Module 2

• LOCATION AND LAYOUT

 Facilities Location
• Facility location referrer to selection of geographical location
and factory/Plant for production organizations.
• Plant Location:
Plant: A Factory or a Manufacturing Unit.
Location: Area/city/place in which a plant can be set up.
• Plant layout Planning: A blue print or a 2D drawing
 When we Need of facility location
• Facility location is importance for both new and existing
organizations.
• Existing company may need facility location:

 Expansion
 Change in availability of resources
 Shift of demand
 To expand new target market
 Development of new technology
 Socio Political and legal changes
 facility location/site
• Selection the wrong facility location results:
 Low profit margin.
 High cost of production
 Poor production efficiency
 High distribution cost
 Labour Problem/trouble.
 Closure of organization.
 Factors affecting facility location
1. Proximity to markets.
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour availability /Skilled workers
6. Availability of civic amenities
7. Site Topography
8. Opportunity for Expansion
9. Supporting industries and services
10. Special Grants, Regional Tax and Import Export Barriers
11.Government/Government policy
12. Climate conditions
 Location Models
• Location Models: Which helps in identifying near ideal
location.
 Locations Model
• 1. Factor Rating Method
• 2. Point Rating Method
• 3. Break-even analysis.
• 4. Qualitative Factor Analysis.
• Please refer Ashwatappa( Production Management) , Page in-
between 100 to 125.
 1. Factor Rating Method
Factors Factor Location Rating Product of Rating
Rating Location A Location B Location A Location B
(1to5) (1 to 10) (1 to 10)

Availability of Power
Availability of Water
Access to Rail and Air Transportation
Skilled Labours
Suitability of Climate
Availability of Vendors/suppliers
Civic Amenities for workers
Site Topography
Disposal of Waste
Total Score
 1. Factor Rating Method
Factors Factor Location Rating Product of Rating
Rating Location A Location B Location A Location B
(1to5) (1 to 10) (1 to 10)

Availability of Power 5 10 8 50 40
Availability of Water 1 8 10 8 10
Access to Rail and Air Transportation 4 8 10 32 40
Skilled Labours 4 9 8 36 32
Suitability of Climate 3 7 9 21 27
Availability of Vendors/suppliers 2 5 8 10 16
Civic Amenities for workers 3 10 8 30 24
Site Topography 5 8 9 40 45
Disposal of Waste 4 8 8 32 34
Total Score
 Steps Involved in Factor rating
• 1. List most relevant factors which is required for your company.
• 2. Rate each Factor from 1 to 5 (1-very low & 5- Very High)
• 3. Rate the each location according to its merits from 1 to 10 (1-
very low & 10- Very High)
• 4. Compute the product of rating by multiplying the factor rating by
location Rating.
• 5. Add the sum of the product of rating for each location.
• 6. select the maximum sum of the product rating.
 2. Point Rating Method
Factors Rated Maximum possible Points Assigned to Locations.
points
(10 - 400)
Location A Location B

Future Availability of Raw Materials

Transportation Facility

Lobour Availability

Availability of Vendors/suppliers

Site Topography

Civic Amenities for workers

Disposal of Waste

Total Score 1230 1265

 2. Point Rating Method
Factors Rated Maximum possible Points Assigned to Locations.
points
(10 - 400)
Location A Location B

Future Availability of Raw Materials 300 280 250

Transportation Facility 200 150 170

Lobour Availability 20 20 15

Availability of Vendors/suppliers 400 350 370

Site Topography 200 100 150

Civic Amenities for workers 300 280 240

Disposal of Waste 100 50 70

Total Score 1230 1265

 Steps Involved in point Rating
• 1. list most relevant factors which is required for your company.
• 2. Select the range of points (from 10 to 400)
• 3. Rate each factor within the Range of points.(max possible points)
• 4. Rate each location according to its merits, which should not be
more than maximum possible point.
• 5. Add the points assigned to locations.
• 6. Select the location which has maximum points.
Break Even Analysis
Location Fixed cost Per Year Variable cost Per Unit

A 25000 50
B 50000 25
C 80000 15
• Total cost = Fixed cost + (Variable cost per Unit X Number of
Quantity produced)

• Assume TC for 2000 unit

• TC A=
• TC B=
• TC C=
TC for Location A= 25000+50x500=50000 Rs
TC for Location A= 25000+50x1000=75000 Rs
TC for Location A= 25000+50x1500=100000 Rs
TC for Location A= 25000+50x2000=125000 Rs
TC for Location A= 25000+50x2500=150000 Rs
TC for Location A= 25000+50x3000=175000 Rs

TC for Location B= 50000+25x500=62500

TC for Location B= 50000+25x1000=75000
TC for Location B= 50000+25x1500=87500
TC for Location B= 50000+25x2000=100000
TC for Location B= 50000+25x2500=112500
TC for Location B= 50000+25x3000=125000

TC for Location C= 80000+15x500=87500

TC for Location C= 80000+15x1000=95000
TC for Location C= 80000+15x1500=102500
TC for Location C= 80000+15x2000=110000
TC for Location C= 80000+15x2500=117500
TC for Location C= 80000+15x3000=125000
 Chart Title
200000 Graph
180000

160000

140000

120000

100000

80000

60000

40000

20000

0
500 1000 1500 2000 2500 3000
Location A 50000 75000 100000 125000 150000 175000
Location B 62500 75000 87500 100000 112500 125000
Location C 87500 95000 102500 110000 117500 125000

Location A Location B Location C

 4. Qualitative Factor Analysis.
Relevant Factors Assigned Weight Score for Location(10-100)

A B C D

Production Cost 0.35 100 80 75 85

Raw Material Supply 0.25

Labour Availability 0.20

Cost Of Living 0.05

Environment 0.05

Markets 0.10

Total 1.00
Relevant Factors Assigned Weight Weighted Score for Location

A B C D

Production Cost 0.35 35 28 26.25 29.75

Raw Material Supply 0.25

Labour Availability 0.20

Cost Of Living 0.05

Environment 0.05

Markets 0.10

Total 1.00
 LAYOUT

LAYOUT: The way in which the parts of something

are arranged or laid out
Plant Layout: Plant layout refers to the physical
arrangement of production facilities.
 Layout planning includes:
• New layout design.
• Minor change in present layout.
• Existing layout rearrange.
• Re-allocation of existing facilities.
OBJECTIVES OF GOOD LAYOUT
 OBJECTIVES OF GOOD LAYOUT
• To effectively utilize of floor space.
• To ensure smooth flow of operations.
• To reduce material handling system.
• To Increase Production (Max Possible Production)
• To reduce hazards to personnel
• To reduce Accidents
• To allow ease of maintenance
• To ensure safety and health of the employee
 Plant Layout Design/planning (House)

• Hall
• Bedrooms
• Kitchen.
• Dining hall.
• Sit out
• Store room.
• Wash rooms.
• Place for washing cloths and for drying.
• Parking
Plant Layout Design (House)
 TYPES OF LAYOUT:
• There are mainly four types of plant layout:
• (a) Product or line layout
• (b) Process or functional layout
• (c) Combined or group layout
• (d)Fixed position or location layout
 PRODUCT OR LINE LAYOUT:

• Work stations and equipment are located along the line of production,
• In this type of layout the machines and equipments are arranged in one
line depending upon the sequence of operations required for the product.
• The output of one machine becomes input of the next machine.
• This type of layout is used for Mass production.
• It requires a very little material handling.
• Ex- Automobile.
 Process or functional layout:

• In this type of layout the machines of a similar type are arranged together at
one place.
• This type of layout is used for batch production/Job Shop Production.
• It is preferred when the product is not standardized and the quantity produced
is very small.
• Ex- Pharma companies, shoes co, switch board manufacturing.
Furniture, Etc.
 COMBINED LAYOUT:
• A combination of process & product layout is known as
combined layout.
• In an industrial plant, it is difficult to confine to one type of
layout only, because sometimes it becomes necessary to
use process layout for some activities and product layout
for certain other activities in the same plant.
• Ex- Cement manufacturing
 FIXED POSITION OR LOCATION LAYOUT:

• Fixed position layout involves the movement of manpower and

machines to the product which remains stationary.
• This type of layout is preferred where the size of the job is bulky and
heavy.
• Example of such type of layout ships, boilers, generators, aircraft
manufacturing.
 Advantages and Disadvantages of lay Outs
1. Product or Line Layout – Mass Production
2. Process or Functional layout – Job Shop Production.
3. Combined layout
4. Fixed Layout
 Product or Line Layout
Advantages –
• Mass production/Higher out puts/High Production Rate/
Higher Volume.
• Less Material Handling.
• More Automation.
• Unskilled workers can manage.
• Greater possibility of Space utilization.
• Lesser Supervision.
 Product or Line Layout
Disadvantages –
• Heavy Capital Investment.
• Breakdown leads to zero Output.(Less Flexibility)
• Initial setup required lot of time.
• Less variety of output.
• High Overhead charges.-repair, insurance maintenance.
• Additional Output not possible.
 Process or Functional layout
Advantages –
• Lower capital investment.
• Greater flexibility.
• More verity of products.
• Initial setup required less time.
• Lower overhead cost.
 Process or Functional layout
Disadvantages –
• Material handling is More.
• Non Automated.
• Low production rate/more cycle time.
• More inventory.
• Large space/area required.
• Required skilled workers.
 Fixed Layout
Advantages –
• Only one workstation.
• Movement of product is less/nil.
• Flexibility in operation.
• More Profitable, if number of orders is more than one.
• Less breakdown due to more number of operations.
 Fixed Layout
Disadvantages –
• Longer time for a single output.
• Large space required near product.
• Heavy Capital Investment.
• High Overhead charges.
• More number of workers/employees required.
• Product failure leads to huge loss.
• Selecting the wrong facility location results in.

A. High profit margin

B. High cost of production
C. High production efficiency
D. All the above