening can 2e conducted as t5o8phase process. 7n the first phase "enture
ideas are eliinated on a go<no8go 2asis. A J*esJ response to any of the follo5ing
should eliinate the idea fro further consideration.
Are the capital re6uireents e>cessi"eK
Are en"ironental effects contrary to 0o"ernent regulationsK
7s "enture idea inconsistent 5ith national policies! goals and restrictionsK
Bill effecti"e ar4eting need e>pensi"e sales and distri2ution systeK
Are there restrictions! onopolies! shortages! or other causes that a4e
any factor of production una"aila2le at reasona2le costK
16
LECTURE NO. 4
CO$PARATIVE RATING OF PRODUCT IDEAS0 PRESENT $AR;ET3
$AR;ET GRO:TH POTENTIAL3 COSTS3 RIS;S
C%1para(*2e Ra(*'+ %/ Pr%,.( Iea)
After eliination of unattracti"e "enture ideas! it is desira2le to choose the
2est of those reaining for further analysis. ?arious coparati"e schees ha"e
2een proposed for rating "enture ideas. 7n this section factors that should 2e
considered and soe possi2le ran4ing ethods are e>ained. For a product idea
to lead to a successful "enture! it ust eet the follo5ing four re6uireents:
%. An ade6uate present ar4et
.. ;ar4et gro5th potential
'. Copetiti"e costs of production and distri2ution
/. :o5 ris4 in factors related to deand! price! and costs
1. Pre)e'( $ar5e(0- The siCe of the presently a"aila2le ar4et ust pro"ide the
prospect of iediate sales "olue to support the operation. Sales estiates
should not 2e 2ased solely on an estiate of the nu2er of potential custoers
and their e>pected indi"idual capacity to consue. Soe factors that effect sales
are:
;ar4et siCe (nu2er of potential custoers)
ProductLs relation to need
Auality8price relationship copared to copetiti"e products
A"aila2ility of sales and distri2ution systes and sales efforts re6uired
E>port possi2ilities
2. $ar5e( Gr%7(- P%(e'(*a&0 There should 2e a prospect for rapid gro5th and
high return on in"ested capital. Soe indicators are:
Pro3ected increase in need and nu2er of potential custoers
7ncrease in custoer acceptance
Product ne5ness
Social! political and econoic trends (fa"ora2le for increasing
consuption)
3. C%)() (Copetiti"e costs of production and distri2ution)0 The costs of
production factors and distri2ution ust perit an accepta2le profit 5hen the
17
product is priced copetiti"ely. The coparati"e rating process should consider
factor li4ely to result in costs higher than those of copetiti"e producers should:
Costs of ra5 aterial inputs
:a2or costs
Selling and distri2ution costs
Efficiency of production processes
Patents and licenses
<. R*)5) 0 12"iously it is ipossi2le to loo4 into the future 5ith certainty! and the
5illingness to assue ris4 is the a3or characteristic that sets the entrepreneur
apart. Eo5e"er! unnecessary ris4 is foolhardy and! 5hile it ay 2e difficult or
ipossi2le to predict the future! one can e>aine! 5ith considera2le confidence!
the possi2le effect of unfa"ora2le future e"ents on each of "enture ideas. The
follo5ing factors should 2e considered.
;ar4et sta2ility in econoic cycles
Technological ris4s
7port copetition
SiCe and po5er of copetitors
Auality and relia2ility ris4s (unpro"en design)
7nitial in"estent cost
Predicta2ility of deand!
?ulnera2ility of inputs (supply and price)
:egislation and controls
Tie re6uired to sho5 profit
7n"entory re6uireents
For purposes of preliinary screening! these factors can 2e su23ecti"ely
e"aluated.
18
LECTURE NO. 5
PRE SELECTION 9 PRE FEASI#ILITY STAGE3 ANALYSIS STAGE0 $AR;ET
ANALYSIS3 SITUATIONAL ANALYSIS RELATED TO $AR;ET
Pre )e&e.(*%' 9 Pre /ea)*!*&*(" S(a+e
The preliinary screening ay ha"e se"eral ideas 5hich appear to 2e
5orthy of further study. Since a coplete feasi2ility study is tie consuing and
e>pensi"e! it ay 2e desira2le to perfor a pre feasi2ility analysis in order to
further screen the possi2le ideas. The purpose of a pre feasi2ility study is to
deterine.
Bhether the pro3ect sees to 3ustify detailed study
Bhat atters deser"e special attention in the detailed study (e.g. ar4et
analysis! technical feasi2ility! in"estent costs)
An estiate of cost for the detailed study
For any ideas the pre8feasi2ility analysis ay pro"ide ade6uate e"idence
of "enture profita2ility if certain segents are ore carefully "erified. Ephasis
depends on the nature of the product and the area of greatest dou2t. 7n ost
cases ar4et aspects and aterials recei"e priary ephasis. The pre8feasi2ility
study ay include soe or all of the follo5ing eleents.
1. Pr%,.( e).r*p(*%'. The productLs characteristics should 2e 2riefly descri2ed!
along 5ith possi2le su2stitutes 5hich e>ist in the ar4et place. Also! allied
products should 2e identified! 5hich can or should 2e anufactured 5ith the
product under study.
2 De).r*p(*%' %/ 1ar5e(. The present and pro3ected potential ar4et and the
copetiti"e nature of the ar4et should 2e delineated.
Bhere is the product no5 anufacturedK
Eo5 any plants e>ist and ho5 specialiCed are theyK
Bhat are the national production! iports! and e>portsK
Are there go"ernent contracts or incenti"esK
Bhat is the estiated product longe"ity or future consuptionK
Bhat is the price structureK
3. O,(&*'e %/ (e.-'%&%+*.a& 2ar*a'(). The technology choices that e>ist for the
anufacture of the product should 2e descri2ed 2riefly. Also! the 4ey plant
location factors should 2e identified.
19
<. A2a*&a!*&*(" %/ 1a*' pr%,.(*%' /a.(%r). Production factors such as ra5
aterials! 5ater! po5er! fuel and la2or s4ills should 2e e>ained to ensure
a"aila2ility.
=. C%)( e)(*1a(e). Estiates should 2e ade of the necessary in"estent costs
and costs of operation.
>. E)(*1a(e %/ pr%/*(. The data gathered should include estiates of profits of
firs anufacturing siilar products or! if the preliinary data are e>tensi"e! an
actual estiated profit for the pro3ect under study.
?. O(-er a(a. 7n certain cases! local attitudes to5ard industryI educational!
recreational and ci"ic dataI and a"aila2ility of local sites! ay 2e the ost
iportant in the e"aluation of the suita2ility of a proposed product! especially in
the case of the esta2lishent of a ne5 fir.
Thus pre feasi2ility study can 2e "ie5ed as a series of steps culinating in
a docuent 5hich perits deterination of 5hether or not a coplete detailed
feasi2ility study should 2e ade. 7t does not possess the depth the detailed study
is e>pected to ha"e! and the data usually are gathered in an inforal anner.
A'a&")*) S(a+e
At the analysis stage "arious alternati"es in ar4eting! technology and
capital a"aila2ility need to 2e studied. The analysis can 2e conducted at different
le"els of effort 5ith respect to tie! 2udget and personnel! depending on the
circustances. The coplete study is referred to as techno8econoic feasi2ility
study. 7n soe cases such a detailed study is not necessary. For e>aple! if the
product has an assured ar4et! in8depth ar4et analysis is not re6uired. 7n soe
cases! a partial study of the ar4et or of the technologies satisfies the data
re6uireents for decision a4ing. The detailed analysis should include the
follo5ing.
$ar5e( a'a&")*) 9 )(,"
;ar4et analysis can ser"e as a tool for screening "enture ideas and also as a
eans of e"aluating the feasi2ility of a "enture idea in ters of the ar4et. 7t
pro"ides:
understanding of the ar4et
inforation on feasi2ility of ar4eting the product
analytical approach to the decision a4ing
7n addition! it assists in analyCing the decisions already ta4en. $ar5e( a'a&")*)
a')7er) 6,e)(*%') a!%,(.
20
siCe of ar4et and share anticipated for the product in ters of "olue and
"alue
pattern of deand
ar4et structure
2uying ha2its and oti"es of 2uyers
past and future trends
price 5hich 5ill ensure acceptance in the ar4et
ost efficient distri2ution channels!
copanyLs strong points in ar4eting
;ar4et analysis in"ol"es systeatic collection! recording! analysis! and
interpretation of inforation on:
e>isting and potential ar4ets
ar4eting strategies and tactics
interaction 2et5een ar4et and product
ar4eting ethods
current or potential products
7n collecting the ar4et data! for 5hate"er siCe ar4et or type of product! it
is helpful to follo5 an orderly procedure.
The initial step is to put do5n in 5riting a preliinary stateent of
o23ecti"es in as uch detail as possi2le. A good procedure is to structure the
o23ecti"es in 6uestion for. Bhen setting o23ecti"es! al5ays 4eep in ind as to
ho5 the inforation 5ill 2e used 5hen it is o2tained. This helps in eliinating
o23ecti"es that 5ould not a4e a contri2ution to the ar4et analysis.
S*(,a(*%'a& a'a&")*) re&a(e (% $ar5e(
The situational analysis of the ar4et in"ol"es analyCing the productLs
relationship to its ar4et 2y using readily a"aila2le inforation. The inforation
re"ie5ed and each 6uestion as4ed 5ill gi"e the analyst a feel for the situation
surrounding the product. The state in"ol"es an inforal in"estigation 5hich
includes tal4ing to people in 5holesale ar4et! 2ro4ers! copetitors! custoers
and other indi"iduals in the industry. 7f this inforal in"estigation produces the
sufficient data to easure the ar4et ade6uately! the analysis need not proceed
further. Also! in soe instances! 5here tie is critical or 5here 2udget is a
pro2le! the data gathered during the inforal ar4et analysis ay 2e all that is
a"aila2le on 5hich to 2ase decisions.
21
Seldo do the data o2tained during the situational analysis ans5er all the
necessary 6uestions. The inforal analysis pro"ides the 2asis for re"ision of the
o23ecti"es and fre6uently indicates the ost fruitful ethods 2y 5hich ar4et can
2e studied. This also helps in preparing a coprehensi"e prograe of ar4et
study. Such a prograe should include a description of the tas4s and ethods
2y 5hich each type of inforation is to 2e gathered. 7t should include not only the
tie schedule for each tas4! 2ut also an estiate of costs li4ely to 2e incurred.
Basic steps in"ol"ed in a ar4et study for a ne5 enterprise are outlined
2elo5:
-efine o23ecti"es of the study and specify inforation re6uired
Bor4out details of the study as under:
8identify sources of inforation (2oth secondary and priary)
8tie and cost in"ol"eent
8ethodology and action plan
Select saples and decide contacts and "isits
Prepare the 6uestionnaire as the sur"ey instruent and field test the sae
Conduct the sur"ey and analyCe inforation
Prepare the report 5ith findings and interpretations
The analysis should generally contain:
A 2rief description of the ar4et including the ar4et area! ethods of
transportation e>isting rates of transportation! channels of distri2ution! and
general trade practices
Analysis of past and present deand including deterination of 6uantity
and "alue of consuption! as 5ell as identification of the a3or consuers
of the product
Analysis of past and present supply 2ro4en do5n as to source! inforation
on copetiti"e position of the product such as selling prices! 6uality! and
ar4eting practices of the copetitors
Estiate of future deand of the product
Estiate of the pro3ectMs share of the ar4et considering all a2o"e factors
22
LECTURE NO. 6
TECHNICAL ANALYSIS3 FINANCIAL ANALYSIS3 SENSITIVITY AND RIS;
ANALYSIS3 FEASI#ILITY COST ESTI$ATES
Te.-'*.a& a'a&")*)0
The technical analysis ust esta2lish 5hether or not the identified "enture
is technically feasi2le and! if so! a4e tentati"e choices aong technical
alternati"es and pro"ide cost estiates in respect of:
(i ) fi>ed in"estent!
(ii) anufacturing costs and e>penses! and
(iii) start8up costs and e>penses.
7n order to pro"ide cost estiates! tentati"e choices ust 2e ade aong
technical alternati"es such as:
(i) le"el of product < anufacturing technology!
(ii) ra5 aterial inputs!
(iii) e6uipent!
(i") ethods!
(") organiCation! and
("i) facilities location and design.
T-e a'a&")*) )-%,& *'.%rp%ra(e0
-escription of the product! including specifications relating to its physical!
echanical! and cheical properties as 5ell as the uses of the product
-escription of the selected anufacturing process sho5ing detailed flo5
charts as 5ell as presentations of alternati"e processes considered and
3ustification for adopting the one selected
-eterination of plant siCe and production schedule! 5hich includes the
e>pected "olue for a gi"en tie period! considering start8up and technical
factors
Selection of achinery and e6uipent! including specifications! e6uipent
to 2e purchased and origin! 6uotations fro suppliers! deli"ery dates! ters
of payent! and coparati"e analysis of alternati"es in ters of costs!
relia2ility! perforance and spare parts a"aila2ility .
7dentification of plantLs location and assessent of its desira2ility in ters
of its distance fro ra5 aterial sources and ar4ets. For a ne5 pro3ect
23
this part ay include a coparati"e study of different sites! indicating the
ad"antages and disad"antages of each.
-esign of a plant layout and estiation of the costs of erection of the
proposed types of 2uildings and land ipro"eents
Study of a"aila2ility of ra5 aterials and utilities! including a description of
physical and cheical properties! 6uantities! needed! current and
prospecti"e costs! ters of payent! source of supply and their location
and continuity of supply
Estiate of la2or re6uireents including a 2rea4do5n of the direct and
indirect la2or super"ision re6uired for the anufacture of product
-eterination of the type and 6uantity of 5aste to 2e disposed of!
description of the 5aste disposal ethod! its costs and necessary
clearance fro the authorities
Estiation of the production cost for the product
The eliination of inappropriate technology alternati"es for producing the
identified product can 2e done on the 2asis of side effects. The factors 5hich ay
2e considered as side effects include:
contri2ution to eployent
re6uireents for scarce s4ills
energy re6uireents
capital re6uireents
need for iported e6uipent
support of indigenous industry
ultiplier effect of the "enture operation
en"ironental effects.
safety and health haCards!
7nforation concerning anufacturing processes and e6uipent! 5hich
ay facilitate the selection and decision a4ing! ay 2e o2tained fro: (i)
e>isting anufacturers of the product! (ii) trade pu2lications! (iii) trade
associations and organiCations! and (i") e6uipent anufacturers.
F*'a'.*a& a'a&")*)
The financial analysis ephasiCes on the preparation of financial
stateent! so that the "enture idea can 2e e"aluated in ters of coercial
profita2ility and the agnitude of financing re6uired. 7t re6uires the asse2ly of
24
the ar4et and the technical cost estiates into "arious profora stateents. 7f
ore inforation on 5hich to 2ase an in"estent decision is needed! a sensiti"ity
analysis or! possi2ly! a ris4 analysis can 2e conducted. The depth of analysis
5ould depend! to a certain e>tent! on the "enture idea and the o"erall o23ecti"es
of the feasi2ility analysis.
The financial analysis should include:
For e>isting copanies8audited financial stateents! such as 2alance
sheets! incoe stateents and cash flo5 stateents
For ne5 copanies8stateents of total pro3ect costs! initial capital
re6uireents and cash flo5s relati"e to the pro3ect tie ta2le
For all pro3ects8financial pro3ections for future tie periods! including
incoe stateents! cash flo5s and 2alance sheets
Supporting schedules for financial pro3ections! stating assuptions used as
to collection period of sales! in"entory le"els! payent period of purchases
and e>penses! eleents of product costs! selling! adinistrati"e and
financial e>penses
financial analysis sho5ing return on in"estent! return on e6uity! 2rea48
e"en "olue and price analysis
Sensiti"ity analysis to identify ites that ha"e a large ipact on profita2ility
or possi2ility of ris4 analysis
The analyst ay o2tain profita2ility easures for the "enture 2eing studied
in se"eral 5ays. Coon non8tie "alue approaches to easure profita2ility are
the pay 2ac4 period and financial stateent (accounting) rates of return. These
rates of return are 2ased on soe net incoe figure di"ided 2y soe in"estent
2ase. Fre6uently used profita2ility easure of this type are: net incoe to assets!
first8year earnings to initial in"estent! a"erage net incoe to initial in"estent!
and a"erage net incoe to a"erage in"estent.
Profita2ility easures! 5hich consider the tie "alue of oney! that is!
discounted cash flo5 ethods! are net present "alue (NP?)! internal rate of return
(7++)! and the discounted 2enefit < cost ratio. Bhen profita2ility easures other
than financial stateent rates of return are used as the in"estent decision
criteria! the analyst needs estiates of the follo5ing:
the net in"estent! 5hich is gross capital less any capital reco"ered fro
the sale or trade of e>isting assetsI
25
the operating cash flo5s! 5hich are the after8ta> cash flo5s resulting fro
the in"estentI
the econoic life of the "enture! defined as the tie period during 5hich
2enefits can 2e o2tained fro the "entureI and
the appropriate discount rate.
Bith the rele"ant cash flo5s coputed for the "enture! the ne>t step is to
decide 5hich in"estent decision criterion to use for the acceptance or re3ection
of "entures as 5ell as their ran4ing. Theoretically! the net present "alue criterion is
the 2est easure of profita2ility of the in"estent decision criteria used to
e"aluate ne5 "enture ideas! the internal rate of return appears as the techni6ue to
2e of prie iportance. The pay2ac4 period is used priarily as a suppleentary
techni6ue.
Se')*(*2*(" a' r*)5 a'a&")*)
+ecogniCing that the "enture profita2ility forecast hinges on future
de"elopents 5hose occurrence can not 2e predicted 5ith certainty! the decision8
a4er ay 5ant to pro2e further. The analyst ay 5ant to deterine the ipact
of changes in "aria2les such as product price! ra5 aterial costs! and operating
costs on the o"erall results. Sensiti"ity analysis and ris4 analysis are the
techni6ues that allo5 the analyst to deal 5ith such pro2les.
The purpose of sensiti"ity analysis is to identify the "aria2les that ost
affect the outcoe of a "enture. Sensiti"ity analysis is useful for deterining
conse6uences of a stated percentage change in a "aria2le such as product price.
7t in"ol"es specifying the possi2le range for the "aria2le! such as price! and
calculating the effect of changes in this "aria2le to profita2ility. Bith such a
calculation! the analyst can deterine the relati"e iportance of each of the
"aria2les to profita2ility. Eo5e"er! only ris4 analysis can pro"ide any indication of
the li4elihood that such e"ents (change in product price) 5ill actually occur.
+is4 analysis ta4es into account the recogniCed fact that "aria2les! such as
product price! depend on future e"ents 5hose occurrence can not 2e predicted
5ith certainty. Eence! in"estent decision situations can 2e characteriCed 5ith
respect to certainty! ris4 and uncertainty. Since certainty seldo e>ists for future
returns on in"estent! only ris4 and uncertainty are of interest. 9ncertainty is
used to refer to an e"ent! such as technological 2rea4through resulting in
o2solescence! that is e>pected to ta4e place although the pro2a2ility
26
of its occurrence cannot 2e forecasted during the "entureLs lifetie. +is4 refers to
a situation in 5hich a pro2a2ility distri2ution of future returns can not 2e
esta2lished for the "enture. The ris4iness of the "enture can 2e defined as the
"aria2ility or dispersion of its future returns. 7n practice! there are usually se"eral
"aria2les and the aggregate ris4 of the "enture can not 2e deterined easily
2ecause it is coposed of nuerous ris4s. The purpose of ris4 analysis is to
isolate the ris4s and to pro"ide a eans 2y 5hich "arious "enture outcoes can
2e reduced to a forat fro 5hich a decision can 2e ade. A ore detailed
co"erage can 2e found under profita2ility analysis.
Fea)*!*&*(" .%)( E)(*1a(e)
A lot of guess 5or4 goes into feasi2ility cost estiate. Attepts are al5ays
ade to collect and update historical figures 5ith additions for escalation < inflation
and local factors! 2ased on statistics and guess 5or4. 7n such a situation 5hat is
e>pected is a rule of thu2 or an order of agnitude estiate. The order of
agnitude estiate is deri"ed fro the cost reports of copleted "entures.
Pro2a2ility of this estiates accuracy is generally 2et5een N.$! and /) percent.
Preliinary control estiate is often used in the feasi2ility report.
This is prepared! generally! after the copletion of the process design and
a3or e6uipent listing. Accuracy of this estiate ay "ary 2et5een N %$ and .$
percent. Endea"our is usually ade to achie"e a N.) percent accuracy in the
feasi2ility report estiates. For a rule of thu2! the follo5ing are the percentages
of the "enture cost factors:
8Pro3ect de"elopent and detailed pro3ect report (-P+) preparation 8 . O
8Engineering and design 8 %' O
8Brought out aterials and e6uipent8$$ O
8Fa2rication and construction8 ') O
-epending on the type of "enture! sector and cople>ity! these can "ary on either
side.
27
LECTURE NO. 7
#REA; EVEN ANALYSIS0 INTRODUCTION3 #REA;-EVEN CHART3 FI@ED
COSTS3 VARIA#LE COSTS3 #REA; EVEN POINT CALCULATION
Break-Even Analysis
I'(r%,.(*%'
Brea48e"en analysis is a techni6ue 5idely used 2y production anageent
and anageent accountants. 7t is 2ased on categoriCing production costs
2et5een those 5hich are J"aria2leJ (costs that change 5hen the production output
changes) and those that are Jfi>edJ (costs not directly related to the "olue of
production).
Total "aria2le and fi>ed costs are copared 5ith sales re"enue in order to
deterine the &e2e& %/ )a&e) 2%&,1e3 )a&e) 2a&,e %r pr%,.(*%' a( 7-*.- (-e
!,)*'e)) 1a5e) 'e*(-er a pr%/*( '%r a &%)) ((-e A!rea5-e2e' p%*'(A).
BA 2rea4e"en analysis *) ,)e (% e(er1*'e -%7 1,.- )a&e) 2%&,1e "%,r
!,)*'e)) 'ee) (% )(ar( 1a5*'+ a pr%/*(.C
T-e #rea5-E2e' C-ar(
7n its siplest for! the 2rea48e"en chart is a graphical representation of
costs at "arious le"els of acti"ity sho5n on the sae chart as the "ariation of
incoe (or sales! re"enue) 5ith the sae "ariation in acti"ity. The point at 5hich
neither profit nor loss is ade is 4no5n as the J2rea48e"en pointJ and is
represented on the chart 2elo5 2y the intersection of the t5o lines:
28
7n the diagra a2o"e! the line OA represents the "ariation of incoe at
"arying le"els of production acti"ity (JoutputJ). O# represents the total fi>ed costs
in the 2usiness. As output increases! "aria2le costs are incurred! eaning that
(%(a& .%)() (/*4e + 2ar*a!&e) also increase. At lo5 le"els of output! Costs are
greater than 7ncoe. At the p%*'( %/ *'(er)e.(*%'3 P! costs are e4a.(&" e6,a& (%
*'.%1e! and hence neither profit nor loss is ade.
F*4e C%)()
Fi>ed costs are those 2usiness costs that are '%( *re.(&" re&a(e to the
le"el of production or output. 7n other 5ords! e"en if the 2usiness has a Cero
output or high output! the le"el of fi>ed costs 5ill reain 2roadly the sae. 7n the
long ter fi>ed costs can alter 8 perhaps as a result of in"estent in production
capacity (e.g. adding a ne5 factory unit) or through the gro5th in o"erheads
re6uired to support a larger! ore cople> 2usiness.
Examples of fixed costs:
8 +ent and rates
8 -epreciation
8 +esearch and de"elopent
8 ;ar4eting costs (non8 re"enue related)
8 Adinistration costs
Var*a!&e C%)()
?aria2le costs are those costs 5hich "ary directly 5ith the le"el of output.
They represent payent output8related inputs such as ra5 aterials! direct
la2our! fuel and re"enue8related costs such as coission.
#rea5 E2e' P%*'( Ca&.,&a(*%'
Calculation of BEP can 2e done using the follo5ing forula :
: ; VCUP SUP
TFC
BEP

=
5here !
BEP P 2rea48e"en point (9nits of production)
TFC P total fi>ed costs
29
?C9P P "aria2le costs per unit of production
S9P P Selling price per unit of production
For e>aple! suppose that fi>ed costs for producing %))!))) 5idgets 5ere
Q')!))) a year. ?aria2le costs are Q...) aterials! Q/.)) la2our! and Q).@)
o"erhead! for a total of Q=.)). 7f selling price 5as chosen as Q%..)) for each
5idget! then: Brea4 e"en point 5ill 2e Q')!))) di"ided 2y (Q%..)) 8 =.))) e6uals
&))) units.This is the nu2er of 5idgets that ha"e to 2e sold at a selling price of
Q%..)) 2efore 2usiness 5ill start to a4e a profit.
A2a'(a+e) %/ #rea5 E2e' A'a&")*)
7t e>plains the relationship 2et5een cost! production "olue and returns.
The a3or 2enefit to using 2rea48e"en analysis is that it indicates the lo5est
aount of 2usiness acti"ity necessary to pre"ent losses.
L*1*(a(*%') %/ #rea5-e2e' -A'a&")*)
7t is 2est suited to the analysis of one product at a tie
30
LECTURE NO. 8
PLANT LOCATION0 INTRODUCTION3 LOCATION DECISION PROCESS3
FACTORS INVOLVED IN THE PLANT LOCATION DECISION
I'(r%,.(*%'
Plant location decisions are strategic! long ter and non8repetiti"e in
nature. Bithout sound and careful location planning in the 2eginning itself! the
ne5 plant ay pose continuous operating disad"antages. :ocation decisions are
affected 2y any factors! 2oth internal and e>ternal to the organiCationMs
operations.
7nternal factors include the technology used! the capacity! the financial
position! and the 5or4 force re6uired.
E>ternal factors include the econoic! political and social conditions in the
"arious localities.
;ost of the fi>ed and soe of the "aria2le costs are deterined 2y the
location decision. The efficiency! effecti"eness! producti"ity and profita2ility of the
plant are also affected 2y the location decision. :ocation decisions are 2ased on a
host of factors! soe su23ecti"e! 6ualitati"e and intangi2le 5hile soe others are
o23ecti"e! 6uantitati"e and tangi2le.
:-e' D%e) a L%.a(*%' De.*)*%' Ar*)eD
The ipetus to e2ar4 upon a plant location study can 2e attri2uted to
reasons as gi"en 2elo5:
7t ay arise 5hen a ne5 plant is to 2e esta2lished.
7n soe cases! the plant operations and su2se6uent e>pansion are
restricted 2y a poor site! there2y necessitating the setting up of the facility
at a ne5 site.
The gro5ing "olue of 2usiness a4es it ad"isa2le to esta2lish additional
facilities in ne5 territories.
-ecentraliCation and dispersal of industries reflected in the industrial policy
resolution so as to achie"e an o"erall de"elopent 5ould necessitate a
location decision at a acro le"el.
7t could happen that the original ad"antages of the plant ha"e 2een
out5eighed due to ne5 de"elopents.
Ne5 econoic! social! legal or political factors could suggest a change of
location of the e>isting plant.
31
Soe or all the a2o"e factors could force a fir or an organiCation to
6uestion 5hether the location of its plant should 2e changed or not.
Bhene"er the plant location decision arises! it deser"es careful attention
2ecause of the long8ter conse6uences. Any ista4e in selection of a proper
location could pro"e to 2e costly. Poor location could 2e a constant source of
higher cost! higher in"estent! difficult ar4eting and transportation! dissatisfied
and frustrated eployees and consuers! fre6uent interruptions of production!
a2noral 5astage! delays and su2standard 6uality! denied ad"antages of
geographical specialiCation and so on. 1nce a plant is set up at a location! it is
"ery difficult to shift later to a 2etter location 2ecause of nuerous econoic!
political and sociological reasons.
Ra7 $a(er*a&
1n the 2asis of a"aila2ility! the ra5 aterials can 2e categoriCed into:
(a) u2i6uitous8to denote those a"aila2le alost e"ery5here and
(2) localiCed aterials! ha"ing specific locations! 5hich are further di"ided
into pure aterial 5hich contri2utes nearly the total 5eight of it to the finished
products! and gross aterial! 5hich contri2utes only a sall fraction of total
5eight to the finished products. 7t is o2"ious that u2i6uitous hardly influence the
decision of location. A aterial inde> has 2een proposed! 5hich e6uals the 5eight
of localiCed aterial used in the finished product di"ided 2y the 5eight of the
finished product.
0!o'1c% 3ini)he' %he o3 <ei2h%
0!o'1c% 3ini)he' in %he 1)e' a%e!ial local o3 <ei2h%
;#I: In'e= #a%e!ial =
7f the aterial inde> is greater than unity! location should 2e nearer to the
source of ra5 aterial and if it is less than unity! then a location nearer to ar4et
is ad"ised.
L%.a(*%' De.*)*%' Pr%.e))
Ta2le gi"en 2elo5 lists possi2le foral steps in a plant location decision
process. The actual approach "aries 5ith the siCe and scope of operations.
The o23ecti"es are influenced 2y! o5ners! suppliers! eployees and
custoers of the organiCation influence the o23ecti"es. They ay ste fro
opportunities (or concerns) 5ith respect to any phase of the production syste
(i.e. inputs! processing! or outputs). The follo5ing sections descri2e the "aria2les!
criteria and odels rele"ant to the location decision process.
32
Ta!&e Steps in a facility location decision
% -efine the location o23ecti"es and associated "aria2les
. 7dentify the rele"ant decision criteria
R 6uantitati"e8econoic
R 6ualitati"e 8 less tangi2le
' +elate the o23ecti"es to the criteria in the for of a odel! or odels ( such
as 2rea48e"en! linear prograing! 6ualitati"e factor analysis)
/ 0enerate necessary data and use the odels to e"aluate the alternati"e
locations
$ Select the location that 2est satisfies the criteria
Fa.(%r) I'2%&2e I' (-e P&a'( L%.a(*%' De.*)*%'
:ocation studies are usually ade in t5o phases naely!
7. the general territory selection phase and
II> the e>act site < counity selection phase aongst those a"aila2le in the
general locale. The considerations "ary at the t5o le"els! though there is
su2stantial o"erlap as sho5n in the follo5ing Ta2le.
Ta!&e Fa.(%r) *'2%&2e *' (-e (7% )(a+e) %/ p&a'( &%.a(*%' )(,"
L%.a(*%' /a.(%r) Ge'era& (err*(%r"
)e&e.(*%'
Se&e.(*%' %/ )pe.*/*.
)*(e
;ar4et R
+a5 aterial R
Po5er R R
Transportation R R
Cliate and fuel R
Euan resource and
5ages
R R
+egulatory la5s and
ta>es
R R
Counity ser"ices R
Bater and 5aste R
Ecology and pollution R
Capital a"aila2ility R R
Site characteristics R
Security R R

A typical tea studying location possi2ilities for a large pro3ect ight
in"ol"e econoists! accountants! to5n planners! ar4eting e>perts! legal e>perts!
politicians! e>ecuti"es! industrial engineers! ecologists etc. 7t is indeed an
interdisciplinary tea that should 2e set up for underta4ing location studies.
33
LECTURE NO.
TERRITORY SELECTION AND SITE9 CO$$UNITY SELECTION
Terr*(%r" Se&e.(*%'
For the general territory < region < area! the follo5ing are soe of the
iportant factors that influence the selection decision.
1. $ar5e()0 There has to 2e soe custoer < ar4et for the product. The ar4et
gro5th potential and the location of copetitors are iportant factors that could
influence the location. :ocating a plant or facility nearer to the ar4et is preferred
if proptness of ser"ice is re6uired particularly if the product is suscepti2le to
spoilage. Also if the product is relati"ely ine>pensi"e and transportation costs add
su2stantially to the cost! a location close to the ar4et is desira2le.
2. Ra7 1a(er*a&) a' ),pp&*e): Soeties accessi2ility to "endors<suppliers of
ra5 aterials! e6uipent etc. ay 2e "ery iportant. The issue here is
proptness and regularity of deli"ery and in5ard freight cost iniiCation.
7f the ra5 aterial is 2ul4y or lo5 in cost! or if it is greatly reduced in 2ul4
"iC. transfored into "arious products and 2y8products or if it is perisha2le and
processing a4es it less so! then location near ra5 aterial source is iportant. 7f
ra5 aterials coe fro a "ariety of locations! the plant < facility ay 2e situated
so as to iniiCe total transportation costs. The costs "ary depending upon
specific routes! ode of transportation and specific product classifications
3. Tra')p%r(a(*%' /a.*&*(*e)0 Ade6uate transportation facilities are essential for
the econoic operation of production syste. For copanies that produce or 2uy
hea"y 2ul4y and lo5 "alue per ton coodities! 5ater transportation could 2e an
iportant factor in location plants.
<. $a'p%7er ),pp&"0 The a"aila2ility of s4illed anpo5er! the pre"ailing 5age
pattern! li"ing costs and the industrial relations situation influence the location.
=. I'/ra)(r,.(,re0 This factor refers to the a"aila2ility and relia2ility of po5er!
5ater! fuel and counication facilities in addition to transportation facilities.
>. Le+*)&a(*%' a' (a4a(*%': Factors such as financial and other incenti"es for
ne5 industries in 2ac45ard areas or no8industry8district centers! e>eption fro
certain state and local ta>es! octroi etc. are iportant.
S*(e 9 C%11,'*(" Se&e.(*%'
Ea"ing selected the general territory < region! one 5ould ha"e to go in for
site < counity selection. Soe factors rele"ant for this are:
34
1. C%11,'*(" /a.*&*(*e)0 These in"ol"e factors such as 6uality of life 5hich in
turn depends on a"aila2ility of facilities li4e education! places of 5orship! edical
ser"ices! police and fire stations! cultural! social and recreation opportunities!
housing! good streets and good counication and transportation facilities.
2. C%11,'*(" a((*(,e)0 These can 2e difficult to e"aluate. ;ost counities
usually 5elcoe setting up of a ne5 industry especially since it 5ould pro"ide
eployent opportunities to the local people directly or indirectly. Eo5e"er! in
case of polluting industries! they 5ould try their utost to locate the as far a5ay
as possi2le. Soeties 2ecause of pre"ailing la5 and order situation! copanies
ha"e 2een forced to relocate their units. The attitude of people as 5ell as the state
go"ernent has an ipact on location of polluting and haCardous industries.
3. :a)(e *)p%)a&0 The facilities re6uired for the disposal of process 5aste
including solid! li6uid and gaseous effluent need to 2e considered. The plant
should 2e positioned so that pre"ailing 5inds carry any fues a5ay fro
populated areas and that the 5aste ay 2e disposed off properly and at
reasona2le costs.
<. E.%&%+" a' p%&&,(*%'0 These days! there is a great deal of a5areness
to5ards aintenance of natural ecological 2alance. There are 6uite a fe5
agencies propagating the concepts to a4e the society at large ore conscious
of the dangers of certain a"aila2le actions.
=. S*(e )*8e0 The plot of land ust 2e large enough to hold the proposed plant and
par4ing and access facilities and pro"ide roo for future e>pansion.
>. T%p%+rap-"0 8The topography! soil structure and drainage ust 2e suita2le. 7f
considera2le land ipro"eent is re6uired! lo5 priced land ight turn out to 2e
e>pensi"e.
?. Tra')p%r(a(*%' /a.*&*(*e)0 The site should 2e accessi2le prefera2ly 2y road
and rail. The dependa2ility and character of the a"aila2le transport carriers!
fre6uency of ser"ice and freight and terinal facilities is also 5orth considering.
E. S,pp%r(*'+ *',)(r*e) a' )er2*.e)0 The a"aila2ility of supporting ser"ices
such as tool roos! plant ser"ices etc. need to 2e considered.
F. La' .%)()0 These are generally of lesser iportance! as they are non8
recurring and possi2ly a4e up a relati"ely sall proportion of the total cost of
locating a ne5 plant.
0enerally! the site 5ill 2e in a city! su2ur2 or country location. 7n general!
the location for large scale industries should 2e in rural areas! 5hich helps in
35
regional de"elopent also. 7t is seen that once a large industry is set up (or e"en
if a decision to this effect has 2een ta4en)! a lot of infrastructure de"elops around
it as a result of the location decision. As for the location of ediu scale
industries is concerned! these could 2e prefera2ly in the su2ur2an < sei8ur2an
areas 5here the ad"antages of ur2an and rural areas are a"aila2le. For the sall8
scale industries! the location could 2e ur2an areas 5here the infrastructural
facilities are already a"aila2le. Eo5e"er! in real life! the situation is soe5hat
parado>ical as people! 5ith oney and eans! are usually in the cities and 5ould
li4e to locate the units in the city itself.
Soe of the industrial needs and characteristics that tend to fa"our each of
this location are.
+e6uireents go"erning choice of a .*(" &%.a(*%' are:
A"aila2ility of ade6uate supply of la2our force
Eigh proportion of s4illed eployees
+apid pu2lic transportation and contact 5ith suppliers and
custoers
Sall plant site or ulti floor operation
Processes hea"ily dependent on city facilities and utilities
0ood counication facilities li4e telephone! tele>! post
offices
0ood 2an4ing and health care deli"ery systes
+e6uireents go"erning the choice of a ),!,r!a' &%.a(*%' are:
:arge plant site close to transportation or population centre
Free fro soe coon city 2uilding Coning (industrial
areas) and other restrictions
Freedo fro higher par4ing and other city ta>es etc.
:a2our force re6uired to reside close to the plant
Counity close to! 2ut not in large population centre
Plant e>pansion easier than in the city
+e6uireents go"erning the choice of a r,ra& &%.a(*%' are:
:arge plant site re6uired for either present deands or
e>pansion
-angerous production processes
:esser effort re6uired for anti8pollution easures
36
:arge "olue of relati"ely clean 5ater
:o5er property ta>es! a5ay fro 9r2an :and Ceiling Act
restrictions
Protection against possi2le sa2otage or for a secret process
Balanced gro5th and de"elopent of a de"eloping or
underde"eloped area
9ns4illed la2our force re6uired
:o5 5ages re6uired to eet copetition
37
LECTURE NO. 1!
SU#GECTIVE3 HUALITATIVE AND SE$I-HUANTITATIVE TECHNIHUES3
EHUAL :EIGHTS $ETHOD3 VARIA#LE :EIGHTS $ETHOD3 :EIGHT-CU$-
RATING $ETHOD3 ANOTHER :EIGHT-CU$-RATING $ETHOD
S,!Ie.(*2e3 H,a&*(a(*2e a' Se1*-H,a'(*(a(*2e Te.-'*6,e)
Three su23ecti"e techni6ues used for facility location are 7ndustry
Precedence! Preferential Factor and -oinant Factor. 7n the industry precedence
su23ecti"e techni6ue! the 2asic assuption is that if a location 5as 2est for siilar
firs in the past! it ust 2e the 2est for the ne5 one no5. As such! there is no
need for conducting a detailed location study and the location choice is thus
su23ect to the principle of precedence 8 good or 2ad.
Eo5e"er! in the case of the preferential factor! the location decision is
dictated 2y a personal factor. 7t depends on the indi"idual 5his or preferences
e.g. if one 2elongs to a particular state! he < she ay li4e to locate his < her unit
only in that state. Such personal factors ay o"erride factors of cost or profit in
ta4ing a final decision. This could hardly 2e called a professional approach though
such ethods are pro2a2ly ore coon in practice than generally recogniCed.
Eo5e"er! in soe cases of plant location there could 2e a certain doinant
factor (in contrast to the preferential factor) 5hich could influence the location
decision. 7n a true doinant sense! ining or petroleu drilling operations ust
2e located 5here the ineral resource is a"aila2le. The decision in this case is
siply 5hether to locate or not at the source.
For e"aluating 6ualitati"e factors! soe factor ran4ing and factor 5eight
rating systes ay 2e used. 7n the ran4ing procedure! a location is 2etter or
5orse than another for the particular factor. By 5eighing factors and rating
locations against these 5eights a sei86uantitati"e coparison of location is
possi2le. :et us no5 discuss soe specific ethods.
E6,a& :e*+-() $e(-%
Assign e6ual 5eights to all factors and e"aluate each location along the
factor scale. For e>aple! a anufacturer of fa2ricated foods selected three
factors 2y 5hich to rate four sites. Each site 5as assigned a rating of ) to %)
points for each factor. The su of the assigned factor points constituted the site
rating 2y 5hich it could 2e copared to other site.
38
Ta2le -ecision atri>
Factor<Potential Sites S7 S. S' S/
F7 . $ ( .
F. ' ' @ '
F' & . = '
Site rating %% %) ./ @
Saple calculation: %% P . N ' N &
:oo4ing at the a2o"e Ta2le ! one can see that site S' has the highest site
rating of ./. Eence! this site 5ould 2e chosen.
Var*a!&e :e*+-() $e(-%
The a2o"e ethod could 2e utiliCed on account of gi"ing e6ual 5eight age
to all the factors. No5! thin4 of assigning "aria2le 5eights to each of the factors
and e"aluating each location site along the factor scale. Factor F& ight 2e
assigned ')) points! factor F2 %)) points and factor F3 $) points. The points
scored! out of the a>iu assigned to each of the factors! for each possi2le
location site could 2e o2tained and again the site rating could 2e deri"ed as
follo5s:
Ta!&e -ecision atri>
Factor ;a>iu points Potential sites
S% S. S' S/
F7 ')) .)) .$) .$) $)
F. %)) $) =) @) %))
F' $) $ $) %) /)
Site rating .$$ '=) '/) %()
Saple calculation: .$$ P .)) N $) N $
:oo4ing at the a2o"e Ta2le! it can 2e seen that site S. has the highest site
rating of '=). Eence! this site 5ould 2e chosen.
39
:e*+-( -.,1-Ra(*'+ $e(-%
This is another ethod of e"aluating a potential location site. 1ne can
assign "aria2le 5eights to each factor. A coon scale for each factor then rates
the locations. The location point assignent for the factor is then o2tained 2y
ultiplying the location rating for each factor 2y the factor 5eight. For e>aple!
rating 5eights of one to fi"e could 2e assigned to the three factors F1 (huan
resource)! F2 (counity facilities) and F3 (po5er a"aila2ility and relia2ility)! as $!
'! . respecti"ely. No5 for each of the factors! sites S7! S.! S' or S/ could recei"e
) to %) points as follo5s and the site rating could 2e o2tained.
Ta!&e -ecision atri>
Factor Factor rating
points
Potential sites
S% S. S' S/
F7 $ . $ ( .
F. ' ' ' @ '
F' . & . = '
Site rating '% '@ @' .$
Saple calculation 'l P $ > . N ' > ' N . > &
As sho5n in the a2o"e Ta2le! the saple calculation should hopefully
suffice to o2tain the site rating. Eence! site S' 5ith the highest rating of @' is
chosen.
A'%(-er 7e*+-(-.,1-ra(*'+ 1e(-%
A'%(-er 7e*+-(-.,1-ra(*'+ 1e(-% esta2lishes a su23ecti"e scale
coon to all factors. This in"ol"es assigning points against the su23ecti"e scale
for each factor and assigns the factor points of the su23ecti"e rating for each
factor. For e>aple! fi"e su23ecti"e ratings8Poor! Fair! Ade6uate! 0ood and
E>cellent are selected to 2e used in e"aluating each site for each factor. For each
of the factors! ade6uate 5as assigned a "alue Cero and then negati"e and
positi"e relati"e 5orth 5eights are assigned the su23ecti"e ratings 2elo5 and
a2o"e ade6uate for each factor as gi"en in follo5ing Ta2le.
Ta2le -ecision atri>
Poor Fair Ade6uate 0ood E>cellent
Fl Bater supply 8%$ 8%. ) & %)
F. Appearance
of site
8' 8% ) % .
The range 2et5een iniu and a>iu 5eight assigned to a factor in
effect 5eights that factor against all other factors in a anner e6ui"alent to the
5eight8cu8rating ethod descri2ed pre"ious to this one. Each location site S% to
40
S/ are then rated 2y selecting the applica2le su23ecti"e rating for each factor for
each location and the e6ui"alent points of that su23ecti"e factor rating assigned to
the factor. Thus one can no5 o2tain the follo5ing Ta2le.
Ta2le -ecision atri>
Factor Potential sites
S% S. S' S/
F7 ) 8%. & )
F. ) 8' . 8%
F' ) ) ) )
Site rating ) 8%$ @ 8%
Saple calculation: 8%$ P (8%.) N (8') N ())
Accordingly! site S' 5ith the highest rating of @ 5ould 2e chosen.
The location analyst presents to the anageent 2oth the cost and the
intangi2le data results. 7n such cases! anageent could ta4e a decision 2ased
on a siple coposite easure ethod illustrated 2elo5 5ith the aid of a
nuerical e>aple.
41
LECTURE NO. 11
CO$POSITE $EASURE $ETHOD3 LOCATIONAL #REA;-EVEN ANALYSIS
C%1p%)*(e $ea),re $e(-%
The steps of the coposite easure ethod are:
-e"elop a list of all rele"ant factors
Assign a scale to each factor and designate soe iniu
Beigh the factors relati"e to each other in light of iportance to5ards
achie"eent of syste goals. .
Score each potential location according to the designated scale and
ultiply the scores 2y the 5eights.
Total the points each location and either (a) use the in con3unction 5ith a
separate econoic analysis! or (2) include an econoic factors in the list of
factors and choose the location on the 2asis of a>iu points.
The follo5ing illustrates the coposite easure ethod 5ith a nuerical
e>aple. There are three potential sites and fi"e rele"ant factors li4e
transportation costs per 5ee4! la2or costs per 5ee4! ra5 aterial supply!
aintenance facilities and counity attitude. The costs are in rupees 5hereas
for the last three factors! points are assigned on )8%)) scale. The data collected is
sho5n in the follo5ing Ta2le.
Ta2le Payoff atri>
Factor Potential sites
S% S. S'
Transportation cost<5ee4 +s
:a2our cost<5ee4! +s.
F7
F.
@))
%%@)
&/)
%).)
$@)
%%&)
+a5 aterial supply
;aintenance facilities
Counity attitude
F'
F/
F$
')
&)
$)
@)
.)
@)
=)
')
=)
The location analyst has pre8esta2lished 5eights for "arious factors. This
includes a standard of %.) for each +s.%) a 5ee4 of econoic ad"antage. 1ther
5eights applica2le are ..) on ra5 aterial supply! ).$ on aintenance facilities
and ..$ on counity attitudes. Also the organiCation prescri2es a iniu
accepta2le score of ') for aintenance facilities.
First of all! loo4 at the econoic factors Fl and F. for 5hich onetary
"alues 5ere possi2le. 7f one totals the costs for each site! one gets the costs for
sites S%! S. and S' as +s.%(@)! +S.%&&) and +s.%=/)! respecti"ely. Thus! site
42
S% 5ould 2e the 5orst cost 5ise. Site S. 5ould ha"e an econoic ad"antage
o"er site S% to the e>tent of +S. (%(@)8%&&)) P +s.'.). Siilarly! site S' 5ould
ha"e an econoic ad"antage o"er site S7 to the e>tent of +s. (%(@)8%=/)) P
+s../). No5 the onetary "alue in +upees can 2e con"erted to a point scale
using the fact that a standard of %.) is to 2e assigned for each +s.%) per 5ee4 of
econoic ad"antage. Thus one can get the follo5ing Ta2le.
Ta2le -ecision atri>
Factors Beightage Potential sites
S% S. S'
Econoic ad"antage
(Fl N F.)
F'
F/
FS
%.)
..)
).$
..$
)
')
&)
$)
'.
@)
.)
@)
./
=)
')
=)
Coposite site rating .%$ /). '$/
Saple calculation: .%$ P (%.) > )) N (..) > ')) N ().$ > &)) N (..$ > $))
L%.a(*%'a& #rea5-E2e' A'a&")*)
Soeties! it is useful to dra5 location 2rea48e"en charts! 5hich could aid
in deciding 5hich location 5ould 2e optial. The location of a food factory in a
South -elhi site 5ill result in certain annual fi>ed costs! "aria2le costs and
re"enue. The ) figures 5ould 2e different for a South ;u2ai site. The fi>ed
costs! "aria2le costs and price per unit for 2oth sites are gi"en 2elo5 in the Ta2le.
Ta2le Cost data
:ocation site Fi>ed costs ?aria2le Costs Price per tonne
South -elhi (Sl) /)!))!))) ')!))) =$!)))
South ;u2ai (S.) &)!))!))) ./!))) @.!)))
:et us assue that the e>pected sales "olue as estiated 2y a ar4et
research tea is ($ tonnes.
No5 the 2rea48e"en point is defined to 2e the point or "olue 5here the
total costs e6ual total re"enue. Thus for each site Sl and S.! the 2rea48e"en point
can 2e deterined 2y using a siple forula as follo5s:
1ni%: 0e! co)% ?a!ia&le @ 1ni% 0e! ;.e*en1e
co)%) Fi=e'
;BE+: e e*en *ol1 @ B!ea$ =
At the South -elhi :ocation S%
tonnes BEP 89 88 > 88
30000 75000
000 9 00 9 40
= =

=
43
and at the South ;u2ai location S.
tonnes BEP 104 448 > 103
000 9 24 000 9 82
000 9 00 9 60
= =

=
:et us see 5hat 5ould 2e the profit or loss for the t5o sites at the e>pected
"olue of ($ tonnes. The calculations are sho5n in the follo5ing Ta2le.
Ta2le Cost coparisons
South -elhi (S%) South ;u2ai (S.)
Costs
Fi>ed : /)!))!)))
?aria2le: .@!$)!)))
Total : &@!$)!)))
Costs
Fi>ed : &)!))!)))
?aria2le : ..!@)!)))
Total : @.!@)!)))
+e"enue: =$!))) > ($ P =% !.$!))) +e"enue: @.!))) > ($ P ==!()!)))
Profit :
P (=% !.$!))) 8 &@!$)!)))) P .!=$!)))
:oss :
P (==!()!))) 8 @.!@)!)))) P /!()!)))
44
LECTURE NO. 12
FOOD PLANT UTILITIES0 PROCESS :ATER3 STEA$3 ELECTRICITY3 PLANT
EFFLUENTS
FOOD PLANT UTILITIES
The principal plant utilities in a food plant are pr%.e)) 7a(er3 pr%.e))
)(ea1! e&e.(r*. p%7er for otors and lighting! and /,e&.
Pr%.e)) :a(er
Process 5ater is re6uired for 5ashing the ra5 aterials and for "arious
cooling operations. 7n fruit and "egeta2le processing plants! 5ater ay 2e used
for transportation (fluing) of the ra5 aterials fro recei"ing to processing
areas. Bater used in stea 2oilers ay re6uire ion e>change treatent to reduce
its hardness. Total 5ater re6uireent in fruit and "egeta2le processing ay range
fro $ to %$
'
< ton of ra5 aterial.
2. S(ea1
Stea 2oilers are needed in ost food processing plants to pro"ide
process stea! used ainly in "arious operations! such as heating of process
"essels! e"aporators and dryers! steriliCation! 2lanching! and peeling. A ediu
siCe food plant (@) tons < day ra5 aterial) ay re6uire a 2oiler producing a2out
%) tons<h of stea at %@ 2ar pressure.
T5o principal types of stea 2oilers are used in the food processing
industry! i.e. the fire8tu2e and the 5ater8tu2e 2oilers. The fire tu2e 2oilers operate
at relati"ely lo5er pressure (%#./ 2ar) and produce cleaner stea. The 5ater8
tu2e units operate at higher pressures (%))#%/) 2ar) and they are suited for co8
generation! i.e. electrical po5er and e>haust stea of lo5er pressure for process
heating. Co8generation is econoical in large food plants! re6uiring large aounts
of lo58pressure stea! e.g.! 2eet sugar plants.
A stand2y stea 2oiler of proper capacity ay 2e necessary to pro"ide
process stea during any 2oiler failure or 2rea4do5n.
Stea 2oilers are rated in Btu<h! 4B or 2oiler EP (% Btu<h P )..(' B! %
2oiler EP P (.@ 4B). The heat flu> in the 2oiler heating surface is a2out ).=$ 4 B<

.
. The 2oiler efficiency is a2out @$O 5ith ost of the theral losses in the dry
gases and the oisture. Stea generation is a2out %./ t<h per ;B.
45
7n order to aintain the concentration of accuulated dissol"ed solids in
stea 2oilers 2elo5 '$)) pp! periodic discharge of hot 5ater (2lo5 do5n) is
practiced.
Fuel is used in food plants ostly for generating process stea and
process drying. Natural gas and li6uefied propane (:P0) are preferred fuels in
food processing! 2ecause their co2ustion gases are not o23ectiona2le in direct
contact 5ith food products. Fuel oil and coal can 2e used for indirect heating! i.e.
through heat e>changers.
Culinary stea of special 6uality is used 5hen stea is in3ected in food
products. The stea ust 2e free of o23ectiona2le cheicals used in 2oilers!
5hich ay 2e carried into the food 2eing heated. Culinary stea is usually
produced fro pota2le 5ater in a secondary syste of a heat e>changer heated
5ith high pressure industrial stea.
3. E&e.(r*.*("
Electrical po5er in food processing plants is needed for running the otors
of the processing! control! and ser"ice e6uipent! for industrial heating! and for
illuination. For a ediu siCe food plant processing a2out %)) tons<day ra5
aterials! the po5er re6uireent ay of the order of $)) 4B. A stand2y po5er
generator of a2out .)) 4 ?A is recoended for eergency operation of the
ain plant! in case of po5er failure or 2rea4do5n.
Single8phase or three8phase alternating current (AC) of %%) ? (&) cycles)
or ..) ? ($) cycles) is used in food processing plants. The electrical otors are
either single8phase or three8phase s6uirrel cage.
Energy8efficient electrical otors should 2e used in "arious food
processing operations. A easure of the efficiency of electrical po5er is the
po5er factor (pf)! defined as pf P
VA k
W k
! 5hich should 2e e6ual or higher than
).@$.
7lluinating (lighting) of industrial food plants should utiliCe fluorescent
laps! 5hich can sa"e significant aounts of energy.
<. P&a'( E//&,e'()
46
Plant effluents consisting ainly of 5aste5ater! 2ut including solids and
gas 5astes re6uire special handling and treatents to coply 5ith the local la5s
and regulations.
Food plants should 2e designed and operated so that a iniu pollution
is caused to the en"ironent. The En"ironental Protection Agency (EPA) in the
9S has issued codes and regulations that ensure the 6uality of natural 5ater
2odies is not daaged 2y effluent discharges fro industrial plants. Siilar
regulations apply to atospheric eissions of o23ectiona2le gases and dust.
En"ironental inforation needed to coply 5ith EPA regulations for 5aste5ater
includes testing for pE! teperature! 2iocheical o>ygen deand (B1-)! fats oil
and grease (F10)! and total suspended solids (TSS).
:arge aounts of 5aste are produced in the processing of fruits and
"egeta2les! as in canning! freeCing! and dehydration operations. Saller 5aste
"olues are produced in dairy plants (5ith the e>ception of cheese and il4
po5der)! and in dry8processing (illing) of grain (e.g.! 5heat flour).
A ediu siCe fruit or "egeta2le processing plant handling a2out %))
ton<day of ra5 aterials ay discharge a2out %)))
'
<day of 5aste 5ater.
Treatent of food 5aste 5ater ay in"ol"e one or ore of the follo5ing
operations:
%. Siple screening out of the suspended solids!
.. 0ra"el filtration!
'. solids settling in sedientation tan4s!
/. 2iological o>idation (aeration)!
$. spray irrigation!
&. discharge into the local pu2lic se5er! and
=. discharge into a 5ater5ay.
:i6uid 5astes (5aste 5ater) can 2e disposed to the local 5aste (se5age)
treatent plants! after reo"ing soe o23ectiona2le coponents! such as fat! oil!
and grease to an accepta2le le"el! e.g.! lo5er than %))) g<:. Pollution loads
higher than .)) g<: are coon in food plant li6uid 5astes. 7t is ore
econoical to pay pollution surcharges to the local se5age plant! 5hene"er
possi2le! than to 2uild an e>pensi"e 5aste5ater treatent facility.
Food preser"ation plants! located a5ay fro unicipal se5age systes!
dispose the process 5ater to large storage ponds (lagoons)! 5here a slo5 natural
47
2io8o>idation of the organic 5aste ta4es place. The treated lagoon 5aste5ater
can 2e discharged to the land ad3oining the plants.
Soe solid food 5astes can 2e sold at relati"ely lo5 prices for anial
feeds! either unprocessed or dried! e.g.! solid citrus or sugar 2eet 5astes. Soe
solid food 5astes can 2e di"erted to the land (grape poace to "ineyard)! 5hile
soe other can 2e i>ed 5ith the soil (coposting).
The sanitary se5age of food plants! depending on the nu2er of
eployees! should 2e treated in a different syste than the process 5aste5ater.
7t can 2e discharged to the local se5age syste! if a"aila2le. 1ther5ise! it is
treated in septic tan4s constructed near the food plant.
+elati"ely sall aounts of gas 5astes (odorous ?1C) are generated 2y
soe food industries! such as 2a4eries (ethanol)! fisheal dryers! and edi2le oil
refining plants. Also! odors fro coffee and cocoa roasting ay re6uire soe for
of treatent. Treatent of o23ectiona2le gas 5astes in"ol"es gas a2sorption
e6uipent! such as 5et scru22ers.
The design of treatent facilities for industrial 5aste5ater! and solids<gas
5astes re6uires the e>pertise of en"ironental engineers 5ho are failiar 5ith
the local la5s and regulations concerning en"ironental pollution.
48
LECTURE NO. 13
PLANT SIJE AND FACTORS
Plant size / capacity for any food-processing unit refers to the planned rate
of production of the identified product(s). 7t can 2e e>pressed in ters of either
2%&,1e or 7e*+-( or ',1!er pr%,.e per ,'*( (*1e of the product. The (*1e
,'*( for e>pressing the plant siCe could 2e ta4en as -%,r or a )-*/( or a a" or a
"ear. 7t is al5ays useful to ta4e a decision a2out the siCe<capacity in the 2eginning
of the plant design.
Knowledge of the plant size may help in:
assessing the type and siCe of the plant and achinery needed
assessing the siCe and cali2er of the 5or4 force needed
deterining the re6uireents of total land area and co"ered space for
the plant
deciding the type of layout
assessing the other physical facilities needed
deterining the type of sales efforts and distri2ution syste
financial or econoic "ia2ility calculations
The siCe<capacity of the plant 5ill depend on a nu2er of factors such as:
ra5 aterial a"aila2ility :
ar4et deand
degree and nature of the ar4et copetition
econoic considerations i.e. accepta2le return on in"estent <
profita2ility
The interaction of each of the a2o"e factor 5ith plant siCe can 2e assessed
on the 2asis of inforation collected as part of the ar4et study. Therefore! a
coprehensi"e ar4et study is a ust.
Ra7 $a(er*a& A2a*&a!*&*("
There ay 2e ade6uate or unliited deand for the product in the ar4et
5ith little or no copetition! 2ut the entrepreneur ay not get ade6uate supplies
of the ra5 aterial to produce the product in 6uantities one 5ishes. This 5ould
liit the siCe.
$ar5e( De1a'
;ar4et deand for any product is the total "olue that 5ill 2e 2ought 2y a
e/*'e .,)(%1er +r%,p in defined +e%+rap-*.a& area in a defined (*1e per*%
49
and in a defined e'2*r%'1e'(. 7t is possi2le that the ra7 1a(er*a& *) a2a*&a!&e *'
a!,'a'.e. 1ne can get as uch ra5 aterial as one 5ishes. But one can not
sell all that one can produce. The e1a' /%r (-e pr%,.( *) &*1*(e. 7n this
case! it is the ar4et deand! 5hich 5ill deterine the plant siCe.
De+ree a' Na(,re %/ (-e $ar5e( C%1pe(*(*%'
There is '% re)(r*.(*%' %' ra7 1a(er*a& a"aila2ility. 7t is a"aila2le in
a2undance. Also! there is e'%,+- e1a' for the product in the ar4et.
However, there eist a large num!er of manufacturers / processors for the
product who are epected to provide stiff competition. 7n this case! the plant siCe
ay 2e restricted to a &*1*( +%2er'e !" (-e )-are %/ (-e 1ar5e(! 5hich the
entrepreneur ay capture. -epending on the product! a 1K - 1=L ar4et share is
considered to 2e ade6uate. The copetition ay in"ol"e price or 6uality or tiely
deli"ery or a co2ination of such features. To study the copetition! the
entrepreneur needs to ha"e a list of a3or copetitors! details of their product
range! product features! output! ar4et share and pricing.
E.%'%1*. C%')*era(*%')
;any ties plant siCe is deterined 2y the financial resources a"aila2le
5ith the entrepreneur as also 2y the degree of ris4 the entrepreneur is prepared to
ta4e. Soeties it is also ad"isa2le to find the popular plant siCe of e>isting
enterprises engaged in anufacturing<processing the product of choice.
7n cases 5here the a"aila2ility of ra5 aterial! ar4et deand and the
financial resources are not a pro2le! the entrepreneur ay loo4 for the siCe
5hich 5ill ensure hi < her a iniu accepta2le return<profit. T-*) )*8e *)
.a&&e (-e 1*'*1,1 e.%'%1*.a&&" 2*a!&e p&a'( )*8e. Eo5e"er! 5hen situation
perits a plant siCe larger than the iniu econoically "ia2le siCe! a siCe!
5hich 5ill a>iiCe profits! is selected.
The iniu accepta2le return<profit "ie5ed in t5o 5ays. 7n one case
larger share of the capital in"estent ay consist of the e6uity (entrepreneurLs
o5n capital) 5hile in another case it ay consist of the 2orro5ed capital. 7n case
of the forer! the return<profit ust 2e greater than the aount of interest earned
if the entire capital of the entrepreneur 5as in"ested as fi>ed deposit in a
scheduled 2an4. 7n case of the later! the return<profit ust 2e greater than the
interest paid on the 2orro5ed capital.
Bhile deciding the plant siCe<capacity one should also ree2er the
follo5ing:
50
Specify the nu2er of days for 5hich the proposed plant 5ill 5or4 in a
year. 7n general! it is custoary to presue ')) 5or4ing days. Eo5e"er! if
the enterprise is to handle the seasonal product! it ay 5or4 for less than
')) days.
1ne shift consists of @ hours. 1ne shift 5or4ing is the ost popular pattern
aong sall enterprises. T5o and three shift 5or4ing is largely liited to
continuous enterprises and the ediu and large8scale enterprises.
51
LECTURE NO. 14
THE ENTERPRISE AND ITS ENVIRON$ENT3 THE TOTAL REVENUE
FUNCTION3 THE TOTAL COST FUNCTION
T-e E'(erpr*)e a' I() E'2*r%'1e'(
7agine a food processing enterprise that copetes 5ith se"eral others.
The enterprise produces a single product! has soe control o"er the price it 5ill
charge and is priarily de"oted to a4ing a profit. 7agine further that the a3or
characteristics of the ar4et! the copetitors! and enterprises o5n internal
technology are 5ell 4no5n to anageent and essentially static in tie. 9nder
these conditions one ay e>plore soe of the a3or econoic decisions that
ight 2e ade. 1ne ay start 5ith the en"ironent in 5hich the enterprise e>ists
and 5or4 in5ard! e"entually reaching the le"el of decisions at 5hich the analyst
often 5or4s.
7n studying the enterpriseLs en"ironent one ight 5ish to study in detail
the custoers! copetitors! suppliers! and the legal! political! social and
geographic factors 5hich 2ear upon its operations. To a"oid soe of the chaos
this ight in"ol"e! it is assued that all these things can 2e e>pressed 2y the
deand cur"e of the enterprise. The deand cur"e e>presses a part of the
relationship of the enterprise 5ith its ar4et 2y siply gi"ing the aount of
product that can 2e sold as a function of the price charged for it. 7n this siple
odel! price is ta4en to 2e the a3or deterining factor in the aount the
enterprise can sellI and such o2"ious other factors as 6uality! ad"ertising! sales
effort! reputation! and ser"ice are left out of the picture. Thus the relationship
2et5een the price and the aount of product that can 2e sold is gi"en 2y:
P P a # 2 - for ) S - S a<2
P ) other5ise
Eere P is the unit price! - is the aount of product sold! and a and 2 are
positi"e constants. 7t is assued that the aount of product! -! is a continuous
"aria2le. The straight8line e>aple! 5hich has 2een gi"en! ight ha"e 2een a
cur"eI 2ut the point is that one usually e>pects large "olue to 2e associated 5ith
lo5 price! and sall "olue to 2e associated 5ith high price (Figure %).
The analyst 5ho 4no5s the deand cur"e ay then decide 5hat price one
5ill charge! and the cur"e 5ill tell ho5 uch one can sellI or! one ay decide
52
5hat "olue to produce and the cur"e 5ill indicate the highest price at 5hich one
5ill 2e a2le to dispose of the production. 9ltiately one 5ill a4e the choice so as
to a>iiCe profit! and profit ay 2e defined siply as the difference 2et5een
total re"enue or gross sales (T+) and total cost (TC)!
Profit P T+ 8 TC
The total re"enue resulting fro any price8"olue choice ay 2e
coputed directly fro the deand cur"e.
Figure % A -eand Cur"e
T-e T%(a& Re2e',e F,'.(*%'
Total re"enue of the enterprise is siply the aount of product sold
ultiplied 2y the unit price charged. Therefore!
Total +e"enue (T+) P (unit price) ("olue) P P-
Bhere!
P P unit price! P (a # 2 -)
- P aount of product sold! (?olue)
9sing the deand function! total re"enue can 2e e>pressed in ters of -
alone!
T+ P (a # 2 -) - P a - 8 2 -
.
for ) S - S a<2
P ) other5ise
53
No5 if one 5ere dealing 5ith a peculiar enterprise! 5hich has no costs at
all! or has only costs independent of the volume of production! (-e' 1a4*1*8*'+
pr%/*( 7%,& !e a.-*e2e !" 1a4*1*8*'+ (%(a& re2e',e. The "olue that 5ill
a>iiCe total re"enue can 2e found 2y the usual ethods of calculus (Figure 8
.).
Figure .. A total re"enue function
( ) 0 2 = = bD a
dD
dTR
b
a
D
2
=
1ne ay 2e assured of a a>iu 2y noting that
b
dD
TR d
2
2
2
=
is negati"e since 2 is a positi"e constant. I( 1a" !e '%(e (-a( (-e er*2a(*2e %/
(%(a& re2e',e 7*(- re)pe.( (% 2%&,1e *) +*2e' (-e 'a1e A1ar+*'a& re2e',eA.
7t e>presses the rate at 5hich re"enue increases 5ith increase in the "olue of
sales. ;ost enterprises! ho5e"er! 5ould not find that a>iu total re"enue
resulted in a>iu profit! thus one ust in"estigate the pro2le of total cost of
production in order to copute the profit in the ore usual 5ay.
T-e T%(a& C%)( F,'.(*%'
7agine that the analyst is a2le to e>aine the producti"e operations of the
enterprise. At this point the analyst ay 2e especially interested in how total cost
changes with the volume of production. 7n estiating total cost it is helpful to
divide the components of this sum into two classes called fied costs and varia!le
costs.
54
F*4e .%)() include all costs independent of the volume of production.
These are the costs! 5hich ust 2e et irrespecti"e of the le"el of production.
Variable costs include all costs 5hich "ary ore or less directly 5ith the
"olue of production: These costs include such things as *re.( &a!%,r .%)()
and ra7 1a(er*a& .%)() that tend to r*)e as the nu2er of units produced goes
up. 7t ay 2e difficult to disco"er 3ust e>actly -%7 2ar*a!&e .%)() % M2ar" 7*(-
(-e &e2e& %/ pr%,.(*%'. Further! costs 5hich are fi>ed in the short run ay not
2e fi>ed in the long run. For e>aple! if production is stopped! the enterprise ay
eet its fi>ed e>penses for a short period in anticipation of rene5ed acti"ity!
ho5e"er! this can not go on for long 5ithout resulting in li6uidation or soe other
drastic odification of the cost structure. 7n spite of these difficulties! these .%)(
.&a))*/*.a(*%') are sufficiently suggesti"e to gi"e soe iportant insights. T%
.&ar*/" (-e)e! let
TC (-) P total cost at a production le"el of - units
FC P fi>ed costs! independent of -
?C (-) P "aria2le costs at a production le"el of -
TC (D) = FC + VC (D)
This is the general for of the enterpriseLs (%(a& .%)( /,'.(*%'.
Consider a siple case in 5hich the "aria2le cost function turns out to 2e a siple
linear function of the "olue of production.
?C (-) P

-
T-e ra(e %/ .-a'+e %/ (-e 2ar*a!&e .%)() 5ith the "olue of production is
called the J1ar+*'a& .%)(!J or soeties the J*'.re1e'(a& .%)(J. 7n this case 5e
ha"e siply
;arginal cost P
=
: ;
: ;
D d
D VC d
This iplies that arginal costs are constant! and that the cost of
producing a small additional amount is always the same. 7f - is ta4en to 2e a
discrete "aria2le! then the arginal cost is siply the cost of producing one
additional unit of product 5hen the production is at soe gi"en le"el.
?C (- N %) # ?C (-) P arginal cost
55
Figure '. A total cost function
9sing the siple8linear cost function (Figure 8 ')! the total cost function 2ecoes
TC (-) P FC N

-
and profit is gi"en 2y
Profit P T+ (-) # TC (-) P ( a - # 2 -
.
) 8 (FC N

-)
P 8 FC N (a 8

) - # 2-
.
for ) S - S a<2
P ) other5ise
The8analyst 5ho 5ishes to a>iiCe profit under these conditions 5ill then 2e
interested in the "alue of -! 5hich a>iiCes this function. Thus if
a # " T )
0 2
: ;
= = bD v a
dD
profit d
b
v a
D
2

=
7f
a8 " S )
the profit 5ill 2e a>iiCed for
-P)
The situation! 5hich confronts the analyst is sho5n graphically in F*+,re <!
in 5hich it is assued that
56
a 8 " T )
Figure / A profit 8 :oss function
An iportant 8principle eerges here if one o2ser"es that at this le"el of
production! arginal cost is e6ual to arginal re"enue. For
: 0 ; 2
: ;
9
2
= =

= v a v bD a
dD
D dTR
b
v a
D

Thus one ight forulate a decision rule 5hich says! Uto a>iiCe profit!
increase production as long as arginal re"enue is greater than arginal cost!
2ut stop 5hen the t5o are e6ualV. Alternati"ely! Uto maimize profit, increase
production until the revenue from the last unit of product is "ust e#ual to the cost of
producing it$J

57
LECTURE NO. 15
#REA;-EVEN AND SHUTDO:N POINTS3 PRODUCTION3 ECONO$ICS OF
$ASS PRODUCTION3 PRODUCTION $ANAGE$ENT DECISION
#rea5-E2e' a' S-,(%7' P%*'()
Fro Figure / certain other insights ay 2e o2tained. There are t5o points
at 5hich total revenue is e#ual to total cost, and thus profit is zero. %hese points
are called the !rea&- even points. Bet5een the 2rea48e"en points the enterprise
5ill a4e a profit! 2ut outside of these it 5ill suffer a loss. The lo5er or left8hand
2rea48e"en point is of special interest to the analysts since this is the le"el of!
production that ust 2e reached to get the enterprise out of the red. ;any of the
decisions of the enterprise a2out its acti"ities depend hea"ily on the ans5er to the
6uestionI J'ill the venture !e a!le to operate at or a!ove its !rea&-even pointKJ
Another decision that ay confront the analyst is 5hether or not to cease
production entirely 5hen conditions force "olue do5n 2elo5 the lo5er 2rea48
e"en point. This decision ight 2e studied using the odel! although this is not
essential. Suppose the analyst finds that the enterprise is forced to produce at
soe le"el lo5er than the 2rea48 e"en pointI one then has the follo5ing
alternati"es:
a
l
P stop production
a
.
P continue production at soe le"el -
%
2elo5 the 2rea48e"en point
Assuing that no uncertainty or ris4 is in"ol"ed in the analysis of this
decision! one could copute the profit associated 5ith each alternati"e:
Profit
a
% W
FC
a
.
T+ (-
%
) # TC (-
%
)
The profit for a
.
ay 2e coputed as follo5s:
T+ (-
%
) # TC (-
%
) P T+ (-
%
) # (FC N "-
%
)
Alternati"e a
.
5ill 2e preferred if
T+ (-
%
) 8 (FC N "-
%
) X 8 FC
T+ (-
%
) X "-
l

Thus one has the decision rule! Jso long as total re"enue e>ceeds "aria2le
costs! do not stop production.J This rule ust o2"iously apply in the short run!
since the enterprise cannot go on sustaining a loss for "ery long.
58
PRODUCTION
The pro2les and decisions discussed so far are largely the concern of top
anageent! since they are in the real of a3or copany policy. The analyst at
least early in the career! is ore li4ely to 2e associated 5ith decisions specifically
related to the ethods of production and operation eployed. Thus one ay 2e
concerned 5ith alternati"e production processes! alternati"e designs for the
product! alternati"e operating procedures! and so on.
7deally all the decisions should 2e studied fro the o"erall "ie5point of the
enterprise! 5ith the ai of perhaps a>iiCing total profit as 5as pre"iously
sho5n. For o2"ious practical reasons! not e"ery decision can 2e approached
iediately fro this "ie5point and thus one uses other! ore iediate criteria.
Typically uch effort is de"oted to reducing costs through the ipro"eent of the
product! the process! or the operating procedures. Although soeties it ay 2e
true that if costs are reduced 2y a rupee! profit 5ill increase 2y a rupee! things are
usually not so siple. Suppose! for e>aple! the analyst can sho5 that 2y
refusing to disrupt production in order to push through JrushJ orders! costs can 2e
reduced. Clearly profits ay not 2e increased 2y an e6ual aount! since the
custoers ay ta4e their 2usiness else5here. 7n practice any decisions are
approached fro the "ie5point of iniiCing costs 2ecause it ay 2e difficult to
easure profit directly! and good 3udgent indicates that higher profits are li4ely
to result.
ECONO$IES OF $ASS PRODUCTION
Suppose that anageent is confronted 5ith the follo5ing decision. 7f the
production process and e6uipent are 4ept su2stantially the sae! 5hat "olue
of production 5ill iniiCe the a"erage unit cost of productionK This is the
6uestion of the econoic operating le"el for a plant. 7f 5e assue that under
these conditions the plantLs costs are gi"en 2y a linear total cost function! as in
Figure %! then the a"erage unit cost is siply gi"en 2y

v
D
FC
D
vD FC
D
D TC
D AC + =
+
= =
: ;
: ;
59
Figure %. A total cost function
7n this situation the ore one produces! the lo5er the a"erage unit cost.
%his phenomenon is so important that it is given the name (economics of mass
production( and forms the entire !asis of much of the industrial development$
The siple linear cost function leads to the conclusion that production ay 2e
increased indefinitely! al5ays 5ith the result of lo5ering a"erage unit cost.
+ecalling that the plant and production process is 2eing held su2stantially
constant! this conclusion does not appear realistic. As one tries to o2tain ore
and ore production fro the plant! the facilities are strained to their liit!
e>pensi"e o"ertie operation sees necessary! scrap ay increase!
aintenance ay 2e neglected and a"erage cost ay go up (Figure .).
Figure . an a"erage cost function
This 5ould ha"e 2een noted! one has assued a soe5hat ore realistic
total cost function! such as
TC (-) P FC N "
%
- N "
.
-
.

7n this case a"erage cost is gi"en 2y
D v v
D
FC
D AC
2 1
: ; + + =
and 5ill 2e iniiCed 5hen
60
0
: ;
2
2
= + = v
D
FC
dD
D ADC
This yields
2
v
FC
D =
The phenoenon of rising a"erage cost 5hich sets in 5hen production
goes a2o"e this le"el suggests that 5e ight forulate the general hypothesis: As
one tries to get ore and ore production out of a gi"en plant and process! the
unit cost 5ill e"entually go up. Thus one has to coproise 2et5een the
conflicting effects of econoies of ass production and the e"entual up tuning of
the a"erage cost function. The 2est coproise in the sense of iniiCing cost is
gi"en 2y the result o2tained a2o"e.
At this point! another helpful decision rule ay 2e o2tained. At the point
5here a"erage cost is iniu! it is easy to sho5 that
AC (-) P arginal cost at - P "
%
N . Y FC"
.
Thus one could say that a"erage cost 5ould coe do5n so long as
arginal cost is 2elo5 it. But 5hen arginal cost e>ceeds a"erage cost! it 5ill
rise. To iniiCe a"erage cost! find the le"el of production 5here it is e6ual to
arginal cost. A little thought 5ill confir the coon sense of this rule.
A PRODUCTION $ANAGE$ENT DECISION
The 5or4 of the analyst is partly that of transforing anageent
pro2les into atheatical pro2les. 7f the analyst can disco"er or create a
atheatical structure that reasona2ly reflects the anageent decision! then he
< she is in a position to use the atheatical structure or odel to predict the
results of "arious anagerial choices. 1ne 5ay! and perhaps the only 5ay! to
2ecoe ac6uainted 5ith the art of odel 2uilding is to study soe e>aples. :et
us ta4e a soe5hat ore detailed loo4 at production 2y eans of an especially
useful odel! 5hich ay 2e used to capture soe of the cople>ity of production
anageent decisions. 7nstead of considering a plant in ters of a production
function! 5e no5 loo4 ore closely at 5hat is inside the plant.
Suppose 5e ha"e a food processing plant! and our 2usiness consists of
2uying "egeta2les fro farers! preparing the! and pac4ing the in cans of our
o5n anufacture. The plant consists of three departents: the can departent!
5hich produces the containers! the preparation departent! 5hich cleans and
61
coo4s the "egeta2les! and the pac4ing departent! 5hich fills and la2els the cans.
At the oent! farers are offering 2oth peas and toatoes! either of 5hich
could 2e processed in our plant. 1ur total cost and re"enue structure is so siple
that 5e can say each can of peas yields us a profit of +s. $.)) and each can of
toatoes yields a profit of +s. @.)). These profits are the sae no atter 5hat
le"el of production for either "egeta2le 5e decide on if 5e are planning for the
coing 5ee4! then our profit for the 5ee4 5ill 2e (in +upees).
T P oft 8 5 +! + =
5here! P is the nu2er of cans of peas 5e turn out and T is the nu2er of cans of
toatoes. At this point it ay appear that since toatoes are ore profita2le! 5e
should entirely forsa4e peas and turn out all the toatoes possi2le. Eo5e"er!
usually things are not as siple as8that. First of all! 5e disco"er that the farers in
the area 5ill ha"e a"aila2le no ore than the e6ui"alent of .)!))) cans of
toatoes and no ore than the e6ui"alent of .$!))) cans of peas. Thus our
choices of P and T are liited 2y the a"aila2ility of "egeta2les. 7t ust 2e that
P S .$!))) T S .)!)))
Ne>t! 5e note that the capacity of our departents is also liited. Suppose
2oth "egeta2les are pac4ed in the sae type of can! and the can departent has
a capacity of ')!))) cans per 5ee4. This puts another restriction on our
production progra.
P N T S ')!)))
The preparation departent! 5hich operates /) hours per 5ee4! re6uires
).))% hours to process enough peas to fill a can and ).)). hours to process a
can of toatoes. Be then ha"e a processing departent restriction that says
).))% P N ).)). T S /)
or
P N .T S /)!)))
The pac4ing departent has a capacity of $)!))) cans of either type for
the 5ee4! gi"ing
P N T S $)!)))
1ne ight go on adding restrictions and conditions to a4e the pro2le
ore and ore realistic! 2ut at this point the decision a2out a production progra
is sufficiently coplicated to suggest the difficulties that ight 2e encountered.
62
The pro2le is still siple enough so that its solution ay 2e graphically
illustrated. Any decision as to a production progra can 2e represented 2y a point
on Figure &! that is! a particular pair of "alues for P and T. By plotting the
ine6ualities 5hich e>press the restriction 5e can see e>actly ho5 our choice is
liited. Because of the liited production 2y farers our choice of P ust lie on
or 2elo5 the horiContal line P P .$!))). Siilarly! our choice of T ust lie to the
left of a "ertical line T P .)!))). The other t5o restrictions are siilarly plotted!
5ith the result that our decision is liited in fact to P and T co2inations lying in
or on the edge of the shaded area in Figure '.
Figure ' Possi2le production prograes and restrictions
The capacity of the canning departent does not need to 2e considered in
this particular decision! since the other restrictions pre"ent any possi2ility of
reaching this capacity. At the oent 5e ha"e ore capacity than necessary in
this departent.
63
LECTURE NO. 16
PLANT LAYOUT0 I$PORTANCE3 FLO: PATTERNS
I1p%r(a'.e a' F,'.(*%'
P&a'( &a"%,( re/er) (% a' %p(*1,1 arra'+e1e'( %/ *//ere'( /a.*&*(*e)
*'.&,*'+ -,1a' re)%,r.e3 p&a'( a' 1a.-*'er"3 1a(er*a& e(.. Since a layout
once ipleented .a''%( !e ea)*&" .-a'+e and costs of such a change are
su2stantial! the p&a'( &a"%,( *) a )(ra(e+*. e.*)*%'. A poor layout will result in
continuous losses in ters of higher efforts for aterial handling! ore 5aste and
re5or4! poor space utiliCation etc. Eence! need to analyCe and design a sound
plant layout can hardly 2e o"er ephasiCed. 7t is a crucial function that has to 2e
perfored 2oth at the tie of initial design of any facility! and during its gro5th!
de"elopent and di"ersification.

The pro2le of plant layout should 2e seen in relation to o"erall plant design
5hich includes any other functions such as product design! sales planning!
selection of the production process! plant siCe! plant location! 2uilding!
di"ersification etc. The layout pro2le occurs 2ecause of any de"elopents
including:
change in product design
introduction of ne5 product
o2solescence of facilities
changes in deand
ar4et changes
copetiti"e cost reduction
fre6uent accidents
adoption of ne5 safety standards
decision to 2uild a ne5 plant

Plant layout pro2le is defined !y $%%re (1F>2) as follo5s: Uplant layout is a
plan of! or the act of planning! an optiu arrangeent of facilities! including
personnel! operating e6uipent storage space! aterials handling e6uipent!
and all other supporting ser"ices! along 5ith the design of the 2est structure to
contain these facilitiesV.
64
O!Ie.(*2e) a' a2a'(a+e)
Soe of the iportant o23ecti"es of a good plant layout are as follo5s:
O2era&& )*1p&*/*.a(*%' %/ pr%,.(*%' pr%.e)) in ters of e6uipent
utiliCation! iniiCation of delays! reducing anufacturing tie! and 2etter
pro"isions for aintenance
O2era&& *'(e+ra(*%' %/ 1a'3 1a(er*a&)3 1a.-*'er"3 ),pp%r(*'+ a.(*2*(*e)
a' a'" %(-er .%')*era(*%') in a 5ay that result in the 2est
coproise.
$*'*1*8a(*%' %/ 1a(er*a& -a'&*'+ .%)( 2y suita2ly placing the facilities in
the 2est flo5 se6uence
Sa2*'+ *' /&%%r )pa.e! effecti"e space utiliCation and less congestion <
confusion!
)ncreased output and reduced in-process inventories
Better ),per2*)*%' and .%'(r%&
:%r5er .%'2e'*e'.e and 5or4er satisfaction
#e((er 7%r5*'+ e'2*r%'1e'(! safety of eployees and reduced haCards
1*'*1*8a(*%' %/ 7a)(e and -*+-er producti"ity
a"oid unnecessary capital in"estent
-*+-er /&e4*!*&*(" and aap(a!*&*(" to changing conditions

T"pe) %/ &a"%,( Pr%!&e1)
The plant layout pro2les can 2e classified into four types as follo5s:
P&a''*'+ .%1p&e(e&" ne5 facility
E4pa'*'+ %r re&%.a(*'+ an e>isting facility
Rearra'+e1e'( of e>isting layout
$*'%r 1%*/*.a(*%') in present layout
F&%7 Pa((er')
According to the principle of flo5! the layout plan arranges the 5or4 area
for each operation or process so as to ha"e an o"erall sooth flo5 through the
production < ser"ice facility. The 2asic types of flo5 patterns that are eployed in
designing the layout are 78flo5! :8flo5! 98 flo5! S8flo5 and 1 8 flo5 as sho5n in
Figure %. These are 2riefly e>plained 2elo5:
65
(a) (!)
(.)

() (e)
F*+,re-1 #a)*. ("pe) %/ /&%7 pa((er') e1p&%"e *' e)*+'*'+ (-e &a"%,(
(a) 78Flo5: separate recei"ing and shipping area.
(2) :8Flo5: 5hen straight line flo5 chart is to 2e accoodated.
(c) 98Flo5: "ery popular as a co2ination of recei"ing and dispatch
(d) S8Flo5: 5hen the production line is long and CigCagging on the production
floor is re6uired.
(e) 18Flo5 5hen it is desired to terinate the flo5 near 5here it is originated
66
LECTURE NO. 17
#ASIC TYPES OF PLANT LAYOUTS3 PRODUCT OR LINE LAYOUT3
PROCESS OR FUNCTIONAL LAYOUT3 CELLULAR OR GROUP LAYOUT3
AND FI@ED POSITION LAYOUT3 PLANT LAYOUT FACTORS3 LAYOUT
DESIGN PROCEDURE
#a)*. T"pe) %/ P&a'( La"%,()
-epending upon the focus of layout design! the 2asic types of the layouts
are:
Pr%,.( %r &*'e &a"%,(
This type of layout is de"eloped for product focused systes. 7n this type of
layout only one product! or one type of product! is produced in a gi"en area. The
5or4 centers are organiCed in the se6uence of appearance. The ra5 aterial
enters at one end of the line and goes fro one operation to another rapidly 5ith
iniu of 5or48in8process storage and aterial handling. The e6uipent is
arranged in order of their appearance in the production process.
Figure % Product or :ine :ayout
The decision to organiCe the facilities on a product or line 2asis is
dependent upon a nu2er of factors and has any conse6uences 5hich should
2e carefully 5eighed. Follo5ing conditions fa"or decision to go for a product8
focused layout.
Eigh "olue of production for ade6uate e6uipent utiliCation
67
StandardiCation of product
+easona2ly sta2le product deand
9ninterrupted supply of aterial
Soe of the 1aI%r a2a'(a+e) of this type of layout are:
+eduction in aterial handing
:ess 5or48in8process
Better utiliCation and specialiCation of la2or
+educed congestion and sooth flo5
Effecti"e super"ision and control
The 1aI%r pr%!&e1 in designing the! product8focused systes is to decide
the cycle tie and the su28di"ision of 5or4 5hich is properly 2alanced (p%p,&ar&"
5'%7' a) &*'e !a&a'.*'+)
Pr%.e)) %r /,'.(*%'a& &a"%,(

T-*) ("pe %/ &a"%,( *) e2e&%pe /%r pr%.e)) /%.,)e )")(e1). The
processing units are organiCed 2y functions into departents on the assuption
that certain s4ills and facilities are a"aila2le in each departent. S*1*&ar
e6,*p1e'( a' %pera(*%') are +r%,pe (%+e(-er. The functional layout is ore
),*(e /%r &%7-2%&,1e) %/ pr%,.(*%' (!atch production) and particularly 5hen
(-e pr%,.( *) '%( )(a'ar*8e. 7t is econoical 5hen /&e4*!*&*(" (aterial can
2e rerouted in any se6uence) is the 2asic syste re6uireent. The fle>i2ility ay
2e in ters of the routes through the syste! "olue of each product and the
processing re6uireent of the ites.
Figure . Process or Functional :ayout
68
The a3or ad"antages of a process layout are:
Better e6uipent utiliCation
Eigher fle>i2ility
0reater incenti"e to indi"idual 5or4er
;ore continuity of production in unforeseen conditions li4e 2rea4do5n!
shortages! a2senteeis etc.
Ce&&,&ar %r +r%,p &a"%,(
7t is a )pe.*a& ("pe %/ /,'.(*%'a& &a"%,( in 5hich the /a.*&*(*e) are
.&,!!e (%+e(-er *'(% .e&&). This is suita2le for systes designed to use the
concepts! principles and approach of group technology. Such a layout offers the
ad"antages of ass production 5ith high degree of fle>i2ility. Be can eploy high
degree of autoation e"en if the nu2er of products is ore 5ith fle>i2le
re6uireents. 7n such a syste the facilities are grouped into cells 5hich are a2le
to perfor siilar type of function for a group of products.
Figure ' Cellular or 0roup :ayout
A2a'(a+e) 0
A Also 4no5n as Z0roup TechnologyM
A Each cell anufactures products 2elonging to a single faily.
A Cells are autonoous anufacturing units 5hich can produce finished
parts.
A Coonly applied to achined parts.
69
A 1ften single operators super"ising CNC achines in a cell! 5ith ro2ots for
aterials handling.
A Producti"ity and 6uality a>iised. Throughput ties and 5or4 in
progress 4ept to a iniu.
A Fle>i2le.
A Suited to products in 2atches and 5here design changes often occur.
NF*4e P%)*(*%'O La"%,(
This is suita2le for producing single! large! high cost coponents or products.
Eere the product is static. :a2our! tools and e6uipent coe to the 5or4 site.
Figure / Fi>ed Position :ayout
PLANT LAYOUT FACTORS
The design of any layout is go"erned 2y a nu2er of factors and the 2est
layout is the one that optiiCes all the factors. The factors influencing any layout
are categoriCed into the follo5ing eight groups:
T-e 1a(er*a& /a.(%r0 includes design! "ariety! 6uantity! the necessary
operations! and their se6uence.
T-e 1a*' /a.(%r0 includes direct 5or4ers! super"ision and ser"ice help!
safety and anpo5er utiliCation.
T-e 1a.-*'er" /a.(%r0 includes the process! producing e6uipent and
tools and their utiliCation
T-e 1%2e1e'( /a.(%r0 includes inter and intradepartental transport and
handling at the "arious operations! storage and inspection! the aterials
handling e6uipent.
70
T-e 7a*(*'+ /a.(%r0 includes peranent and teporary storage and delays
and their locations.
T-e )er2*.e /a.(%r): include ser"ice relating to eployee facilities such as
par4ing lot! loc4er roos! toilets! 5aiting roos etc.I ser"ice relating to
aterials in ters of 6uality! production control! scheduling! dispatching!
5aste controlI and ser"ice relating to achinery such as aintenance.
T-e !,*&*'+ /a.(%r: includes outside and inside 2uilding features and
utility distri2ution and e6uipent.
T-e .-a'+e /a.(%r0 includes "ersatility! fle>i2ility and e>pansion
Each of the a2o"e entioned factors coprise a nu2er of features and
the layout engineer ust re"ie5 these in the light of his pro2le. 9sually the
layout design process is a coproise of these "arious considerations to eet
the o"erall o23ecti"es in the 2est possi2le anner.

LAYOUT DESIGN PROCEDURE
The o"erall layout design procedure can 2e considered to 2e coposed of
four phases ?iC.!
Phase 7: :ocation
Phase 77: 0eneral 1"erall :ayout
Phase 777: -etailed layout
Phase 7?: 7nstallation
Soe iportant guidelines that help in the layout design are:
Plan fro 5hole to details
First plan the ideal and then o"e to the practical aspects
;aterial re6uireents should 2e central to the planning of process and
achinery .
odify the process and achinery 2y different factors to plan the layout
Though there is al5ays an o"erlap in the different phases of layout design the
1aI%r )(ep) (-a( -a2e (% !e /%&&%7e *' (-e &a"%,( e)*+' are %,(&*'e a)
/%&&%7)0
)(a(e (-e pr%!&e1 in ters of its o23ecti"e! scope and factors to 2e
considered
71
C%&&e.( !a)*. a(a on sales forecasts! production "olues! production
schedules! part lists! operations to 2e perfored! 5or4 easureent!
e>isting layouts! 2uilding dra5ing etc.
A'a&"8e a(a and present it in the for of "arious charts
P&a' (-e pr%,.(*%' pr%.e)) and its arrangeent
P&a' (-e 1a(er*a& /&%7 pa((er' and de"elop the o"erall aterial8handling
plan
Estiate p&a'( and 1a.-*'er" re6uireents
Select aterial handling e6uipent
-eterine storage re6uireents
-esign and plan acti"ity relationships
P&a' a,4*&*ar" and ser"ice facilities including their arrangeent
De(er1*'e )pa.e re6,*re1e'() and allocate acti"ity areas
-e"elop p&%( p&a' and !&%.5 p&a' i.e. integrate all plant operations
-e"elop detailed layouts and plan 2uilding along 5ith its arrangeent
E2a&,a(e3 1%*/" a' .-e.5 the layouts
I')(a&& &a"%,() and follo5 up
The Systeatic :ayout Planning (S:P) procedure as presented 2y Francis
and Bhite (%(=/) is sho5n in Figure8$. Be see that once the appropriate
inforation is gathered! a flo5 analysis can 2e co2ined 5ith an acti"ity analysis
to de"elop the relationship diagra. Space considerations 5hen co2ined 5ith
the relationship diagra lead to the construction of the space relationship
diagra. Based on the space relationship diagra odifying considerations and
practical liitations! a nu2er of alternati"e layouts are designed and e"aluated.
Da(a .%&&e.(*%'
The de"elopent of any layout is dependent on the 6uality and 6uantity of
facts that 5e ha"e a2out the "arious factors influencing it. The data collection
phase is not a one8tie effort 2ut an ongoing function. The data for o"erall plan is
to 2e collected at initial stages 5here as the data for detailed layouts ay 2e
o2tained at a later stage! the facts ha"e to 2e o2tained regarding "arious
aterials and processes! the flo5 routing and se6uencing! space re6uireents
and different acti"ities and relationships.
72
Figure8$ Systeatic layout planning procedure
73
LECTURE NO. 18
GENERAL GUIDE LINES FOR PLANT LAYOUT3 TYPICAL CLEARANCES3
AREAS AND ALLO:ANCES3 PLANT LAYOUT3 LAYOUT OF EHUIP$ENT3
SPACE DETER$INATION
Ge'era& G,*e&*'e) 9 .%')*era(*%')
S*(e &a"%,(0
A good site layout pro"ides safe and econoical flo5 of aterials and
personnel. A 1a(er*a& )-ee( for the site is therefore prepared 5hich then allo5s
the "arious processes to 2e positioned relati"e to one another. The ser"ices (e.g.
2oiler house! effluent plant etc.) are then added in the ost con"enient positions.
The central 2uildings (adinistration! canteen! la2oratories etc.) are placed in
such a anner that the distances tra"eled 2y personnel to use the are
iniiCed. Finally the road and rail systes are ar4ed in. Typical siCes and
clearances for the site layout are gi"en in Ta!&e) 1 (% 3. Ea"ing esta2lished site
constraints and standards! a ore detailed site layout can 2e ade. The site
layout thus prepared should then 2e considered to see 5hether the layout is
consistent 5ith safety re6uireents and that it assists action in any eergency as
also the constraints and standards ha"e not 2een "iolated.
Broad guidelines for preparation of the site layout are gi"en 2elo5:
;iniiCe the distance that aterials ha"e to tra"el to or fro stores or
during processing
Separate the ra5 aterial unloading and finished product loading
facilities
7solate the haCardous operations
:ocate storage areas close to unloading and loading facilities
locate 2oiler roo! po5er station! cooling to5ers! 5ater puping station
etc. on periphery 2ut ad3acent to the area of largest use
The usual clearances 2et5een pipes including flanges and lagging and
2et5een pipes and other o23ects should 2e .$ 2ut this should 2e
increased if hot pipes run near plastic pipes! ca2les etc.
Stea and 5ater ains! electricity and telephone ca2les etc. should! in
general! run parallel to the road syste and should a"oid going through
plant area
74
:ocate office 2uilding close to the ain entrance
Pro"ide ade6uate par4ing facilities for "ehicles 5aiting to load < unload!
cars! scooters etc.
Plan roads in such a anner that the "ehicles do not pass through
process areas. 7deally! outside of a plant should 2e accessi2le on all
four sides 2y road
Bor4shop and general stores should 2e located 5ithin easy access of
the processing units.
Ta2le8% Typical Clearances 2et5een ?arious 9nits for Preliinary Site :ayouts
Area T% C&eara'.e
Plant areas
To the ad3acent unit! ain
roads or 2oundary
%$
Boilers and furnaces %$
Blo5 do5n stac4s 5ith flares ')
0as holders ')
Cooling to5ers ')
Effluent plants %$
:oading areas
To process units
%$
Bare houses ')
1ffices and canteens ')
;edical center ')
0arage ')
Fire station ')
Bor4 shops ')
;ain roads %.
;ain roads To 2uilding line e>cluding
loading 2ays
(
%$
%$
+oads
Center line to loading 2ay
head roo
=
Pa"ed areas and paths /
+ail roads $
75
Ta!&e-2 Typical Areas and SiCes for Preliinary Site :ayouts
Adinistration %)
.
per adinistration
eployee.
Bor4 shop .)
.
per 5or4shop eployee
:a2oratory .)
.
per la2oratory eployee
Canteen %
.
per dining place
'.$
.
per dining place including
4itchen and store
;edical center ).% 8 ).%$
.

%)
.
iniu
per eployee depending on
cople>ity of ser"ice
Fire station
(housing % fire! % crash! %
foa! % generator and %
security !"ehicle)
$))
.
per site
0arage (including
aintenance)
%))
.
per "ehicle
;ain roads %) 5ide
Side roads =.$ 5ide
Path5ays %.. 5ide upto %) people <inute
. 5ide for %) people < inute
(near offices! canteen etc.)
+oad turning circles ()
)
turn %% radius
T 3unction =.$ radius
inor roads / radius
;iniu railroad cur"e $& inside cur"e radius
Cooling to5ers per to5er ).)/
.
< 4Bh echanical draught
)[)@
.
< 4Bh natural draught
76
Ta2le8' Typical Constraint Allo5ances for Preliinary Plant :ayout
E6,*p1e'( Sa/e(" H%r*8%'(a& Ver(*.a& C%')(r,.(*%'9
Ere.(*%'9 Ge'era&
Centrifuges
Crushers
;ills
' . N 7 $ access corridor
-ryers %.$ N 7 . N 7 ..$ to 2uilding
Coluns %.$ ' 2et5een
ad3acent coluns
Furnaces and
fired heaters
%$ to
haCard
' . 5idths (center to
center ad3acent
heaters )
+eactors
Stirred "essels
%$ to
haCard
%.$ ' N 7 / access area /)

.
for each ') c
'
reactor "olue
Eeat e>changer
(horiContal)
%.$ N7
channel
%.$8. shell
side
%.$
Tan4s %$ to
haCard
%<. dia
(a"g.)
2et5een
tan4s
'
Pups . otor
end %.$
sides
Filters %.$ N 7
Copressors %.$ N 7 ' N 7 . 5idths (center to
center ad3acent
copressors )
7 : is the length of the longest internal part of the e6uipent that ust 2e reo"ed
for aintenance or operation.
P&a'( &a"%,(
7n general! a ost econoical plant layout is that in 5hich spacing of the
ain e6uipent ites is such that it iniiCes the interconnecting pipe 5or4 and
structural steel 5or4. As a general rule! layout should 2e as copact as possi2le
5ith all e6uipent at ground le"el and it should confor to access and safety
re6uireents. The a3or considerations are listed 2elo5:
E6uipent should 2e laid to gi"e a>iu econoy of pipe 5or4 and
supporting steel. Norally! they should 2e laid out in a se6uence to suit the
process flo5! 2ut e>ceptions to this arise fro the desira2ility to group
certain ites such as tan4s or pups or perhaps to isolate haCardous
operations.
77
7n general! high ele"ation should only 2e considered 5hen ground space is
liited or 5here gra"ity flo5 of aterials is desired.
E6uipent ites 5hich are considered to 2e a source of haCard should 2e
grouped together and 5here"er possi2le should 2e located separately fro
other areas of the plant.
Pro"ide sufficient clear space 2et5een critical and echanically dangerous
or high teperature e6uipent to allo5 safety of operating or aintenance
personnel.
The e6uipent needing fre6uent internal cleaning or replaceent of
internal parts should 2e laid out for ease of aintenance.
Ele"ation to the underside of the pipe 2ridges and rac4s o"er pa"ed areas
should 2e at least / .
La"%,( %/ e6,*p1e'(
Thought should 2e gi"en to the location of e6uipent re6uiring fre6uent
attendance 2y operating personnel and the relati"e position the control roo to
o2tain the shortest and ost direct routes for operators 5hen on route operation.
Eo5e"er! the control roo should 2e in a safe area. Soe iportant
considerations in"ol"ed in locating a fe5 4ey e6uipent ites are listed 2elo5:
;i>ing "essels can 2e laid out in a straight line! in pairs or staggered.
7n e"aporators using 2aroetric leg type condensers! 2aroetric leg
should 2e at least %) fro the "essel 2ase. This is usually situated on
the ground floor. For ultiple effect e"aporators! place the indi"idual effects
as close as possi2le to iniiCe "apor lines. ?apor li6uid separator is
accoodated 5ithout increasing the distance 2et5een effects. The layout
re6uireents for crystalliCers are siilar to those for e"aporators.
Furnaces should 2e located at least %$ a5ay fro other e6uipent.
Aple roo need to 2e pro"ided at the firing front for the operation of the
2urner and 2urner control panel.
Bhere there are a large nu2er of heat e>changers! they are often put
together in one or ore groups. :ocation should pro"ide a layout! 5hich is
con"enient to operate and aintain. EoriContal clearance of at least %.$
should 2e left 2et5een e>changers or e>changers and piping. Floating
head heat e>changers re6uire an installation length of at least ..$ ties the
78
tu2e length. Air cooled e>changers are located ad3acent to the plant section
they ser"e.
Pups in general should 2e located close to the e6uipent fro 5hich
they ta4e suction. Changes in direction of the suction line should 2e at least
).& fro the pup. As far as possi2le! clearances and piping should
pro"ide free access to one side of the otor and pup. Clearances
2et5een pups or pups and piping should 2e at least %.. for sall
pups (%@ 4B) and %.$ to . for large pups. Pups handling hot
li6uid (&) \C) should 2e at least =.$ fro pups handling "olatile li6uids.
Spa.e De(er1*'a(*%'
7n the layout planning process the space is allotted to different acti"ities.
The theoretical iniu space! a plant can occupy! is the total "olue of its
"arious coponents. ?arious constraints pre"ent the attainent of this iniu.
Such constraints include allo5ing ade6uate clearances for access during
operation and aintenance and to allo5 safe operation. Bhile deterining the
space consideration should 2e gi"en to the follo5ing.
1perating e6uipent
Storage
Ser"ice facilities
1perators<5or4ers
Allo5ance ust 2e ade for space 2et5een ad3acent e6uipent<achines
for o"eent of the 5or4er! 5or48in8process! aintenance personnel etc.
79
LECTURE NO. 1
SY$#OLS USED FOR FOOD PLANT DESIGN AND LAYOUT0
INTRODUCTION3 VALVES3 LINE SY$#OLS3 FLUID HANDLING3 HEAT
TRANSFER3 $ASS TRANSFER
S"1!%&) U)e F%r F%% P&a'( De)*+' a' La"%,(
Process diagras can 2e 2ro4en do5n into t5o a3or categories: process
/&%7 *a+ra1) (PF-s) and pr%.e)) a' *')(r,1e'( ra7*'+) (P P ID))3
soeties called piping and instruentation dra5ings. A flo5 diagra is a siple
illustration that uses process sy2ols to descri2e the priary flo5 path through a
unit. A process flo5 diagra pro"ides a 6uic4 snapshot of the operating unit. Flo5
diagras include all priary e6uipent and flo5s.
A technician can use process design docuent to trace the priary flo5 of
food aterials through the unit. The flo5 diagra is used for "isitor inforation
and ne5 eployee training. A process and instruent dra5ing is ore cople>.
The PD7- includes a graphic representation of the e6uipent! piping! and
instruentation. ;odern process control can 2e clearly inserted into the dra5ing
to pro"ide a process technician 5ith a coplete picture of electronic and
instruent systes. Process operators can loo4 at their process and see ho5 the
engineering departent has autoated the unit. Pressure! teperature! flo5! and
le"el control loops are all included on the unit PD7-. Process technicians use
PD7-s to identify all of the e6uipent! instruents! and piping found in their units.
F*+. Va&2e)
80
F*+. L*'e S"1!%&)
FLUID HANDLING
F*+. F&,* Ha'&*'+
81
Hea( Tra')/er
82
F*+. Hea( Tra')/er
$ASS TRANSFER
83
F*+. $a)) Tra')/er
84
LECTURE NO. 2!
SY$#OLS USED FOR FOOD PLANT DESIGN AND LAYOUT0 STORAGE
VESSELS3 CONVEYORS AND FEEDERS3 SEPARATORS3 $I@ING AND
CO$$UNITION AND PROCESS CONTROL AND INSTRU$ENTATION
SY$#OLS.
STORAGE VESSELS
85
F*+. S(%ra+e Ve))e&)
86
CONVEYORS AND FEEDERS
F*+. C%'2e"%r) a' Feeer)
87
SEPARATORS
88
F*+. Separa(%r)
89
$I@ING AND CO$$UNITION
F*+. $*4*'+ a' .%11,'*(*%'
90
DRIVERS
F*+. Dr*2er)
91
PROCESS CONTROL AND INSTRU$ENTATION SY$#OLS
Fig. Process control and 7nstruentation Sy2ols
92
LECTURE NO. 21
E@PERI$ENTATION IN PILOT LAYOUT0 SIJE AND STRUCTURE OF THE
PILOT PLANT3 $INI$U$ AND $A@I$U$ SIJE3 TYPES AND APPLICATIONS
E4per*1e'(a(*%' *' P*&%( P&a'(
The pilot plant is a physical odel and should 2e a UcopyV of the
corresponding industrial unit! 5ith e6uipent scaled do5n in siCe to appro>iately
%<%)) # %<%) of the odeled unit.
Pilot plant e>perients ser"e to o2tain ore inforation and data in the
follo5ing areas:
1. Market sure!0 A deterined ne5 product aount can 2e produced in the pilot
plant! to test its acceptance and to decide 5hether it 5ould 2e econoically
profita2le.
2. Desi"n data: The 2eha"ior of a gi"en operation or unit process can 2e found
under conditions ipossi2le to duplicate in the la2oratory.
3. #roducts and ra$ materials0 A pilot plant is usually needed to characteriCe
food products and to e"aluate the de"elopent of certain ra5 aterials into
specific products.
<. %ptimi&ation data of a runnin" plant.
SIJE AND STRUCTURE OF THE PILOT PLANT
#a)*. Pr*'.*p&e) %/ S.a&*'+
The ost iportant criterion in deterining the siCe and for of a pilot
plant is the principle of siilarity! a principle first forulated 2y Ne5ton.
7f! fluids are handled in the pilot plant! three types of siilarities in"ol"ed in
fluid dynaics ust 2e included:
1> 'eometric similarit!. Both the pilot plant and food processing plant
should ha"e the sae physical for or at least the sae geoetric
diension relationships.
.. (inematic similarit!. The sae "elocity relationships should e>ist in 2oth
the pilot and food processing plants.
'. D!namic similarit!: 7n 2oth the pilot and food processing plants! the sae
force relationships should e>ist. For e>aple! the tur2ulence regie should 2e
siilar on 2oth scales 5hen fluids are handled.
93
7f the process siulated in a pilot plant in"ol"es cheical the follo5ing
siilarities apply:
1> %hermal similarity.
2> *hemical and !iochemical similarity.
$*'*1,1 a' $a4*1,1 S*8e
Se"eral factors can affect the siCe of a pilot plant. 7n general! the *'*1,1
)*8e is set 2y the iniu product aount re6uired for 6uality analytical control.
The 1a4*1,1 )*8e of the pilot plant is set 2y the aount of processed
product needed in order to test ar4et acceptance.
T"pe) a' App&*.a(*%')
Bhen product production in aounts large enough to conduct ar4et
acceptance tests is re6uired! the pilot plant is called a sei8coercial plant.
App&*.a(*%')
The ost coon applications of a pilot plant are as follo5s:
%. Product studies
] Auality characteriCation
] 7nfluence of process conditions on product 6uality
] -e"elopent of ne5 products
] Studies of ar4et acceptance
.. +a5 aterial studies
] +a5 aterial characteriCation
] E"aluation of aptitude for industrialiCation of different ra5 aterials
'. Process technology and engineering studies
] Setting the ost suita2le process conditions fro an econoic
point of "ie5 (cost iniiCation) and a product 6uality point of "ie5
(to o2tain a product of gi"en 6uality). Process technology is
optiiCed.
] Study of process e6uipent alternati"es to carry out gi"en food
processing steps or unit operations.
] -e"elopent of ne5 process technology.
] -e"elopent of ne5 process engineering or process e6uipent.
/. Au>iliary syste re6uireent studies
] +elia2le e"aluation of ass and energy 2alances and food
physical properties
] Study of energy reco"ery possi2ilities in process systes
] 7pro"eent and e"aluation of alternati"es for control systes
94
LECTURE NO. 22
ENGINEERING ECONO$Y 0 INTRODUCTION3 TER$S0 TI$E VALUE OF
$ONEY3 INFLATION3 INTEREST3 INTEREST RATE3 CO$POUND INTEREST3
RATE OF RETURN3 PAY$ENT3 RECEIPT 3 CASH FLO:3 PRESENT VALUE3
EHUIVALENCE3 SUN; COSTS3 OPPORTUNITY COSTS3 ASSET3 LIFE OF AN
ASSET3 DEPRECIATION3 #OO; VALUE OF AN ASSET3 SALVAGE VALUE3
RETIRE$ENT3 REPLACE$ENT3 DEFENDER AND CHALLENGER.
I'(r%,.(*%'
Engineering Econoy is the study of 6uantitati"e techni6ues
for the e"aluation of engineering alternati"es 2ased upon financial criteria.
7n production systes engineering! econoic choices are re6uired 5hen
(a) phasing8in of ne5 products and ser"ices! and phasing8out of e>isting
products and ser"ices!
(! a4ing a choice 2et5een alternati"e production technologies!
(c) choosing plant location and layout! and
(d) 5hen deciding a2out the 6uestions of e6uipent replaceent etc.
I1p%r(a'( (er1) %/ E'+*'eer*'+ E.%'%1"
(*) T*1e Va&,e %/ $%'e"0 Tie "alue of oney is defined as the tie
dependent "alue of oney steing 2oth fro changes in the purchasing po5er
of oney (inflation or deflation) and fro the real earning potential of alternati"e
in"estents o"er tie.
The follo5ing are reasons 5hy +s.%))) today is U5orthV 1%re (-a'
+s.%))) one year fro today.
%. 7nflation! .. +is4! and '. Cost of oney
(ii) I'/&a(*%'0 7t is the decrease in the purchasing po5er of a gi"en su of oney
5ith tie due to cople> national and international econoic factors.
(iii) I'(ere)(: 7t is the oney paid for the use of 2orro5ed oney. A production
concern 2orro5s oney fro indi"iduals! coercial 2an4s! insurance
copanies and go"ernent! and pays interest on the 2orro5ed oney.
(i) I'(ere)( Ra(e0 7t is the ratio of the aount of interest paid at the end of a
period or tie! usually one year! to the su of oney 2orro5ed at the 2eginning
95
of that period. The su 2orro5ed is called the Principal. The interest rate is
usually e>pressed as i percent per annu.
(2) C%1p%,' I'(ere)(: 7f a su of oney is 2orro5ed for ore than one period
of tie! then in copound interest! the aount of interest paya2le at the end of
any gi"en period of tie is calculated on the total aount paya2le at the
2eginning of that period of tie. 7n 2usiness! copound interest only is charged.
(2*) Ra(e %/ Re(,r'0 7f a production concern in"ests an aount of oney in
setting up production facilities! then the ra(*% of the 'e( pr%/*( ear'e 2y the
copany a( (-e e' %/ a per*% %/ (*1e to (-e ),1 *'2e)(e is called the +ate
of +eturn on in"estent.
(ii) A((ra.(*2e Ra(e %/ Re(,r'. This is the iniu rate of return 5hich is used
as a criterion 2y 5hich a concern e"aluates alternati"e in"estent proposals. An
alternati"e 5hose e>pected rate of return is less than the attracti"e rate of return
is re3ected.
(iii) Pa"1e'(0 ,no5n also as cost! outlay! e>penditure or dis2urseent!
payent is any su paid 2y a production concern for 2uying aterials! paying
5ages etc.
(ix) Re.e*p( ())0 ,no5n also as return! incoe! profit or re"enue! re.e*p( *) a'"
),1 re.e*2e !" a pr%,.(*%' .%'.er' /r%1 sales of products and ser"ices
etc.
(x) Ca)- /&%70 7t is the series of actual or estiated pa"1e'() and re.e*p() of a
production concern o"er a period of tie. The cash flo5 can 2e represented in
the for of a cash flo5 diagra as sho5n in Figure %.
Figure % A typical Cash8flo5 diagra
96
(xi) S,'5 .%)(): Engineering econoic analysis is concerned 5ith a4ing
choices 2et5een engineering alternati"es. For this purpose all past payents or
receipts (called Sun4 Costs) L.%'.er'*'+ (-e a&(er'a(*2e) are *rre&e2a'(! and
are therefore ignored. (sun4 P done for)
(xii) Opp%r(,'*(" C%)(): 7f a copany in"ests certain su of oney into a
certain "enture (or proposal) 5ith an eleent of ris4! that su is no longer
a"aila2le for in"esting in any other alternati"e "enture. T-e pr%/*() %r re(,r')
&%)( a) a re),&( %/ '%( *'2e)(*'+ *' a par(*.,&ar a&(er'a(*2e *) .a&&e (-e
Opp%r(,'*(" C%)(.
(xiii) A))e(: An asset of a production concern is a "alua2le li4e land! 2uilding!
achine! aterial etc. o5ned 2y the concern.
(xi) L*/e %/ a' A))e(: The life of an asset can 2e considered in three 5ays!
(a) A.(,a& %r Te.-'%&%+*.a& L*/e of an asset is the duration during 5hich it can
fulfill its re6uired functions. 7t is deterined fro technological considerations. (!)
A..%,'(*'+ L*/e %/ a' a))e( is the duration during 5hich the in"estent ade
in ac6uiring the asset is to 2e reco"ered fro gross profits in the for of
depreciation.
(c) E.%'%1*. &*/e of an asset is the duration during 5hich an asset perfors its
technological function econoically. The asset is actually used 2y the production
concern during its econoic life only.
(x) Depre.*a(*%': A copany in"ests in assets e>pecting to earn profits 2y
a4ing use of those assets. Eo5e"er! net profits 5ould accrue only after the
in"estent ade in ac6uiring the assets is reco"ered. -epreciation is systeatic
procedure of reco"ering e"ery year a portion of in"estent ade on an asset
during its accounting life. 7ncoe ta> during a year is chargea2le only on the net
profit o2tained 2y deducting the aount of depreciation fro gross profits.
(xi) #%%5 Va&,e %/ a' A))e(0 At any tie during the accounting life of an
asset! its 2oo4 "alue is e6ual to its cost price inus the total aount of
depreciation charged on it 2y that tie.
(xii) Sa&2a+e Va&,e: 7t is the actual or estiated "alue of an e>isting asset at
5hich it can 2e sold no5 or at a certain date in the future.
97
(xx) Re(*re1e'(0 7t is the disposal of an e>isting asset through sales or
a2andonent as scrap.
(xiii) Rep&a.e1e'(0 7t eans ac6uiring a ne5 asset through purchase or lease
to perfor the sae or e>tended ser"ice 5hich had so far 2een perfored 2y
another asset 5hich has 2een retired.
(xix) De/e'er a' C-a&&e'+er0 Bhen an econoic analysis
is ade to decide 5hether or not to replace an e>isting asset 5ith another! the
e>isting asset is referred to as the -efender and the proposed replaceent as the
Challenger.
98
LECTURE NO. 23
$ETHODS OF ECONO$IC EVALUATION OF ENGINEERING ALTERNATIVES
1. UNDISCOUNTED CASH FLO: $ETHODS -PAY #AC; PERIOD $ETHOD
2. DISCOUNTED CASH FLO: $ETHODS
A) NET PRESENT VALUE $ETHOD
#) EHUIVALENT ANNUAL $ETHOD
C) RATE OF RETURN $ETHOD
3. COST- #ENEFIT ANALYSIS3 SOCIAL COSTS3 SOCIAL #ENEFITS
$e(-%) %/ E.%'%1*. E2a&,a(*%' %/ E'+*'eer*'+ A&(er'a(*2e)
There are 2asically t5o 4inds of ethods of econoic e"aluation of
engineering alternati"es!
%. 9ndiscounted Cash Flo5 ;ethods and
.. -iscounted Cash Flo5 ;ethods.
1. U'*).%,'(e Ca)- F&%7 $e(-%)0 7n such ethods future payents and
receipts are not discounted. 7n other 5ords: the discount rate is considered as
Cero. Because in ost 2usiness 5orld! interest is charged! these ethods ust
2e considered only as appro>iate and rough. Eo5e"er! 2ecause of their
siplicity they are often used as a first screening of alternati"es 2efore applying
the discounted cash flo5 ethods. The ost popular undiscounted
cash8flo5 ethod is the Pa"-!a.5 Per*% 1e(-%.
Pa"-!a.5 Per*% $e(-%. 7n this ethod! the tie period during 5hich the
undiscounted future profits 5ill 3ust e6ual the original in"estent is calculated.
That alternati"e is considered to 2e the 2est corresponding to 5hich the pay2ac4
period is the sallest.
2. D*).%,'(e Ca)- F&%7 $e(-%). 7n these ethods! future payents and
receipts are discounted. 7n other 5ords these ethods ta4e into account the tie
"alue of oney. There are three ethods 2elonging to this category. Eo5e"er! all
the three ethods are e6ui"alent and pro"ide identical e"aluation if in"estents in
the "arious alternati"es under consideration are e6ual.
"A# Ne( Pre)e'( Va&,e $e(-% : This is also 4no5n as the Net Present Borth
ethod. 7n this ethod! 5e find the net present 5orth ("alue) of all estiated
receipts and payents associated 5ith a gi"en alternati"e using a discount rate
e6ual to 5hat the copany considers an attracti"e rate of return. 7f the net present
99
"alue of an alternati"e is positi"e! it eans that the li4ely rate of return o2taina2le
fro the gi"en alternati"e is greater than the attracti"e rate of return or vice-versa$
That alternati"e is considered the 2est 5hose net present "alue is a&+e!ra*.a&&"
(-e
1a4*1,1.
(#) E6,*2a&e'( A'',a& C%)( $e(-%0 7n this ethod! the e6ui"alent annual cost
of each alternati"e cash flo5 is calculated. The e6ui"alent annual cost of a gi"en
cash flo5 is that unifor series of end8of8year payents 5hose net present "alue
is e6ual to the net present "alue of all the payents (and receipts) of the gi"en
ash flo5! using a gi"en attracti"e rate of return. That alternati"e is considered as
the 2est 5hose e6ui"alent annual cost is the sallest.
(C) Ra(e %/ Re(,r' $e(-%0 7n this ethod! the e>pected rates of return of the
"arious alternati"es are calculated. That alternati"e is the 2est 5hose e>pected
rate of return is the largest. To find the rate of return! it is usual to adopt a trial and
error procedure. 7n this procedure! the net present "alue of the gi"en alternati"e is
calculated using a particular assued "alue of discount rate. 7f the net present
"alue is positi"e! it eans that the e>pected rate of return is larger than the
assued discount rate! and vice-versa$ Accordingly in the ne>t trial! a larger
discount rate is used if the pre"ious net present "alue 5as positi"e! and vice-
versa$ The procedure is terinated 5hen the net present "alue is sufficiently
sall.
C%)(-#e'e/*( A'a&")*)
This is eployed for calculating feasi2ility of engineering alternati"es of large
go"ernent pro3ects! for e>aple! setting up ne5 steel plants! airports! nuclear or
theral po5er stations etc. 7n such pro3ects! it is necessary to consider social
instead of purely financial criteria. -uring cost82enefit analysis! that alternati"e is
selected 5hich is e>pected either
(a) to result in the largest net social 2enefit 2ased on a gi"en social rate of
return (usually sall) 5hich is gi"en 2y
Net social 2enefit P
Present 5orth of all social 2enefits 8 Present 5orth of all social costs
100
or (!) to pro"ide the largest rate of return considering the "alue
of all social 2enefits and all social costs.
S%.*a& C%)()0 They include not only the cost of direct in"estents ade 2y the
go"ernent 2ut also costs incurred 2y e"ery affected e2er of the counity.
For e>aple! if there are specific alternati"e sites 2eing e"aluated for setting up a
steel plant! not only the costs of land! 2uildings! e6uipent! roads and rail5ay
lines are rele"ant! 2ut also the cost of displaceent! reha2ilitation and hardship of
failies 5hose hoes and fars ha"e to 2e re6uisitioned! and costs of ecological
deterioration caused 2y large scale huan encroachent88for e>aple! loss of
5ild life and picnic spots etc.
S%.*a& #e'e/*(): The 2enefits include not only the re"enues accruing to the
go"ernent 2ut also to all direct and indirect 2eneficiaries in the counity as a
5hole. For e>aple! the 2enefits of a steel plant include not only the incoe fro
sales of steel and steel products! 2ut also increased eployent to the
local counity! gro5th of ancillary industry! ipro"eent of rail! road and
counications! and oderniCation of the counity etc.
Pr%.e,re0
(i) 7dentify the "arious pro3ect alternati"es. Then for each proposal! carry out the
follo5ing steps.
(ii) 7dentify all categories of rele"ant social 2enefits and social costs 5hich ay 2e
e>pected to result fro the proposal. 7deally the costs and 2enefits should 2e all
inclusi"e! i$e$ e"ery possi2le cost and 2enefit should 2e found for e"ery possi2le
e2er of the counity. Eo5e"er! practica2ility liits the nu2ers of persons
considered.
(iii) E"aluate each ite of cost and 2enefit on a coon scale! usually oney.
The estiates of costs and 2enefits should 2e prepared for each year of the
pro3ectMs econoic life.
(iv) Prepare a cash flow diagra 2ased on the a2o"e estiates and calculate the
net social 2enefit using a social rate of return! or prefera2ly the e>pected rate of
return.
(v) The alternati"e that yields the largest net social 2enefit or the largest e>pected
rate of return is the 2est.
101
102
LECTURE NO. 24
PROCESS SCHEDULING
S.-e,&*'+ is an iportant tool for anufacturing and engineering! 5here
it can ha"e a a3or ipact on the producti"ity of a process. 7n anufacturing! the
purpose of scheduling is to iniiCe the production tie and costs! 2y telling a
production facility 5hen to a4e! 5ith 5hich staff! and on 5hich e6uipent.
Production scheduling ais to a>iiCe the efficiency of the operation and
reduce costs.
Production scheduling tools greatly outperfor older anual scheduling
ethods.
Copanies use 2ac45ard and for5ard scheduling to allocate plant and
achinery resources! plan huan resources! plan production processes and
purchase aterials.
For5ard scheduling is planning the tas4s fro the date resources 2ecoe
a"aila2le to deterine the shipping date or the due date.
Bac45ard scheduling is planning the tas4s fro the due date or re6uired8
2y date to deterine the start date and<or any changes in capacity re6uired.
The 2enefits of production scheduling include:
Process change8o"er reduction
7n"entory reduction! le"eling
+educed scheduling effort
7ncreased production efficiency
:a2or load le"eling
Accurate deli"ery date 6uotes
+eal tie inforation
Pr%,.(*2*("
Producti"ity is the relation 2et5een 6uantity of inputs and 6uantity of
output.
103
I'p,()
7nputs are plant! la2or! aterials! tooling! energy and a clean en"ironent.
O,(p,()
1utputs are the products produced in factories either for other factories or
for the end 2uyer. The e>tent to 5hich any one product is produced 5ithin any one
factory is go"erned 2y transaction cost.
:*(-*' (-e /a.(%r"
The output of any one 5or4 area 5ithin the factory is an input to the ne>t
5or4 area in that factory according to the anufacturing process. For e>aple the
output of the cutting roo is an input to the se5ing roo.
F%r (-e 'e4( /a.(%r"
By 5ay of e>aple! the output of a paper ill is an input to a print factory.
The output of a petrocheicals plant is an input to an asphalt plant! a cosetics
factory and a plastics factory.
F%r (-e e' !,"er
Factory output goes to the consuer "ia a ser"ice 2usiness such as a
retailer or an asphalt pa"ing copany.
Re)%,r.e a&&%.a(*%'
+esource allocation is assigning inputs to produce output. The ai is to
a>iiCe output 5ith gi"en inputs or to iniiCe 6uantity of inputs to produce
re6uired output.
S.-e,&*'+ A&+%r*(-1)
Production scheduling can ta4e a significant aount of coputing po5er if
there are a large nu2er of tas4s. Therefore a range of short8cut algoriths
(-e,r*)(*.)) (also 4no5n as *)pa(.-*'+ rules) are used:
S(%.-a)(*. A&+%r*(-1)
Econoic :ot Scheduling Pro2le
Econoic production 6uantity
104
He,r*)(*. A&+%r*(-1)
;odified due date scheduling heuristic
Shifting 2ottlenec4 heuristic
105
LECTURE NO. 25
LINEAR PROGRA$$ING0 INTRODUCTION3 SALIENT FEATURES OF LINEAR
PROGRA$$ING (TER$INOLOGY)
De/*'*(*%' %/ Opera(*%') Re)ear.-
The 1perational +esearch Society of 7ndia:
1perations +esearch is the attac4 of odern science on cople> pro2les
arising in the direction and anageent of large systes of en! achines!
aterials and oney in industry! 2usiness! go"ernent and defense.
A classical definition of 1perations +esearch (Ac4off and Arnoff):
1perations +esearch is the application of scientific ethods! techni6ues
and tools to pro2les in"ol"ing the operations of systes so as to pro"ide those
in control of the syste 5ith optiu solutions to the pro2leJ.
C-ara.(er*)(*.) %r S*+'*/*.a'( Fea(,re) %/ Opera(*%') Re)ear.-
The significant features of operations research can 2e stated as:
+. -ecision ;a4ing Tool
.. Scientific Approach.
'. 7nter8disciplinary Tea Approach
/. Syste Approach
$. 1perations +esearch largely depends on -igital Coputer.
&. 123ecti"e.
$ODELS IN OPERATIONS RESEARCH
1perations research e>presses a pro2le 2y a odel: A odel is a
theoretical a2straction (appro>iation) of a real8life pro2le. 7t can also 2e
defined as a siplified representation of an operations or a process in 5hich only
the 2asic aspects or the ost iportant features of a typical pro2le under
in"estigation are considered. The o23ect of the odels is to pro"ide eans for
analyCing the 2eha"ior of the syste for the purpose of ipro"ing its
perforance.
TECHNIHUES USED IN OPERATIONS RESEARCH
+$ ,inear Programming$ 7t is used in the solution of pro2les concerned 5ith
assignent of personnel! 2lending of aterials! transportation and distri2ution!
facility planning! edia selection! product i> etc.
106
-$ .ynamic Programming$
/$ 0ueueing %heory$ 7t is used in sol"ing pro2les concerned 5ith traffic
congestion!
ser"icing achines su23ect to 2rea4do5n! air traffic scheduling! production
scheduling! deterining optiu nu2er of repairent for a group of achines.
1$ )nventory theory
2$ *P3 and P45% %echni#ues$
6$ 7ame %heory (*ompetitive 3odels)$
8$ 5eplacement 3odels$
9$ :e#uencing 3odels
;$ .ecision <nalysis 3odels$
+=$ :imulation$
INTRODUCTION (% L*'ear Pr%+ra11*'+
:inear prograing is one of the operations research techni6ues. 7t has its
early use for ilitary applications 2ut it is eployed 5idely for 2usiness pro2les.
Definition:
:inear prograing is a atheatical techni6ue for the purpose of
allocating the liited resources in an optiu anner (i$e$, either a>iu or
iniu) to achie"e the o23ecti"es of the 2usiness! 5hich ay 2e a>iu
o"erall profit or iniu o"erall cost. The 5ord JlinearJ eans that the
relationships handled are those 5hich can 2e represented 2y straight lines! i$e$,
the relationships are of the for y P a> N ! and the 5ord JprograingJ eans
Jta4ing decisions systeaticallyJ.
7n other 5ords! linear prograing is the optiiCation (either a>iiCation
or
iniiCation) of a linear function of "aria2les su23ect to constraint of linear
ine6ualities.
Thus! linear prograing in"ol"es the planning of acti"ities to o2tain an
JoptialJ result i$e$, a result that reaches the specified goal 2est (according to the
atheatical odel) aong all feasi2le alternati"es.
(i) 7t attepts to a>iiCe .or iniiCe a linear function of decision
"aria2les.
107
(ii) The "alues of the decision "aria2les are selected in such a 5ay that they
satisfy a set of constraints! 5hich are in the for of linear ine6uality.
SALIENT FEATURES OF LINEAR PROGRA$$ING (TER$INOLOGY)
:inear prograing is 2ased on the follo5ing 2asic concepts:
)* Decision Variables (+ctiities)* -ecision "aria2les are the "aria2les 5hose
6uantitati"e "alues are to 2e found fro the solution of the odel so as to
iniiCe or a>iiCe the o23ecti"e function. For e>aple! decision "aria2les in a
product i> anufacturing! represents the 6uantities of the different products to
2e anufactured 2y using its liited resources! such as en! achines!
aterials! oney etc. The decision "aria2les are usually denoted 2y
+
! >
.
!
^^!
n
$
,* %b-ectie Functions* 7t states the deterinants of the 6uantity either to 2e
a>iiCed or to 2e iniiCed. For instance! profit is a function to 2e a>iiCed
or cost is a function to 2e iniiCed. An o23ecti"e function ust include all the
possi2ilities 5ith profit or cost coefficient per unit of output. For e>aple! for a fir
5hich produces four different products <, B! C and - in
6uantities A
%
! 0
-
, A
'
and A
/
respecti"ely! the o23ecti"e function can 2e stated as
:
;iniise C P A
7
C
7
N A
.
C
.
N A
'
C
'
N A
/
*
1
,
5here C is the total cost of production! and C
%
! C
.
! C' and C
/
are unit costs of
products <, >, C and - respecti"ely.
.* Constraints (/ne0ualities)* These are the restrictions iposed on decision
"aria2les. These ay 2e in ters of a"aila2ility of ra5 aterials! achine hours!
an hours etc. Suppose each of the a2o"e ites <, B! C and - re6uires t
l
, t
-
, t
/
and t
1
achine hours respecti"ely. The total achine hours are T hours! and this
is a constraint.
Therefore it can 2e e>pressed as:
A
%
t
+
N A
.
t
-
N A
'
t
/
N A
/
t
1

%
1* 2on32e"atie Condition* The linear prograing odel essentially see4s
that the "alues for each "aria2le can either 2e Cero or positi"e. 7n no case it can
2e negati"e. For the products <, >, C and . the non8negati"e conditions can 2e :
A
%
) t
% )
A
. ) t
. )
A
'
) and also t
' )
A
/
) t
/ )
108
This iplies that 6uantity produced can 2e at the ost Cero and not 2elo5
that. Siilarly! the achine hours e>pended for each unit <, >, C and . can 2e at
the ost Cero and in no case it can 2e negati"e.
4* 5inear 6elations7ip* 7t iplies straight line or proportional relationship aong
the
rele"ant "aria2les. 7t eans change in one "aria2le produces proportionate
change in other "aria2les.
8* #rocess and its 5eel* Process represents to produce a particular output. 7f a
product can 2e produced in t5o different 5ays! then there are t5o different
processes or decision "aria2les for the purpose of linear prograing.
9* Feasible :olution* All such solutions 5hich can 2e 5or4ed out under gi"en
constraints are called Jfeasi2le solutionsJ and region coprising such solution is
called the Jfeasi2le regionJ.
;* %ptimum :olution* 1ptiu eans either a>iu or iniu. The o23ect
of
o2taining the feasi2le optiu solution ay 2e a>iiCation of profit or
iniiCation of cost. 1ptiu solution is the 2est of all feasi2le solutions.
109
LECTURE NO. 26
FOR$ULATION OF LINEAR PROGRA$$ING $ODEL3 ADVANTAGES3
LI$ITATIONS AND APPLICATIONS OF LINEAR PROGRA$$ING3 SOLUTION
OF LINEAR PROGRA$$ING PRO#LE$S.
F%r1,&a(*%' %/ LP $%e&. Forulation of :P odel refers to translating a
pro2le into a forat of atheatical e6uation.
A)),1p(*%') *' L*'ear Pr%+ra11*'+
(i) There is a 5ell defined o23ecti"e function such as a>iiCing profit or
iniiCing cost.
(ii) There are a nu2er of restrictions or constraints (on the aount and e>tent of
a"aila2le resources for satisfying the o23ecti"e function) 5hich can 2e e>pressed
in
6uantitati"e ters. These ay refer to an8hours! achine hours! ra5 aterials!
storage space! capital etc.
(iii) The paraeters are su23ect to "ariation in agnitude.
(iv)The relationship e>pressed 2y constraints and the o23ecti"e function are linear.
(v) The o23ecti"e function is to 2e optiiCed 5.r.t. the decision "aria2les in"ol"ed
in the phenoenon. The decision "aria2les are non8negati"e and represent
real life situation.
A2a'(a+e)3 L*1*(a(*%') a' App&*.a(*%') %/ L*'ear Pr%+ra11*'+
A2a'(a+e)0
(i) :inear prograing helps the anageent to a4e effecti"e utiliCation of
liited
production resources.
(ii) :inear prograing ipro"es the 6uality of decision a4ing 2y replacing
rules of thu2.
(iii) 7t pro"ides feasi2ility in analyCing a "ariety of ulti8diensional pro2les.
(iv) 7t highlights the 2ottlenec4s in the production processes.
(v) 7t helps in re8e"aluation of the 2asic plan to eet changing conditions in the
2usiness (e$g$, sales! deand etc.).
110
L*1*(a(*%')0
(i) The assuptions that all relations are linear ay not hold good in any real
situations.
(ii) 7n linear prograing all coefficients and constraints are stated 5ith certainty.
(iii) The solution any ties is in fractions 5hich ay not reain optial 5hen
rounded8off. .
(iv) Bhen the nu2er of "aria2les or constraints in"ol"ed are 6uite large then it 2e
co necessary to use coputers.
(v) 7t deals 5ith only a single o23ecti"e pro2les! 5hereas in real life situations
there
ay 2e ore than one conflicting o23ecti"es.
App&*.a(*%')0 Soe of the applications of linear prograing in industry!
2usiness! and other fields are as follo5s:
1> #roduct Mix$ A copany can produce se"eral different products! each of
5hich
re6uires the use of liited resources. :inear prograing helps to deterine
the
6uantity of each product to 2e anufactured in order to a>iiCe profit.
2> #roduction #lannin"$ :inear prograing helps in production planning
(in"entory control! anpo5er! e6uipent selection! etc.) in order to iniiCe
total operations costs.
3> +ssembl! line <alancin"* :inear prograing techni6ues help to iniiCe.
tot
elapse tie in asse2ly process.
4> <lendin" #roblem* Bhen a product can 2e ade fro a "ariety of a"aila2le
ra5
aterials! each of 5hich has a particular coposition and price! linear
prograing techni6ue is used to deterine iniu cost 2lend.
5> Media :election$ :inear prograing helps in deterining the ad"ertising
edia
i> so as to a>iiCe the effecti"e e>posure at iniu cost.
6> %raveling :alesman Pro!lem
7> Physical .istri!ution$ 7t helps in selecting ost econoical and effecti"e
location for the anufacturing plant and distri2ution centers.
111
8> :taffing Pro!lem$ :inear prograing helps to allocate optiu anpo5er to
a
particular 3o2 so as to iniiCe total o"er tie cost and total anpo5er.
9> ?o! 4valuation and :election$ Selection of suita2le person for a specified 3o2
and
e"aluation of 3o2 in organiCation has 2een done 5ith the help of linear
prograing.
10> <griculture$ To allocate liited resources such as land! la2our! 5ater supply and
5or4ing capital etc. in the 5ay so as to ipro"e producti"ity.
11> 3ilitary$ ;ilitary applications include the pro2le of selecting an effecti"e air
5eapon 8syste against eney.
12> 5outing Pro!lem$ To deterine the ost econoic pattern and tiings for
flights so as to a4e the ost efficient use of aircraft and cre5s.
:olution of 5inear #ro"rammin" #roblems
,inear Programming Pro!lems can !e solved !y following methods:
+$ 7raphical method
-$ simple method
/$ %ransportation method
1$ <ssignment models
The graphical ethod can 2e used only for t5o or three "aria2lesI 5here
as the other ethods can 2e used for any nu2er of "aria2les.
I&&,)(ra(*2e Pr%!&e1) %' F%r1,&a(*%' %/ L*'ear Pr%+ra11*'+ $%e&
E4a1p&e0 The anager of an oil refinery ust decide on the optial i> of t5o
possi2le 2lending processes of 5hich the input and output per production run are
gi"en as follo5s:
Process )nput (units) @utput
*rude < *rude B 7asoline _ 7asoline *
% $ ' $ @
. / $ / /
%he maimum amount availa!le of crude < and > are -== units and +2=
units, respectively$ 3ar&et re#uirements show that at least +== units of gasoline _
and @) units of gasoline * must !e produced$ Aormulate this pro!lem as an linear
112
programming model to maimize profit$ %he profit per production run
from process % and process . are 5s$ /== and 5s$ 1==, respectively$
L*'ear Pr%+ra11*'+ $%e& F%r1,&a(*%'0
:et!
-ecision "aria2les
>
%
P nu2er of units of 0asoline fro process %

-
P nu2er of units of 0asoline fro process .
@!"ective function, ;a>iiCe C P')) >
%
N /))
-

:u!"ect to constraints:
2
+
N 1
-

.))
/
+
N 2
-
%$)
2
+
N 1
-
%))
9
+
N 1
- @)

) and
.

)
113
LECTURE NO. 27
HUEUING THEORY0 INTRODUCTION3 ELE$ENTS OF HUEUING SYSTE$3 1)
INPUT SOURCE3 2) HUEUE
H,e,*'+ T-e%r" (:a*(*'+ L*'e))
INTRODUCTION
The foration of 6ueues or 5aiting lines is a ost coon phenoenon in
our e"ery day life. 7t occurs 5here the current deand e>ceeds the current
capacity to pro"ide that ser"ice.
Aueues are also fored e"en 5hen the ser"ice rate is higher than the arri"al
rate due to ra'%1 pa((er' %/ arr*2a& %/ .,)(%1er). The e>aples of the places
5here the 6ueues ay 2e fored are 2ar2erLs shop! ration shop! cinea tic4et
5indo5! 2us stop! 2an4 counters! rail5ay reser"ation counters! telephone 2ooth!
doctorMs clinic! repair shops! autoo2ile ser"ice centers etc.
Besides these! 6ueues are also fored in anufacturing industry in
situations 5here in8process goods 5aits for ne>t operation! or 5aits for getting
o"ed to another place! achine 5aiting for repair parts or coponents 5aiting
for asse2ly in asse2ly lines! 2lunt tools 5aiting for reground! 5or4ers 5aiting at
the tool cri2 to o2tain tools etc. This ay increase production cycle duration 5hich
adds to the cost of the product and it ay also delay the specified deli"ery period.
Aueues ay not 2e a physical line of custoersI it ay 2e erely a list of
custoers! units! orders etc. Soe specified e>aples of such type of 6ueues
are: unconnected telephone calls 5aiting list of passengers for a 2erth etc.
The ost iportant issue in 5aiting line pro2les is to decide the 2est le"el
of ser"ice the organiCation should pro"ide. Pro"iding (%% 1,.- )er2*.e 5ould
in"ol"e e4.e))*2e .%)( on the other hand *'ae6,a(e )er2*.e .apa.*(" 5ould
result in long 5aiting lines 5hich results in *))a(*)/a.(*%' %/ .,)(%1er) or
soeties loss of custoers. Thus the ultiate goal is to achie"e an econoic
!a&a'.e 2et5een the .%)( %/ )er2*.e and the .%)( a))%.*a(e 7*(- 7a*(*'+ for
that ser"ice.
Aueueing theory pro"ides a large nu2er of alternati"e atheatical
odels for descri2ing and sol"ing 5aiting line pro2les.
114
The econoic 2alance 2et5een the cost of ser"ice and the cost associated
5ith 5aiting can 2e achie"ed at either 2y:
(a) pro"iding ore facilities at additional cost! or
(!) replacing less efficient ser"ice facilities 2y ore efficient ones! or
(c) changing the pattern of arri"al of custoers for ser"ice! or
(d) changing the pattern of pro"iding ser"ice! or
(e) effecting ethod ipro"eents to reduce ser"ice tie.
Aueueing pro2les can 2e sol"ed 2asically either 2y atheatical or
siulation approaches.
ELE$ENTS OF HUEUEING SYSTE$
The 2asic 6ueueing process (Aueueing odel) consists of:
(a) 7nput Source
(!) Aueue
*) :ervice mechanism
The LCustoersL re6uiring ser"ice are [generated o"er tie 2y an Jinput
sourceJ. These custoers enter the 6ueueing syste and 3oin the 6ueue. At
certain ties a e2er of the 6ueue is selected for ser"ice 2y soe rule 4no5n
as )er2*.e *).*p&*'e. The re6uired ser"ice is then perfored 2y the ser"ice
echanis! after 5hich the custoer lea"es the 6ueueing syste.
Fig. The 2asic 6ueuing process
The "arious eleents of the 6ueueing syste are:
(i) 7nput source (calling population)
(ii) Baiting line (#ueue)
(iii) Ser"ice discipline
(iv) Ser"ice echanis
(v) Syste output
(vi) Custoer 2eha"ior.
115
1. I'p,( )%,r.e
T5o iportant characteristics of the input source are:
(i) its siCe and (ii) the pattern of arri"al.
The siCe is the total nu2er of custoers that ight re6uire ser"ice fro
tie to tie. The siCe of the input source is generally assued to 2e infinite. The
rail5ay reser"ation syste! ta> < toll 2oth on high5ay etc. are the e>aple of
infinite 6ueue.
The arri"al of the custoers ay 2e either at a .%')(a'( ra(e %r a( ra'%1.
;ost arri"als in a ser"ice syste are at rando. This is 5hen each arri"al is
independent of its pre"ious arri"als. The e>act prediction of any arri"al in rando
syste is not possi2le. Therefore! the nu2er of arri"als per unit tie (rate of
arri"al) is estiated 2y Poisson distri2ution.
2. H,e,e
A 6ueue is characteriCed 2y the a>iu perissi2le nu2er of
custoers that it contains. 9nits re6uiring ser"ice enter the syste and 3oin a
6ueue. I' soe ser"ice systes only a liited nu2er of custoers are allo5ed
in the syste and ne5 arri"als are not allo5ed to 3oin the syste unless the
nu2er 2ecoes less than the liiting "alue.
116
LECTURE NO. 28
HUEUING THEORY0 CHARACTERISTICS OF :AITING LINES3 SERVICE
DISCIPLINE3 SERVICE $ECHANIS$3 SYSTE$ OUT PUT3 CUSTO$ER
#EHAVIOR.
CHARACTERISTICS OF :AITING LINES
The iportant characteristics re6uired to study the 5aiting line are:
(*) =aitin" time: 7t is the tie that a custoer spends in the 6ueue 2efore 2eing
ta4en up for ser"ice.
(**) :erice time: 7t is the tie period 2et5een t5o successi"e ser"ices. 7t ay 2e
either constant or "aria2le.
(***) =aitin" time *' t7e s!stem: 7t iplies the tie spent 2y the Custoer in the
6ueue syste.
Baiting tie in the syste P Baiting tie N Ser"ice tie
(i) >ueue len"t7: 7t iplies the nu2er of custoers 5aiting in the 6ueue.
() :!stem len"t7: Syste length is e6ual to the nu2er of custoers in the
6ueue plus those 2eing ser"ed.
SERVICE DISCIPLINE
7t refers to the order in 5hich the custoers 5aiting in 6ueue are selected for
ser"ice. 7t ay 2e first8coe8first8ser"ed! rando or according to soe priority
procedure. The rules go"erning order of ser"ice ay 2e.
(*) F/F%$ Airst-)n-Airst-@ut$ (i.e.! first8coe8first8ser"ed)
According to F7F1! the custoers are ser"ed in the order of their arri"al.
E>aples are 2an4 counters! rail5ay reser"ation counters etc.
(**) 5/F%$ ,ast-)n-Airst-@ut$ According to :7F1! the ites arri"ing last are ta4en out
first. E>aple! in 2ig godo5ns the ites arri"ed last are ta4en out first.
(***) :/6%$ :ervice )n 5andom @rder$ (or +ando and priority) Soeties! certain
custoers are gi"en priority for ser"ice i.e.! the arri"ing custoer is chosen for
ser"ice ahead of soe other custoers already in the 6ueue. 4ample: Serious
patients are gi"en priority for treatent! "ital achines are attended to first in the
117
case of their 2rea4do5ns! iportant orders are gi"en priority in production
scheduling.
First8coe8first8ser"ed (F7F1) is usually iplicitly assued 2y 6ueueing
odels unless other5ise stated.
SERVICE $ECHANIS$
Ser"ice echanis consists of one or ore ser"ice facility each of 5hich
contains one or ore parallel ser"ice channels.
A ser"er ay 2e a single indi"idual or a group of persons! e$g$, a aintenance
cre5.
Furtherore! ser"ers need not e"en 2e people! in any cases a ser"er ay 2e a
achine or a piece of e6uipent! e$g$, for4 lift truc4.
Ser"ice echanis ay "ary depending upon the nu2er of ser"ice
channels! nu2er of ser"ers! nu2er of phases etc. The four 2asic structures of
ser"ice echanis are:
1. S*'+&e C-a''e& S*'+&e P-a)e (S*'+&e H,e,e-S*'+&e Ser2er). 7n
this case the arri"ing units for one 6ueue to 2e ser"ed 2y a single ser"ice
facility:
F*+ Single channel! single phase syste.
2. S*'+&e C-a''e&3 $,&(*p-a)e (S*'+&e H,e,e3 $,&(*p&e Ser2er) *' Ser*e)). 7n
this case the custoers are ser"ed at nu2er of ser"ers arranged in series. A t5o
phase ser"ice eans that once an arri"al enters the ser"ice! it is ser"ed at t5o
stations (or phases one after the other).
F*+. Single channel! ultiphase (.8phase) syste.
118
3. $,&(* C-a''e&3 S*'+&e P-a)e S")(e1 (Single Aueue! ;ultiple Ser"ers in
Parallel). 7n this type there is a single 6ueue and ultiple ser"ers arranged in
parallel as sho5n in Figure.
F*+. ;ultiple channel single phase (Single 6ueue ultiple ser"ers in
parallel).
<. $,&(*p&e C-a''e&3 $,&(*p&e P-a)e. 7n this type there are ultiple channels
and the custoers are ser"ed at ore than one ser"er as sho5n in Figure.
F*+. ;ultiple channel! ulti8phase (Three channel! . phase).
S")(e1 O,(p,(
Syste output refers to the ra(e a( 7-*.- .,)(%1er) are re'ere
)er2*.e. 7t depends upon ser"ice tie re6uired 2y that facility to render ser"ice
and the arrangeent of ser"ice facility. The a"erage nu2er of custoers that
can 2e ser"ed per unit tie is called )er2*.e ra(e. 7t can 2e o2tained 2y
constructing ser"ice tie fre6uency distri2ution. Ser"ice rate is denoted 2y letter Z

M. +eciprocal of ser"ice rate is called ser"ice tie i$e$, Ser"ice tie P

1
.
C,)(%1er #e-a2*%r
119
Custoer 2eha"ior iplies that reactions of the typical custoers a2out
6ueueing syste of the ser"ice echanis. Typical tendencies of the custoers
are:
(*) <alkin": A ne5 custoer refuses to enter the syste.
(**) 6ene"in": A custoer ay lea"e the 6ueue 5ithout getting ser"ice after
5aiting soetie.
(***) ?ocke!in": A custoer ay 4eep on s5itching fro one 6ueue to
another! 5hen there are ore than one ser"ice counters.
(i) Collusion: The custoers in the 6ueue ay deand ser"ice on their
2ehalf as 5ell as on 2ehalf of others.

120
LECTURE NO. 2
$ATERIALS OF CONSTRUCTION OF FOOD EHUIP$ENT0
CHARACTERISTICS OF SUITA#LE CONSTRUCTION $ATERIAL0
STAINLESS STEEL3 ALU$INU$3 NIC;EL AND $ONEL3 PLASTIC
$ATERIALS
C-ara.(er*)(*.) %/ S,*(a!&e C%')(r,.(*%' $a(er*a&
Construction aterials for food processing and au>iliary syste e6uipent
that are in contact 5ith foods or cleaning agents should ha"e certain
characteristics:
a) 5esistance to corrosive action of foods or cheicals (cleaning and sanitation
agents) that ay con"erge 5ith e>posed surfaces of construction aterials.
!) :uita!le surface finish to discourage 2uildup of dirt that can accuulate 5ith
e>cessi"e surface rugosity
c) 7ood mechanical !ehavior according to perforance of echanical functions!
such as structural strength! resistance to a2rasion and physical or theral shoc4s!
and pressure charges.
TYPES OF $ATERIALS AND APPLICATIONS
The ost coon aterials used for constructing the Food E6uipent
%. Stainless steel
.. Aluiniu
'. Nic4el and ;onel
/. Plastic ;aterials
S(a*'&e)) S(ee&
Stainless steel e>hi2its soe of the ost suita2le characteristics of the
construction aterials used for food e6uipent. 7t is the ost 5idely used aterial
in direct contact 5ith food found in the industry. 1f the types a"aila2le! A7S7 ')/
stainless steel is the ost coonly used. (A7S7 # Aerican 7ron Steel 7nstitute)
121
C%1p%)*(*%' %/ (-e D*//ere'( T"pe) %/ S(a*'&e)) S(ee&
C%rr%)*%'
9nder special corrosion conditions! such as handling of acidic fluid foods or
foods containing S1.! A7S7 '%& or '%&: stainless steel should 2e eployed 5ith
preference o"er A7S7 '). or A7S7 ')/. A7S7 '). stainless steel is used to ipro"e
the e>ternal design appearance of food e6uipent! 2ut not e6uipent in contact
5ith food or corrosi"e agents.
The corrosion resistance of stainless steel is due to the spontaneous
foration of a layer of chroiu o>ide on the surface of the aterial (as a
protecti"e coating) 5hen e>posed to air. This layer can 2e fored artificially 2y
treating the surface 5ith nitric acid (.)#')O at &)\C) for ') inutes.
A&,1*',1
Aluinu has a high theral conducti"ity! around .%= B<. , or %@=
4cal<h. . \C! and a specific 5eight of .=)) 4g<'. 7t is corrosion resistant under
noral conditions during the distillation of 5ater! fruit 3uice! il4! and S1.. 7t does
not! ho5e"er! resist attac4 2y hydrochloric and hydrofluoric acid! or caustic
solutions. For this reason! al4ali products ust not 2e used 5ith this aterial. Acid
cleaning agents! on the other hand! are appropriate for aluinu.
Currently! aluinu is used in the construction of soe parts of food
process e6uipent. 7t is not as corrosion resistant as stainless steel! and it is not
as resistant to a2rasion fro cleaning and sanitiCation products and foodstuffs.
N*.5e& a' $%'e&
P,re '*.5e& a' 1%'e& (an alloy 5ith &=O nic4el! .@O copper! and the
reainder iron and anganese) 5ere 5idely used in preference o"er nude or
tinned copper for food e6uipent until stainless steel pro"ed to 2e the ore
satisfactory aterial.
A' a&&%" %/ '*.5e&3 Cinc! and copper has 2een used in casting pieces for
"al"es! ainly for closing de"ices! since it e>hi2its 2etter echanical a2rasion
resistance than nic4el or stainless steel.
122
$%'e& is the preferred aterial for coon salt processing systes since
it e>hi2its e"en 2etter corrosion resistance than stainless steel. 7t is also eployed
in pups that handle alcohol! 2rines! "egetal oils! and fruit 3uices.
P&a)(*. $a(er*a&)
Plastic aterials are used in har"esting and transporting agricultural ra5
aterials to the food processing plant! in food pac4aging of solid and li6uid foods!
and e"en in food process e6uipent (ainly processing tan4s).
The ost iportant plastics are:
Polypropylene.
High density polyethylene
5igid PB*
Polyester
4poy resins
123
LECTURE NO. 3!
ILLU$INATION AND VENTILATION
I&&,1*'a(*%' %/ (-e Pr%.e))*'+ Fa.*&*("
Pride in the 5or4place is easier to aintain in a 5ell8illuinated plant than
in a dar4 and dull facility. Bor4ing in an en"ironent that is percei"ed to 2e clean
prootes neat and tidy 5or4 ha2its. 0ood illuination enhances the operation of
a 5ell8run plant and prootes efficiency and safe 5or4ing conditions.
0ood lighting is an easy goal to reach and a 6uic4 fi> to eliinate dar4
corners and unsafe 5or4 areas. The range of lighting hard5are a4es it possi2le
to ha"e a 5ell8lighted plant. 7ndustry recogniCes standards that should 2e et or
e>ceeded.
Bhen a lighting syste is designed! the follo5ing points should 2e
considered:
] -istri2ution pattern of the light and suita2ility in the area in"ol"ed
] 7lluination output of the light hard5are
] Possi2ility that larger laps can 2e used in the sae fitting 5hen ore
light is re6uired
] -esign and construction of the lap and its fitting
] Change in lap efficiency o"er tie and ease of periodic ser"icing!
cleaning! and replaceent
] Syste cost
:ight is easured in luinous intensity as candela (cd) in S7 units.
TAB:E % +ecoended :e"els of 7lluination
O//*.e) I&&,1*'a(*%'
(.a'e&a)
-esigning! detailed drafting .))
Boo44eeping! auditing! ta2ulating! rough drafting %$)
+egular office 5or4! filing! inde> references! ail sorting %))
+eading or transcri2ing hand5riting in in4 or ediu
pencil
=)
+eading high8contrast or 5ell8printed aterial ')
Corridors! ele"ators! stair5ays .)
LIGHT INTENSITY AND APPLICATION
124
7n any 5or4 area! the light should 2e diffuse and uniforly constant. For the
ost efficient use of a"aila2le light! the ceiling should ha"e a iniu reflectance
of =$O and the side5alls $) to &)O. The floor should 2e .)O reflecti"e. To
pre"ent eyestrain! glare should 2e a"oided. The aount of light reflected off any
surface is affected 2y the soothness of the surface. Bhen the surface is rough!
the reflection 5ill 2e scattered! and the reflected light 5ill diffuse. Bhen the paint
surface is sooth! irregularities in the painted surface can cause glare. The color
of the paint 5ill also affect the aount of light reflected.
Because 5alls are norally fairly sooth! color is the doinant factor in
deterining reflectance and illuination. :ight colors reflect high proportions of
light! 5hile dar4 colors a2sor2 a lot of light. Ta2le . pro"ides reflection "alues for
different colors of paint. There is o2"ious "ariation 2et5een shades of the sae
color. Euan perception of color is influenced 2y the color of the light that
illuinates it. Bhen the doinant color in an area is crea! i"ory or tan! 5hite
fluorescent lighting 5ill 2e 2est. 7f the doinant colors are 2lue or green! the 2lue8
type fluorescent lights 5ill 5or4 2est.
TAB:E . :ight +eflection 2y -ifferent Colors of Paint
C%&%r Re/&e.(*%' (L) C%&%r Re/&e.(*%' (L)
Bhite gloss @/ :ight 2lue $/
Flat 5hite @. ;ediu green $.
Bhite! eggshell @% ;aple 5ood finish /.
7"ory 5hite =( ;ediu 2lue '$
Sil"er gray =$ -ar4 gray ')
*ello5 =$ 1a4 5ood finish %=
Crea =/ Balnut 5ood
finish
%&
Pin4 =. -ar4 red %'
:ight 2uff =) ;ahogany 5ood
finish
%.
7"ory tan &= -ar4 2ro5n %)
;ediu yello5 &$ -ar4 2lue @
:ight green &$ -ar4 green =
;ediu 2uff &$ Blac4 $
;ediu gray $@
125
TYPES OF LA$PS
;any types of laps are used in processing areas. 7n ost cases!
fluorescent laps are fa"ored 2ecause they ha"e a2out ..$ ties the efficiency of
incandescent laps. They also gi"e soft diffused light 5ithout glare. Fluorescent
laps are 2est suited in areas 5here the lap stays on for long periods of tie. 7n
places 5here laps are fre6uently s5itched on and off! fluorescent light should
not 2e used. Fre6uent on and off ser"ice not only results in a short lifespan of the
lighting eleent 2ut places an e>tra load on the starting transforer. Fluorescent
laps can 2e used for a2out .$)) to /))) h 2efore they need to 2e replaced.
7ncandescent laps ust 2e replaced e"ery @)) to %))) h.
;ost installations use fluorescent lighting in all areas possi2le. 7n soe
high oisture areas! including cold roos and 5here e>plosi"e "apors ay 2e
present! incandescent light fittings 5ith "apor8proof fi>tures are re6uired. 7n the
cereal industry! cereal dust can 2e "ery e>plosi"e 5hen i>ed 5ith the right
aount of air. 7n these cases! light 2ul2s and all fittings are copletely enclosed
and 5ater tight.
At loading doc4s! large 5arehouses and outside areas! 5here e>tensi"e
co"erage is re6uired! ercury "apor laps are used. ;ercury "apor laps are
se"eral ties ore efficient than fluorescent lighting.
7ncandescent laps radiate ore long85a"e radiation in the yello5 and red
ranges! 5hile fluorescent lighting is 2luer. 7ncandescent laps produce light and
heat. This is an o2"ious dra52ac4 in cold storage areas. 7f fluorescent lighting is
used in cold roos! the tu2es ust 2e rated to operate at teperatures 2elo5
$`C.
The installation cost for fluorescent lighting is considera2ly greater than the
cost for incandescent lighting. The energy sa"ings 5ill pay for this additional
e>pense o"er tie. All light 2ul2s should 2e replaced at regular inter"als.
+eplacing the only if they are 2ro4en eans that there 5ill 2e one or t5o lights
out at any gi"en tie. :ights ha"e an a"erage lifespan and should 2e replaced
2efore they 2rea4.
VENTILATION
?entilation is the supply of fresh! conditioned air to replace un5anted air.
Conditioning can include alteration of oisture content! change of teperature!
and filtering to reo"e particulates and organiss.
126
Bithin the processing area! "entilation 5ill reo"e o2no>ious odors!
oisture! and heat and replace it 5ith air that is free fro containants and air
that 5ill increase the cofort le"el of 5or4ers. The aount of air is calculated as a
replaceent "olue. -epending upon the production processes! the air can 2e
replaced fro & to .) ties per hour. 7t is also ad"isa2le to 4eep the processing
area under a slight positi"e pressure. This 5ill ensure that processing area air
flo5s out 5hen a door is opened.
Special air is re6uired in areas 5here 2a2y forula is handled or 5here
aseptic operations ta4e place. 7n these cases! air 5ill 2e filtered through special
filters that 5ill reo"e organiss. The processing area ust 2e under positi"e
pressure at all ties so that no organiss can enter fro ad3acent processing
areas.

127
LECTURE NO. 31
CLEANING P SANITIJATION
Cleaning and sanitation should 2e considered an integral part of food
process design and food processing operations. The food processing e6uipent
should 2e designed to facilitate the reo"al and draining of all the process
effluents (stea condensate! 5aste solids! e.g.! peels). All dead ends in tan4s!
containers! and piping should 2e eliinated.
Fouling is particularly iportant in heat e>changers and other installations
in"ol"ing fluid flo5 (e"aporators! filters! cyclones! etc.). The food processing
e6uipent ust 2e cleaned easily either 2y 6uic4 disantling and cleaning the
parts! or 2y Cleaning87n8Place (*)P) techni6ues. The e6uipent of sall food
processing plants is usually cleaned 2y periodic disantling of the principal units!
such as pups! plate heat e>changers! filters etc. Auic4 disantling and re8
asse2ling of process piping is facilitated 2y "arious hand opening clups.
The design and installation of *)P systes in large food processing plants
re6uires specialiCed e>perience in pipe flo5! sanitation! processing operations!
and process control.
The *)P syste in"ol"es the follo5ing se6uential operations: %) Pre8rinsing
5ith cold (soft) 5aterI .) al4ali 5ash (suppleented 5ith sodiu hypochlorite)I ')
interediate 5ater rinseI /) acid rinseI $) final 5ater rinseI and &) rinse 5ith
sanitiCing solution (sodiu hypochlorite) or flushing 5ith hot (() \C) 5ater.
The *)P syste is actually a cheical cleaning operation! in 5hich the
cheical solution is 2rought into contact 5ith all soiled surfaces. Addition of
surface acti"e su2stances! reducing su2stantially the surface tension of 5ater!
facilitates the penetration of 5ater and a6ueous cleaning solutions into cre"ices of
the e6uipent. The re6uired tan4s! pups! pipes! "al"es and heaters (heat
e>changers or stea in3ection de"ices) are used either as single8use or re8use
(re8circulation) systes. Air8operated piston or diaphrag8type pups are used to
feed the cheical solutions. For safety reasons! the pups and the cheical
supply containers are enclosed in a separate copartent of the processing
plant.
Ball spray de"ices are used to clean process and storage tan4s. Cylindrical
and rectangular tan4s are cleaned using li6uid feed rates of @8%. :<in
.
internal
surface! 5hile "ertical silos re6uire li6uid rates of .$8'$ :<in tan4
128
circuference. Ade6uate inclination (slope) of piping and process "essels is
essential for self8draining of process and cleaning li6uids.
9sually! food e6uipent ust 2e cleaned daily! after a processing period.
Eo5e"er! 5hen different products are processed in the sae e6uipent! cleaning
depends also on the fre6uency of product changes.
Effecti"e *)P re6uires autoation of the 5hole syste. ;icroprocessor
controllers (P,*) are used in connection 5ith on8line sensors for teperature!
le"el! flo5 rate! pressure! and "al"e position. The concentration of cleaning agents
and organic effluents can 2e easured 5ith pE eters! redo> potential eters!
and optical density eters. The degree of surface containation can 2e
deterined 2y pressure drop easureents in the pipeline.
De/*'*(*%' %/ Sa'*(a(*%'
The 5ord sanitation coes fro the :atin 5ord sanitas, 5hich eans
Jhealth.J 7n the food industry! sanitation eans creating and aintaining hygienic
and healthful conditions. Scientific principles are used 2y healthy food handlers in
a hygienic en"ironent to produce 5holesoe food. Sanitation can reduce the
gro5th of icroorganiss on e6uipent and dirt on food. This can reduce
containation of food 2y icroorganiss that cause food 2orne illness and food
spoilage. Sanitation is ore than 3ust cleanliness. Food or e6uipent can 2e free
of "isi2le dirt and still 2e containated 5ith icroorganiss or cheicals that can
cause illness or food spoilage.
129
LECTURE NO. 32
$AINTENANCE OF FOOD PLANT #UILDING0 SAFETY COLOR CODE3 ROOF
INSPECTION3 CARE OF CONCRETE FLOORS
$a*'(e'a'.e
Pa*'(*'+0 The tas4 of 4eeping a plant and its e6uipent properly painted is
e>pensi"e 2ut iportant. Pr%per pa*'(*'+ a' .%&%r )e&e.(*%' 7*&& *'.rea)e
p&a'( e//*.*e'.". Eployee orale can 2e ipro"ed 2y a4ing the 5or4ing
en"ironent ore attracti"e. Paint! properly applied! 5ill e>tend the life of ost
aterialsI 5ooden surfaces! structural steel! and sheet etal especially should 2e
4ept painted.
There are )pe.*a& pa*'() for ceent 2loc4s! gypsu 2loc4s! and concrete
floors. E6,*p1e'( pa*'( should ha"e r,)(-*'-*!*(*2e 6,a&*(*e) and a high degree
of oisture iperea2ility. Bhere the surface is e>posed to a11%'*a /,1e) %r
a.*) %r a&5a&*)3 cheical8resistant paints should 2e applied. Particularly useful
in this respect are paints 5ith a ru22er 2ase. To pre"ent 1%& +r%7(- %r 1*&e7
%' a1p ),r/a.e)! copper-9-#uinolinolate (sold in a solu2iliCed for as Cunilate)
has 2een found effecti"e.
No interior painting or finishing should 2e done until the 2uilding has 2een
thoroughly r*e %,( !" ar(*/*.*a& -ea(. 7t is iportant that 'e7 p&a)(er a'
.%'.re(e 2e allo5ed to age fro >K (% FK a") under good drying conditions
2efore painting. Ne5 and unfinished 5ood should 2e co"ered 5ith three coats. All
holes and crac4s should 2e puttied after the first coat is dry.
For !e)( appeara'.e! p&ea)*'+ .%&%r .%1!*'a(*%') should 2e selected.
Building interiors should 2e painted in light colors! and eyestrain 5ith its
conse6uent fatigue is reduced 2y using those that are free fro glare. Sharp color
contrasts should 2e a"oided e>cept 5here they are used to ipro"e safety
conditions 2y a4ing soe pro3ection or o23ect conspicuous.
Ce*&*'+) should 2e pa*'(e 7-*(e. :a&&) ay 2e pa*'(e &*+-( +ree'3
&*+-( +ra"3 .rea13 %r *2%r" 5ith the tri in a dar4er shade. E>terior 5alls should
2e painted in light colors 5ith dar4er tri to atch. For e6uipent! aluinu and
ediu gray! dar4 green and aroon paints ha"e pro"ed highly satisfactory.
Bhite is difficult to aintain. For floors! tile red or dar4 gray is desira2le.
130
;oisture! 5ashing solutions! acids! old gro5th! aonia fues! and noral
5ear and a2use tend to destroy paint. All 2are or 2adly 5orn sections should 2e
Jspotted inJ 5ith recoended priers or undercoats. 7n applying an enael o"er
a pre"iously enaeled surface! it is a general practice to use an enael
undercoat o"er the old surface. This 5ill ensure proper adhesion! since
undercoating clings to pre"ious coats to for a good foundation.
E>terior surfaces on 5hich the paint or pre"ious finish is in 2ad condition
should 2e scraped or 2urned off! ta4ing particular care to a"oid charring the
surface. The surface should then 2e thoroughly sanded and dusted.
:af e t! Colo r C o d e* A safety color code has 2een esta2lished and should 2e
uni"ersally adopted. T-e p,rp%)e %/ (-e .%e *) (% )(a'ar*8e (-e ,)e %/
2ar*%,) .%&%r) /%r *e'(*/"*'+ )a/e("3 /*re pr%(e.(*%'3 a' 1e*.a& e6,*p1e'(
a' a..*e'( -a8ar). The colors and their uses are listed in the follo5ing Ta2le.
Table : :afet! color Code
:i"na
l
Color @se
Alert orange ;achines or e6uipent that ight cut! rush!
other5ise in3ure! or electrocute a 5or4er: interior
surfaces of fuse and po5er 2o>es! achinery
guards! and e>posed parts such as pulleys! gears!
or cutting de"ices.
Eigh8
"isi2ilit
y
Blac4 and
yello5 in
alternate
stripes
Stri4e8against! tripping! or o"ing e6uipent
haCards: lo5 pipes or 2eas in aisles! floor
ele"ation changes and cur2ing!
chain8hoist 2loc4s and lo5 o"erhead con"eyors!
aisle o2structions and truc4ing e6uipent.
Fire8
protect
ion
+ed Fire fighting and fire protection e6uipent:
e>tinguisher locations! standpipe and hose
locations! controls of anually
operated deluge or flooding systes! alar
stations and fire 2ells! fire 2lan4ets and indi"idual
deluge sho5ers! fire doors(@8in. stripe on leading
edge).
Preca
ution
2lue Electrical controls and also e6uipent that is
undergoing repair: o"ens! "ats! 2oilers! "al"es!
4ilns! dryers! tan4s! copressors! and
scaffolding.
131
:i"na
l
Color @se
Safety 0reen cross
on 5hite
2ac4ground
Safety e6uipent and its location: stretcher
2o>es! first8aid ca2inets! and plant hospital.
Traffic gray! 2lac4!
5hite! and
yello5
0ood8house4eeping facilities: aisle ar4ings!
corners! 5aste receptacles! floor areas
iediately surrounding 5aste receptacles! and
storage areas.
R%%/ I')pe.(*%' 0 The roof should 2e inspected at least t5ice a year 2efore and
after the 5inter season and it is also ad"isa2le to a4e an
inspection after a se"ere stor. The constant e>pansion and contraction
of roofing aterial due to changes in teperature 5ill e"entually cause
crac4ing. ;etal roofs are su23ect to rust and corrosion! especially at the
points 5here 3oined or nailed. Periodic inspection 5ill re"eal daaged or 5orn
sections. Propt repair 5ill pre"ent loss fro lea4s and 5ill add
to the life of the roof itself.
Care %/ C%'.re(e F&%%r). 0rease ay 2e reo"ed fro concrete floors
5ith a ild acid or al4ali cleaner. The floor is first 5etted! the cleaner is
sprin4led uniforly o"er the section to 2e cleaned! allo5ed to soa4 for
a tie! and then 2rushed. Either al4ali or acid 5ill attac4 concrete and
5ill e"entually cause pitting. After use of the cleaner! the floor should 2e
thoroughly rinsed 5ith hot 5ater.
Repa*r. Crac4ed or cru2ling areas in concrete floors are repaired 2y
first reo"ing the old floor to a depth of at least . inches! lea"ing the edges
perpendicular. The ca"ity is then 5etted li2erally and cleaned 2y 2rushing. A
ceent 5ash consisting of one part of sifted sand! one part of ceent! and 5ater
at the rate of /.$ gallons per 2ag of ceent is ne>t applied 5ith a stiff 2rush. The
finish coat should 2e applied at once! the crac4 or area 2eing filled )..$ inches
a2o"e the surrounding floor and allo5ed to shrin4 for % or . hours 2efore
soothing and le"eling. Concrete should not 2e peritted to dry rapidly.
Dust Control* The floor should 2e cleaned thoroughly 5ith an al4aline solution to
reo"e all grease and dirt and then rinsed. The surface should then 2e etched
5ith a %) per cent solution of either hydrochloric or sulphuric acid and again
132
rinsed. Finally! a floor8hardening copound such as a dilute solution of sodiu
silicate should 2e applied.
133