Amity Business School

Amity Business School

MBA’s, Semester II
OM
Dr. Sumeet Singh Jasial

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Facility Location
It is attributed to various reason:
• When a new facility is to be established.
• The growing volume of business makes it
advisable to establish additional facilities in
new territories.
• New economic, social, legal or political
factors could suggest a change of location of
the existing plant.
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Steps in the Facility Location Study

• The general territory selection phase.

• The exact site selection Phase.

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Factors that influence territory selection

decision:
• Markets
• Raw Materials and Supplies
• Transportation Facilities
• Manpower Supply
• Infrastructure/Utilities
• Legislation and Taxation
• Climate
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Factors that influence site selection

decision:
• Community Facilities,
• Community Attitudes
• Waste Disposal
• Site Size
• Topography
• Transportation Facilities
• Supporting Industries
• Land Cost 5
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• Equal Weights Method

A manufacturer of Fabricated metal
products selected three factors by which to
rate four sites.

• Variable Weights method

• Weight-cum-Rating Method
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Location Break-Even Analysis

• The location of a Tractor factory in a South

Delhi site will result in certain annual fixed
costs, variable costs and revenue. The
figures would be different for a South
Bombay site. The fixed costs, variable
costs and price per unit for both sites are
given below:

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• Location Fixed Variable Price per

Site Costs Costs/Unit Unit

• South Delhi 40,00,000 30,000 75,898

• South 60,00,000 24,000 82,000

Bombay

Let us assume that the expected sales volume as

estimated by a market research team is 95. Which
location is better?

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Bridgeman’s Dimensional Analysis

• Consider the following data:

Factors S1 S2 weight
Building Cost & 2500,000 1500,000 4
Equipment costs

Taxes (per yr.) 250,000 100,000 4

Power cost/yr 100,000 150,000 4

Community Attitude 2 4 1

Product Quality 4 5 5

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Bridgeman’s Dimensional Analysis

• Consider the following data:

Factors S1 S2 S3 weight
Rent and Utilities 20,000 24,000 30,000 4

Taxes (per yr.) 4,000 3,000 2,000 4

Power cost/yr 190,000 160,000 180,000 4

Materials 260,000 264,000 254,000 5

Community Attitude 2 5 3 2

Product Quality 4 4 1 4

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Ques: Udhampur Distilleries ltd. Has four existing

facilities- W, X, Y, and Z. The details of these facilities
are given in the table below. The company wants to
locate a new facility such that the total transportation
cost is the minimum. Advise the management of the
company about the best possible location using the
median and centre of gravity method.
Existing Facility Annual load Coordinates cost of 1u by 1 distance
W 279 (20,30) Rs 10
X 473 (70,10) Rs 10
Y 350 (50,40) Rs 10
Z 266 (10,80) Rs 10

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Existing Facility Coordinate Cost Annual Load

A (12,20) Rs 10 26000
B (18,18) Rs 10 14000
C (30,7) Rs 10 9500
D (32,25) Rs 10 12000

For the above data, use median & centre of gravity method to
locate new facility such that transportation cost is minimized.

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Existing Facility Coordinate Cost Annual Load

A (10,80) Rs 10 452
B (30,60) Rs 10 678
C (80,50) Rs 10 483
D (50,10) Rs 10 711
E (80, 10) Rs 10 539

For the above data, use median & centre of gravity method
to locate new facility such that transportation cost is
minimized.

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The Burger Doodle restaurant chain uses a

distribution center to prepare the food
ingredients it provides to its individual
restaurants. The company is attempting to
determine the location for a new
distribution center that will service five
restaurants. The grid-map coordinates of
the five restaurants and the annual
number of 40-foot trailer trucks transported
to each restaurant are as follows:
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Restaurant Coordinate Cost Annual Load

1 (100,300) Rs 10 30
2 (210,180) Rs 10 25
3 (250,400) Rs 10 15
4 (300,150) Rs 10 20
5 (400,200) Rs 10 18

Determine the cost effective location coordinates using

median and center of gravity method.

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 Load-Distance MethodAmity Business School
A restaurant chain purchases ingredients from four different
food suppliers. The company wants to construct a new
central distribution center to process and package the
ingredients before shipping them to their various restaurants.
The suppliers transport ingredient items in 40-foot truck
trailers, each with a capacity of 38000 kg. The location of the
four suppliers A, B, C, and D with annual number of trailer
loads that will be transported to the distribution center are as
follows:
Existing Facility Annual load Coordinates
A 75 (200,200)
B 105 (100,500)
C 135 (250,600)
D 60 (500,300)
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Suppose company wants to evaluate three

different sites it has identified for its new
distribution center relative to the four suppliers
identified. The coordinates of the three sites
under consideration are as follows:
Site 1: x1=360, y1=180
Site 2: x2=420, y2=450
Site 3: x3=250, y3=400
Find the best location using load-distance method.

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A manufacturer of a certain industrial component is

interested in locating a new facility in a target market
and would like to know the most appropriate place in
the target market to locate the proposed facility.
There are four supply points in the locality that will
provide key inputs to the new facility. The annual
supply from these four sources and their grid
coordinates are as follows:
Existing Facility Annual load Coordinates
A 200 (125,550)
B 450 (350,400)
C 175 (450,125)
D 150 (700,300) 18
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Assume that manufacturer came to know that there

are constraints in locating the new facility. Based on
an initial survey of possible sites for the proposed
facility, the manufacturer identified four candidates.
Following are the location coordinates of the four
sites:
Site 1: x1=300, y1=500
Site 2: x2=200, y2=500
Site 3: x3=500, y3=350
Site 4: x4=400, y4=200
What is the best location for the proposed new facility?

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Facilities Layout

It refers to an optimum arrangement of different

facilities including man, machine, equipment,
material etc.

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Objectives
• Overall simplification of production process in
terms of equipment utilisation, minimization of
delay, reducing manufacturing time.
• Minimization of material handling cost by
suitably placing the facilities in the best flow
sequence.
• Better supervision and control.
• Worker convenience
• Higher flexibility and adaptability to changing
conditions.

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Basic Facility Layouts

• Process Layout,
• Product Layout, and
• Fixed Layout.

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 Block Diagramming Amity Business School

Walters company management wants to arrange the six

departments of its factory in a way that will minimize
interdepartmental material handling costs. They make an
initial assumption that each department is 20*20 feet and that
the building is 60 feet long and 40 feet wide.
1. Assembly
2. Painting
3. Machine Shop
4. Receiving
5. Shipping
6. Testing

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Load Summary Chart

From/To Department
Department 1 2 3 4 5 6
1 - 50 100 - - 20
2 - - 30 50 10 -
3 20 - - 20 - 100
4 - - - - 50 -
5 - 45 - 10 - -
6 40 30 - - 40 -

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Block Diagramming
• Let there be five departments in an
organization:
1. Call Handling,
2. Work Force Management,
3. Quality Assurance,
4. Analytical,
5. Finance.

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Load Summary Chart

From/To Department
Department 1 2 3 4 5
1 - 100 50 - -
2 - - 200 50 -
3 60 - - 40 50
4 - 100 - -
60
5 - 50 - - -

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Line Balancing (Kilbridge and

Wester’s Method)
• A company works an 8 hours per day for 5 days
per week. The production line is operated for
only 7 hours per day to allow for needs such as
rest and delays. Given the information in the
table below, determine the number of stations if
the line is designed for about of 8400 units per
week. Can the theoretical minimum number of
stations be attained? Show schematically the
minimum number of stations. What is the
maximum possible efficiency? What is the actual
possible efficiency? 27
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Element Performance time Precedence Element

(secs)
a 14 -
b 10 a
c 30 b
d 3 -
e 5 d
f 13 e
g 14 e
h 14 e
i 6 c,f,g,h
j 7 i
k 3 j
l 4 k
m 7 l

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A new small electrical appliance is to be

assembled on a production flow line. The total
job of assembling the product has been
divided in to minimum rational work elements.
The industrial engineering department has
developed time standards based on previous
similar jobs. This information is given in the
following table. Production demand will be
1,20,000 units per year, at 50 weeks per year
and 40 hours per week. Calculate the
efficiency of the balanced line.
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Elements Performance time Precedence activity

1 0.2 -
2 0.4 -
3 0.7 1
4 0.1 1,2
5 0.3 2
6 0.11 3
7 0.32 3
8 0.6 3,4
9 0.27 6,7,8
10 0.38 5,8
11 0.5 9,10
12 0.12 11

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