Facility Location and Layout

 

9.	Facility Location and Layout
	9.1.	Facility Location The organisation’s strategy will need to address the issue of facility location. This must be considered in terms of the need to serve customer markets effectively and to meet long-range demand forecasts. The issues can be considered in terms of the competition and cost of the location decision and the size of the facility. A company’s competitiveness will be affected by its locations as it will impact on costs such as for transportation and labour. In service operations when the facility may not only produce the good but also deliver it to the customer from the facility, the convenience of the location for the customer is vital. A location decision is costly and time consuming to change. The costs include the purchase of land and construction of buildings. An organisation may be located inappropriately due to a previous poor location decision and an unwillingness to face the costs of a subsequent relocation. A change in input costs, such as materials or labour, may also lead to a need to change location. Finally in order to meet the long-term demand forecast it is necessary to consider the size of the facility. Within a medium term planning cycle the size of the facility will impose an upper limit on the organisation’s capacity. Purchasing additional components from suppliers or sub-contracting work can however increase this level. However these strategies may lead to higher costs and thus a loss of competitiveness. The ability to supplement capacity is most restricted in service operations when contact with the customer is required.
	9.2.	Location Factors        Many factors affect the location decision including the following.
		9.2.1.		Proximity to Customers For many service organisations in particular the location of the facility must be convenient for the potential customer. This can range from restaurants were customers may be prepared to travel a short distance to hospitals were the speed of response is vital to the service. High transportation costs for heavy or bulky materials may also lead to locating close to the customer.
		9.2.2.		Proximity to suppliers The volume and bulk of the raw material involved in operations such as steel production means that a location decision will tend to favour areas near to suppliers. A manufacturer and seller of custom-built furniture however will need to be near potential customers. For service companies such as supermarkets and restaurants the need to be in a market-oriented locations means that the cost of transportation of goods will not be a major factor in the location decision. Distribution across country borders means that a whole series of additional costs and delays must be taken into account, including import duties and delays in moving freight between different transportation methods. A site near to an airport or a rail link to an airport may be an important factor if delivery speed is important
		9.2.3.		Proximity to labour   Labour costs have generally become less important as the proportion of direct labour cost in high volume manufacturing have fallen. What is becoming more important is the skills and flexibility of the labour force to adapt to new working methods and to engage in continuous improvement efforts. The wage rate of labour can be a factor in location decisions, especially when the service can be provided easily in alternative locations. Information Technology companies involved in data entry can locate in alternative countries without the customer being aware.
	9.3.	Layout Design Layout design concerns the physical placement of resources such as equipment and storage facilities. Layout design is important because it can have a significant effect on the cost and efficiency of an operation and can entail substantial investment in time and money. In many operations the installation of a new layout, or redesign of an existing layout, can be difficult to alter once implemented due to the significant investment required on items such as equipment. There are four basic layout types of process, product, hybrid and fixed-position layout. The characteristics of each of the layout types will now be considered.
		9.3.1.		Process layout A process layout is one in which resources (such as equipment and people) which have similar processes or functions are grouped together. Process layouts are used when there is a large variety in the products or services being delivered and it may not be feasible to dedicate facilities to each individual product or service. A process layout allows the products or customers to move to each group of resources in turn, based on their individual requirements. Because of their flexibility process layouts are widely used. One advantage is that in service systems they allow a wide variety of routes that may be chosen by customers depending on their needs. Another advantage is that the product or service range may be extended and as long as no new resources are required may be accommodated within the current layout   An important issue with process layouts is the management of the flow of products or services between the resource groups. One problem is that transportation between process groups can be a significant factor in terms of transportation time and handling costs. Another problem is that the number of products or services involved and the fact that each product/service can follow an individual route between the process groups, makes it difficult to predict when a particular product will be delivered or a service completed. This is because at certain times the number of customers or products arriving at a particular process group exceeds its capacity and so a queue forms until resources are available. This queuing time may take up a significant part of the time that the product or customer is in the process. This behaviour can lead to long throughput times (i.e. the time taken for a product or customer to progress through the layout). In a manufacturing organisation a significant amount of time may be spent ‘progress chasing’ to give certain products priority to ensure they are delivered to customers on time. In a service system the customers may feel they are queuing in the system longer than they perceive is necessary for the service they require. However in services there may be flexibility to add or remove staff to match the current arrival rate of customers to the service delivery point. Examples of process layouts include supermarkets, hospitals, department stores and component manufacturers.
		9.3.2.		Product Layout Product layouts, also termed line layouts, arrange the resources required for a product or service around the needs of that product or service. In manufacturing applications such as assembly lines with a high volume of a standard product the products will move in a flow from one processing station to the next. In contrast to the process layout in which products move to the resources, here the resources are arranged and dedicated to a particular product or service. The term product layout refers to the arrangement of the resources around the product or service. In services the requirements of a specific group of customers are identified and resources setup sequentially so the customers flow through the system, moving from one stage to another until the service is complete. A key issue in product layouts is that the stages in the assembly line or flow line must be ‘balanced’. This means that the time spent by components or customers should be approximately the same for each stage, otherwise queues will occur at the slowest stage. The topic of line balancing is considered later in this chapter. The product or line layout is an efficient delivery system in that the use of dedicated equipment in a balanced line will allow a much faster throughput time than in a process layout. The major disadvantage of the approach is that it lacks the flexibility of a process layout and only produces a standard product or service. Another issue is that if any stage of the line fails, then in effect the output from the whole line is lost and so it lacks the robustness to loss of resources (for example equipment failure or staff illness) that the process layout can provide. Examples of product layouts include car assembly, self-service cafes and car valeting.
		9.3.3.		Hybrid Layout  A hybrid layout attempts to combine the efficiency of a product layout with the flexibility of a process layout. Hybrid layouts are created from placing together resources which service a subset of the total range of products or services. When grouping products or services together in this way the grouping is termed a family. The process of grouping the products or services to create a family is termed group technology. Group technology has three aspects :
				1.	Grouping parts into families Grouping parts or customers into families has the objective of reducing the changeover time between batches, allowing smaller batch sizes, and thus improving flexibility. Parts family formation is based on the idea of grouping parts or customers together according to factors such as processing similarity.
				2.	Group physical facilities into cells to reduce transportation time between processes Physical facilities are grouped into cells with the intention of reducing material or customer movements. Whereas a process layout involves extensive movement of materials or customers between departments with common processes, a cell comprises all the facilities required to manufacture a family of components or delivery a service. Material and customer movement is therefore restricted to within the cell and throughput times are therefore reduced. Cells can be U-shaped to allow workers to work at more than one process whilst minimising movement.
				3.	Creating groups of multi-skilled workers Creating groups of multi-skilled workers enables increased autonomy and flexibility on the part of operators. This enables easier changeovers from one part to another and increases the job enrichment of members of the group. This in turn can improve motivation and have a beneficial effect on quality. Creating cells with dedicated resources can significantly reduce the time it takes for products and services to pass through the process by reducing queuing time. It also offers the opportunity for automation due to the close proximity of the process stages. Thus process technology can be used to replace a number of general purpose resources with a single dedicated multi-functional system such as a Flexible Manufacturing System. A disadvantage of hybrid layouts can be the extra expenditure due to the extra resources required in creating cells. Examples of hybrid layouts include custom manufacture, maternity unit in a hospital, cafeteria with multiple serving areas. In services a cell layout could involve an insurance organisation organised by type of claim (e.g. car, home, travel).
		9.3.4.		Fixed-Position layout This layout design is used when the product or service cannot be moved and so the transforming process must take place at the location of product creation or service delivery. In a fixed position layout all resources for producing the product, such as equipment and labour must move to the site of the product or service. The emphasis when using a fixed-position layout is on the scheduling and coordination of resources to ensure that they are available in the required amounts at the required time. For example on a construction site most activities are dependent on the completion of other activities and cannot be undertaken simultaneously. The space available on the site may also constrain the amount of work activity that can take place at any one time. This means detailed scheduling of resources is required to minimise delays. In a restaurant it is important that the order is taken and food delivered to the table at the appropriate time. Examples of fixed-position layouts include construction sites such as for buildings or for large ships, aircraft manufacture and full service restaurants.
	9.4.	Designing Product Layouts - Line Balancing A product layout consists of a number of processes arranged one after another in a ‘line’ to produce a standard product or service in a relatively high volume. These systems which have a characteristic flow (product) layout use specialised equipment or staff dedicated to achieving an optimal flow of work through the system. This is important because all items follow virtually the same sequence of operations. A major aim of flow systems is to ensure that each stage of production is able to maintain production at an equal rate. The technique of line balancing is used to ensure that the output of each production stage is equal and maximum efficiency is attained. Line balancing involves ensuring that the stages of production are co-ordinated and bottlenecks are avoided. Because of the line flow configuration the tasks in the line must be undertaken in order (precedence) and the output of the whole line will be determined by the slowest or bottleneck process. The actual design of the line is thus guided by the order of the tasks which are involved in producing the product or delivering the service and the required output rate required to meet demand. This provides information which determines the number of stages and the output rate of each stage. The steps in line balancing are as follows :
		1.	Draw a precedence diagram The first step in line balancing is to identify the tasks involved in the process and the order that these tasks must be undertaken in. Once the tasks have been identified it is necessary to define their relationship to one another. There are some tasks that can only begin when other tasks have been completed and this is termed a serial relationship. The execution of other tasks may be totally independent and thus they have a parallel relationship. Precedence diagrams are used to show the tasks undertaken in a line process and the dependencies between these tasks.
		2.	Determine the cycle time for the line For a particular line process we will wish to reach a desired rate of output for the line to meet projected demand. This is usually expressed in work items per time period, for example 30 parts per hour. Another way of expressing this output rate is that 30 parts per hour means that a part must leave the system every 2 minutes (60 minutes/30 parts). This measure, termed the cycle time, represents the longest time any part is allowed to spend at each task. Cycle Time = Available Time/Desired Output Taking into consideration the discussion of bottleneck processes above, the cycle time for the line process is thus determined by the task with the highest cycle time or lowest output level.
		3.	Assign tasks to workstations Once the cycle time for the line has been calculated we have the cycle time for each stage or workstation in the line process. We can now allocate tasks to each workstation based on their task times. As a rule of thumb it is more efficient to allocate eligible tasks to a workstation in the order of longest task times first. When the total task time would exceed the cycle time for a workstation then it is necessary to start a new workstation and repeat the allocation of tasks as before. If a task time is longer than the workstation cycle time then it is necessary either to allocate multiple tasks in parallel in order to meet the target time or to break the task down into smaller elements.
		4.	Calculate the efficiency of the line When tasks are assigned to workstations it is very unlikely that their total tasks times at each workstation will match the cycle time exactly. A measure of how close these two values do meet for the whole line, is called the line efficiency. To calculate the line efficiency : Line Efficiency % = (Sum of the task times/(number of workstations  desired cycle time)) *100