Kenya Institute of Management DCM623: Operations Management

TOPIC 7: FACILITIES LOCATION AND LAYOUT

Facility location decision is the systematic process of determining a geographic site for a
firm’s operations. Managers of both service and manufacturing organizations should consider
the desirability of a particular site, including proximity to customers and suppliers, labour costs,
and transportation costs. Location conditions are difficult to measure. Tangible cost-based
factors such as wages and products costs can be quantified easily. On the other hand, non-
tangible features, which refer to such characteristics as reliability, availability and security,
cannot be measured exactly in quantitative forms.
Steps in site Selection
The following are the different stages involved in the site selection process:
1. Selection of the region in which the plant is to be established
2. After selecting the region, the next step is to select a locality with in the region.
3. Selection of site for plant construction
4. Final investment decision

There are mainly two sets of factors affecting the location decision:
1. General locational factors, which include controllable and uncontrollable factors for all type
of organizations.
2. Specific locational factors specifically required for manufacturing and service organizations.
Following are the general factors required for location of plant in case of all types of
organizations.
1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labor and wages
6. External economies
7. Capital.
8. Government policy
9. Climate conditions
10. Supporting industries and services
11. Community and labour attitudes
12. Community Infrastructure.

Controllable factors
1. Proximity to markets
Every company is expected to serve its customers by providing goods and services at the
reasonable price and time. Organizations may choose to locate facilities near to the market.
When the buyers are concentrated, it is advisable to locate the facilities close to the market.
Nearness to the market ensures a consistent supply of goods to customers and it reduces the
cost of transportation.

Page 1 of 28
Kenya Institute of Management DCM623: Operations Management

Locating nearer to the market is preferred if:

• The products are subject to spoilage.
• After sales services are promptly required very often.
2. Supply of raw material
It is essential for the organization to get right type of raw materials at the right time in order
to have a continuous production. This factor becomes very important if the materials are
perishable and cost of transportation is very high. Nearness to raw material is important
in case of industries such as sugar, cement, jute and cotton textiles.

The following things are to be considered in this case:

• When a single raw material is used without loss of weight, locate the plant at the raw
material source or at the market place.
• When weight loosing raw material is required, locate the plant at the raw material
source itself.
• When raw material is universally available, locate close to the market area.
3. Transportation facilities
Speedy transport facilities ensure timely supply of raw materials to the production centers.
The transport facility is a prerequisite for the location of the plant. There are different modes
of transportation such as, air, road, rail, water and pipeline. Goods that are mainly intended
for exports demand, a location near to the port is useful and economical. The factors
influencing the choice locational facility include costs, convenience, and suitability.
4. Availability of infrastructure facilities
The infrastructure facilities like power, water and waste disposal etc., are the important
factors in deciding the location facility. Certain types of industries use more amount of power
and such companies should be located close to the power station. The non-availability of
power may become a survival problem for such industries. Process industries like paper,
chemical, cement etc. require continuous supply of water in large amount. Availability of
waste disposal facility for process industries is an important factor in modern times.

5. Labour and wages

The problem of securing adequate number of skilled and unskilled work force is a major
factor to be considered at the time site selection. Importing labour is usually costly and
involves administrative problems. Productivity of labour is also an important factor to be
considered. Prevailing wage pattern, quality of human resources in terms of education, cost of
living, industrial relation and bargaining power of the unions’ form important considerations.
6. External economies of scale

Page 2 of 28
Kenya Institute of Management DCM623: Operations Management

Availability of various external economies of scale is major factor in deciding the project
location. Tax incentives, facility of industrial estates, special economic zone are some of the
factors to be considered at the time of taking location decision. Location economies of scale in
the manufacturing sector have evolved over time and have mainly increased competition due to
production facilities and lower production costs as a result of lower transportation and logistical
costs.

7. Availability of Capital
Another important factor deciding the choice of location is the availability of capital.
Fixed capital is required for the construction of building and acquisition of land. But on the
other hand, buildings can also be rented and existing plants can be expanded. The availability
of such factors is also affecting the decision on site selection. A careful study on financial
strength and weaknesses of the proposed project should be undertaken.
8. Policies of the Government
The policies of the Central, state governments and local bodies concerning labour laws,
building codes, safety, tax etc. are the major factors which affect the choice location for the
industries. Government provides various kinds of incentives to entrepreneurs for industrial
development in special economic zone. The incentive package may be in the form of
exemption from a sales tax and excise duties for a specific period, soft loan from financial
institutions and investment subsidy. Some of these incentives may tempt to locate the plant to
avail these facilities offered.
9. Climatic conditions
The natural condition of the geographical area needs to be considered together with climatic
conditions. Climates greatly influence human efficiency and behaviour and reflect the
same in the labour productivity. Some industries require specific climatic conditions e.g.,
textile mill requires humidity. Therefore, such special climatic factors have to be
carefully examined in the choice of project site

10. Supporting industries and services

Availability of supporting industries is another consideration which affects the choice of
location. Manufacturing organization will not make all the components and parts by itself.
S o m e t i m e s it subcontracts the work to vendors to manufacture. So,the source of supply of
component parts will be the one of the factors that influences the location. The presence of
healthy relationship among different firms is also a pre-requisite for industries to develop.
The various services like communications, banking services, professional consultancy
services will play a vital role in selection of a location.
11. Community and labour attitudes
The general attitude of the community towards proposed industry will have an important
bearing in the choice location. Sometimes, a specific location is not desirable because of
labours negative attitude towards management, which brings very often the strikes and

Page 3 of 28
Kenya Institute of Management DCM623: Operations Management

lockouts. Such conditions have to be seriously analyzed.

12. Availability of Community infrastructure
All manufacturing activities require access to a transport infrastructure such as roads,
railways, port, power lines and other service facilities. The availability of social facilities like
schools, universities and hospitals are also the major determinants in the choice project site.
These factors are also required to be considered by managers.

PLANT/FACTORY LAY OUT

Plant layout refers to the physical arrangement of production facilities. It is the configuration
of departments, work centers and equipment in the conversion process. It is a floor plan of
the physical facilities. There are several factors which affect the choice of factory layout.
Definition of plant layout
According to Moore ‘Plant layout is a plan of an optimum arrangement of facilities including
personnel, operating equipment, storage space, material handling equipment and all other
supporting services along with the design of best structure to contain all these facilities’.
OBJECTIVES OF LAY OUT
The basic objective of the plant layout is to arrange production facilities economically. The
objectives of plant layout are given below:
1. Streamline the flow of materials through the plant.
2. Facilitate the manufacturing process.
3. Minimize materials handling cost.
4. Effective utilization of men, equipment and space.
5. Flexibility of manufacturing operations and arrangements.
6. Provide for employee convenience, safety and comfort.
7. Minimize investment in equipment
PRINCIPLES OF LAY PUT
The following are the principles plant layout:
1. Principle of integration
A good layout is one that integrates men, materials, machines and supporting services and
others in order to get the optimum utilisation of resources and maximum effectiveness at
least cost.
2. Principle of minimum distance

Page 4 of 28
Kenya Institute of Management DCM623: Operations Management

This is concerned with the minimum movement of man and materials. The facilities should
be arranged such a way that, the total distance travelled by the men and materials should be
minimum. As far as possible straight line movement should be preferred.
3. Principle of cubic space utilisation
The good layout is one that utilise both horizontal and vertical space. It is not only enough if
only the floor space is utilised optimally but the third dimension, i.e., the height is also to be
utilised effectively.
4. Principle of flow
A good layout is one that makes the materials to move in forward direction towards the
completion stage. This means there should not be any backtracking.
5. Principle of maximum flexibility
The good layout is one that can be altered without much cost and time. The future
requirements should be taken into account while designing the present layout of the plant.
6. Principle of safety, security and satisfaction
A good layout is one that gives due consideration to workers safety and satisfaction and
safeguards the plant and machinery against fire, theft, etc.
7. Principle of minimum handling
A good layout is one that reduces the material handling.

Factors to be considered in plant lay out

The following are the important factors to be considered at the time of plant lay out. They are
given below;
1. Need for plant expansion
The future requirements of the organization should be considered at the time of planning for
plant location.

2. Protection of operation equipment

Every care should be taken to ensure the safety machinery and equipment. Shelter is required
whenever there is need to protect equipment from adverse climatic conditions.
3. Maintenance requirements
Some equipment’s require continuous maintenance. There should be adequate facilities in
maintain the equipment’s and machinery. This requirement has to be considered at the time of
planning plant layout.
4. Location
The site selected for the plant also determines the plant lay out. The structure, geology,
Page 5 of 28
Kenya Institute of Management DCM623: Operations Management

climatic conditions of the location influence the decision on plant layout.

TYPES OF LAYOUT
Layouts can be classified into the following five categories:
1. Process layout
2. Product layout
3. Combination layout
4. Fixed position layout
5. Group layout

PROCESS LAYOUT
In the case of process lay out all the machines performing similar type of operations are
grouped at one location. In process layout the arrangement of facilities is grouped together
according to their functions and operations. The flow of material through the facilities from
one functional area to another functional area varies from product to product. Process layout
is suggested for batch production. Usually the paths are long and there will be possibility of
backtracking.Process layout is normally used when the production volume is not sufficient to
justify a product layout.

Advantages of process layout

Advantages of process layout are as follows:
1. In process layout machines are better utilized.
2. Flexibility is possible in process layout.
3. Lower investment on account of comparatively less number of machines
4. Higher utilisation of production facilities.
5. A high degree of flexibility with regards to work distribution to machineries and
workers.
6. The diversity of tasks and variety of job makes the job interesting.
7. Supervisors will become highly knowledgeable about the functions under their
department.
Limitations of process layout
1. Backtracking of materials.
2. Material handling cannot be mechanised which adds to cost.

Page 6 of 28
Kenya Institute of Management DCM623: Operations Management

3. Lower productivity due to number of set-ups.

4. Space and capital are tied up by work-in-process
5.Long movements may occur in the handling of materials thus reducing material handling
efficiency.
Product lay out
In product layout, machines and other supporting services are located according to the
processing sequence of the product. It implies that various operations on a product are
performed in a sequence and the machines are placed along the product flow line .In
product layout machines are arranged in the sequence in which a given product will be
operated upon. This type of layout is preferred for continuous production of goods.
Advantages of product lay out
1. The flow of product will be smooth.
2. Work -in-process inventory is less.
3. Processing time is less.
4. Minimum material handling cost.
5. Simplified production, planning and control systems are possible.
6. Less space is occupied by work transit and for temporary storage.
7. Reduced material handling cost due to mechanised handling systems.
8. Perfect line balancing which eliminates all bottlenecks.
9. Manufacturing cycle is short due to continuous flow of materials.
10. Small amount of work-in-process inventory.
11. Unskilled workers can manage the production.
Limitations
1. A breakdown of one machine in a product line may cause stoppages of machines in
the downstream of the line.
2. A change in product design may require major alterations in the layout.
3. Comparatively high investment in equipment’s is required.
4. Lack of flexibility.
5. A change in product may require the facility modification

Page 7 of 28
Kenya Institute of Management DCM623: Operations Management

Combination lay out

A combination layout combines the advantages of both types of product and process
layouts. A combination layout is possible where an item is being made in different types and
sizes. Here machinery is arranged in a process layout but the process grouping is then
arranged in a sequence to produce various types and sizes of products. It is to be noted that
the sequence of operations remains same with the variety of products and sizes.
Advantages
The major advantages of this type of layout are:
1. Helps in job enlargement
2.Upgrades the skills of the employees.
2. Greater flexibility is possible.
3. Layout capital investment is lower
Group lay out
This type of layout brings an element of flexibility into manufacturing system as
regards to variation in batch sizes and sequence of operations. Group Technology (GT) is the
analysis and comparisons of items to group them into families with similar features. GT can
be used to develop a hybrid between pure process layout and pure product layout. This
technique is very useful for companies that produce variety of parts in small batches to
enable them to take advantage and economics of flow line layout.
The application of group technology involves two basic steps; first step is to determine
component families or groups. The second step in applying group technology is to arrange the
plants equipment used to process a particular family of components. This represents small
plants within the plants. The group technology reduces production planning time for jobs. It
reduces the set-up time. Thus group layout is a combination of the product layout and process
layout. It combines the advantages of both layout systems.
Advantages of Group Technology Layout
Group Technology layout can increase—
1. Component standardization and rationalization.
2. Reliability of estimates.
3. Effective machine operation and productivity.
4. Customer
service. It can
decrease the—

Page 8 of 28
Kenya Institute of Management DCM623: Operations Management

1. Paper work and overall production time.

2. Work-in-progress and work
Fixed position layout
This is also called the project type of layout. In this type of layout, the material, or major
components remain in a fixed location and tools, machinery, men and other materials are
brought to this location. This type of layout is suitable when one or a few pieces of identical
heavy products are to be manufactured and when the assembly consists of large number of
heavy parts, the cost of transportation of these parts is very high.
Advantages
The major advantages of this type of layout are:
1. Helps in job enlargement and upgrades the skills of the operators.
2. The workers identify themselves with a product in which they take interest and pride in
doing the job.
3. Greater flexibility with this type of layout.
4. Layout capital investment is lower.

Organization of physical facility

The following are the most important physical facilities to be organized:
1. Factory building

2. Lighting

3. Climatic conditions

4. Ventilation

5. Work-related welfare facilities.

I. FACTORY
BUILDING
Factory building is a factor which is the most important consideration for every industrial
enterprise. Factory building is required to provide protection for men, machines, materials. It
should offer a comfortable working environment. It is for these reasons that the factory
building acquires great importance.
Following factors are considered for an Industrial Building: A. Design of the building.
B. Type of buildings.

Page 9 of 28
Kenya Institute of Management DCM623: Operations Management

A. Design of the Building

The building should be designed so as to provide a number of facilities— such as lunch
rooms, cafeteria, locker rooms, crèches, libraries, first-aid and ambulance rooms, materials
handling, facilities, heating, ventilation, air- conditioning, etc. Following factors are to be
considered in designing of a factory building:
1. Flexibility:
Flexibility is necessary because it is not always feasible to build a new plant, every
time a new firm is organised or the layout is changed. With minor alternations, the building
should be able to accommodate different types of operations.
3. Product and equipment
The type of product that is to be produced determines column-spacing, type of floor, ceiling,
heating and air-conditioning. A product of a temporary nature may call for a less expensive
building. Similarly, a heavy product demands a different building structure than a product
which is light in weight.
3. Expansibility: Growth and expansion are natural to any manufacturing units. The following
factors should be taken in to account if the future expansion of the concern is to be provided
for:
(i) The area of the land which is to be acquired should be large enough to provide for the
future expansion needs of the firm.
(ii) The design of the building may be in a rectangular shape. Rectangular shapes facilitate
expansion on any side.
(iii) If vertical expansion is expected, strong foundations must be provided.
4. Employee facilities: The employee facility should be given enough
consideration because it may affect the morale, satisfaction and attitude of the employees.
B. Types of Buildings
Industrial buildings may be grouped under two types:
1. Single-storey buildings,

2. Multi-storey buildings.
Choosing a suitable type of building for a particular firm depends on the manufacturing
process and the area of land and the cost of construction.

1. SINGLE-STOREY BUILDINGS
If land is available, an organization can construct single storey building. Single-storey
buildings offer several operating advantages. A single-story construction is preferable when
materials handling is difficult because the product is big or heavy, natural lighting is desired
Page 10 of 28
Kenya Institute of Management DCM623: Operations Management

and frequent changes in layout are anticipated.

Advantages
1. There is a greater flexibility in layout.
2. Expansion is easily ensured by the removal of walls.
3. low cost of transportation and material handling charges.
5. since all the equipment’s are on the same level, effective layout supervision and
control.
6. The danger of fire hazards is reduced because of the lateral spread of the building.
Limitations
Single-storey buildings have the following limitations. These are:
1. More land is required for building construction.
2. High cost of heating, ventilating and cleaning of windows.

3. High cost of transportation for moving men and materials to the factory
2. MULTI-STOREY BUILDINGS
Multi-storey buildings are useful in manufacture of light products, when the acquisition
of land becomes difficult and expensive.

Advantages
1. Maximum operating floor space. This is best suited in areas where land is very costly.
2. Lower cost of heating and ventilation.
3. Reduced cost of materials handling because the advantage of the use of gravity for the flow
of materials.
Limitations
Following are the disadvantages of multi-storey building:
1. Materials handling becomes very complicated. A lot of time is wasted in moving them
between floors.
2. A lot of floor space is wasted on elevators, stairways and fire escapes.
3. Floor load-bearing capacity is limited.
4. Natural lighting is poor in the centers of the shop.
5. Layout changes cannot be affected easily and quickly.
Generally speaking, textile mills, food industries, detergent plants, chemical industries
and software industry use these types of buildings.

Page 11 of 28
Kenya Institute of Management DCM623: Operations Management

II. LIGHTING
Good visibility of the equipment, the product and the data involved in the work process is an
unavoidable factor in accelerating production, reducing the number of defective products and
reducing waste. The use of natural light should be encouraged. Regular cleaning of lighting
fixture is obviously essential. Excessive contrasts in lighting levels between the worker’s task
and the general surroundings should also be avoided. Artificial lighting will enable people to
maintain proper vision.
III. CLIMATIC CONDITIONS
Control of the climatic conditions at the workplace is important to ensure the workers’ health
and comfort. With excess heat or cold, workers may feel very uncomfortable, and their
efficiency drops. This can also lead to accidents. This human body functions in such a way as
to keep the central nervous system and the internal organs at a constant temperature. It is
essential to avoid excessive heat or cold, and wherever possible to keep the climatic
conditions under control within the organization.
IV. VENTILATION
Ventilation is an integral part of the good building system. Ventilation differs from air
circulation. Ventilation replaces contaminated air by fresh air, whereas as the air-circulation
merely moves the air without renewing it. Where the air temperature and humidity are high,
merely to circulate the air is not only ineffective but also increases heat. Therefore, proper
steps have to be taken to ensure the ventilation facility.
V. WORK-RELATED WELFARE FACILITIES
Work-related welfare facilities include basically drinking-water and toilets facilities. Others
may seem less necessary, but usually have an importance to workers. The planners of the
factory building have to see that the organization has enough work- r e l a t e d facilities for
its employees. It is al made mandatory in the Factories Act.
1. DRINKING WATER
Safe, cool drinking water is essential for all types of work, especially in a hot
environment. Without it fatigue increases rapidly and productivity falls. Adequate drinking
water should be provided to employees.
2. SANITARY FACILITIES
Hygienic sanitary facilities should exist in all workplaces. They are particularly important
where chemicals or other dangerous substances are used. Sufficient toilet facilities, with
separate facilities for men and women workers, should be ensured.

3. FIRST-AID AND MEDICAL FACILITIES

Facilities for rendering first-aid and medical care at the workplace in case of accidents are
Page 12 of 28
Kenya Institute of Management DCM623: Operations Management

essential. First-aid boxes should be clearly marked and conveniently located. They should
contain only first-aid requisites absorption.
4.REST FACILITIES
Rest facilities help workers to recover from fatigue and to get away from a noisy, polluted or
isolated workstation. A sufficient number of suitable chairs or benches should be provided.
Rest-rooms enable workers to recover during meal and rest breaks.
5. FEEDING FACILITIES
Organization should arrange food facilities for its employees. A snack bar, buffet or mobile
trolleys can provide tea, coffee and soft drinks, as well as light refreshments. Canteens or a
restaurant can allow workers to purchase a cheap, well-cooked and nutritious meal for a
reasonable price.

6. RECREATIONAL FACILITIES
Recreational facilities offer workers the opportunity to spend their leisure time in activities
likely to increase physical and mental well-being. They may also help to improve social
relations within the enterprise. Such facilities can include halls for sports, reading-rooms,
libraries, clubs for hobbies and cinemas.
Objective of a good layout
1. To reduce material handling cost
2. To provide enough production facility
3. To utilize labour efficiency
4. To provide ease of supervision.
5. To improve productivity
6. To provide safety to employees
7. To reduce the number of accidents
Material requirement planning MRP
Material requirement planning is an inventory system that is computer based and used to
manage the manufacturing process. It is designed to assist in the scheduling and filling of
orders for raw materials that are manufactured in to finished goods.
The following are the objectives of MRP:
1. Reduction in inventory cost
2. Meeting delivery schedule
3. Improve the performance of production

Page 13 of 28
Kenya Institute of Management DCM623: Operations Management

Material handling
The material handling involves the movement of material form one section to another for
the purpose of processing. They can be moved either manually or mechanically. For this
purpose different types material handling equipment are used. The material handling system
in any manufacturing setting plays an important role in the performance of the entire
manufacturing system.
Material handling can be defined as the art and science involving the movement, packing
and storing of substances in any form.

Objectives of material handling

1. To reduce material handling cost

2. To reduce production life cycle
3. Better control of the flow of material
4. To ensure safety in the movement of goods
1. To avoid damage of the goods
Rules for material handling
1. Make handling distances as short as possible
2. Use right method and proper material handling
3. Eliminate wasteful material handling methods
4. Use mechanical equipment’s wherever it is useful
5. Use relevant handling equipment to the job

Assignment Models

The following example will be used as a basis of the step-by-step explanation.

Example 1-Minimizing model

A company employs services engineers based at various locations throughout the country to
service and repair their equipment installed in customer’s premises. Four requests for services
have been received and the company finds that four engineers are available. The distances each
of the engineers is from the various customers in shown in the following table and the company
wishes to assign engineers to customers to minimise the total distances to be travelled.

Customers
W X Y Z
Alf 25 18 23 14

Page 14 of 28
Kenya Institute of Management DCM623: Operations Management

Bill 38 15 53 23
Charlie 15 17 41 30
Dave 26 28 36 29

Step 1. Reduce each column by the smallest figure in that column. The smallest figures are 15,
15, 23 and 14 and deducting these values from each element in the columns produces the
following table.

Table 2
W X Y Z
A 10 3 0 0
B 23 0 30 9
C 0 2 18 16
D 11 13 13 15

Step 2 Reduce each row by the smallest figure in that row.

The smallest figures are 0, 0, 0 and 11 and deducting these values gives the following table.

Table 3
W X Y Z
A 10 3 0 0
B 23 0 30 9
C 0 2 18 16
D 0 2 2 4

Note: Where the smallest value in a row is zero (i.e. as in rows A, B and C above) the rows is, of
course, unchanged.

Step 3 Cover all the zero in the table 3 by the minimum possible number of lines. The lines may
be horizontal or vertical.

Table 4

W X Y Z
A 10 3 0 0
B 23 0 30 9
C 0 2 18 16
D 0 2 2 4

Note: Line 3, covering Row B, could equally well have been drawn covering column X.

Step 4.Compare the number of lines with the number of assignments to be made (in this example
there are 3 lines and 4 assignments).If the number of line equals the number of assignments to be
made go to step 6.

Page 15 of 28
Kenya Institute of Management DCM623: Operations Management

If the number of lines is less than the number of assignments to be made (i.e. as in this example
which has three lines and four assignments) then
a) Find the smallest uncovered element from step 3, called X (in Table 4 this value is 2).
b) Subtract X to every element in the matrix.
c) Add back to every element covered by a line. If an element is covered by two lines, for
example, cell A: W in Table 4, X is added twice.

Note: The effect of these steps is that X is subtracted from all uncovered elements, elements
covered by one line remains unchanged, and elements covered by two lines are increased by
X.

Carrying out this procedure on Table 4 produces the following results:

In Table 4 the smallest elements is 2. New table is

Table

W X Y Z

A 12 3 0 0
B 25 0 30 9
C 0 0 16 14
D 0 0 0 2

Note: It will be seen that cells A: W and B: W have been increased by 2; cells A : X, A : Y,A :Z,
B :X,B:Y, B:Z, C:W and D:W are unchanged, and all other cells have been reduced by 2.

Step 5. Repeat steps 3 and step 4 until the number of lines covering the zero equals the number
of assignments without any further repetition, thus:

Table 6
W X Y Z

A 12 3 0 0 Line 1
B 25 0 30 9 Line 2
C 0 0 16 14 Line 3
D 0 0 0 2 Line 4

Step 6 when the number of lines equals the number of assignments to be made use the following
to make assignments:
a) Assign to any zero which is unique to both a column and a row.
b) Assign to any zero which is unique to a column or a row.
c) Ignoring assignments already made repeat rule (b) until all assignments are made.

Page 16 of 28
Kenya Institute of Management DCM623: Operations Management

Carrying out this procedure for our example results in the following:
a) (Zero unique to both a column and a row). None in this example.
b) (Zero unique column or row). Assign B to X and A to Z. The position is now
as follows.

Table 7

W X Y Z

A Row Satisfied Column satisfied

B Row Satisfied Column satisfied
C 0 Column Satisfied 16 Column Satisfied
D 0 Column Satisfied 0 Column Satisfied

c) Repeating rule (b) results in assigning D to Y and C to W.

Notes:
a) Should the final assignment not be to a zero, then more lines than necessary were used in step
3.
b) If a block of 4 or more zero’s is left for the final assignment, then a choice of assignment
exits with the same mileage.

Step 7 Calculate the total mileage of the final assignment.

A to Z Mileage 14
B to X 15
C to W 15
D toY 36
80 Miles

The assignment technique for maximising

A maximising assignment problem typically involves making assignments so as to maximise
contribution. To maximise only one step 1 from above differs-the columns are reduced by the
largest number in each column. From then on the same rules apply that are used for minimising.

Maximising example
Example 2
The previous example No.1 will be used with the changed assumptions that the figures
relate to contribution and not mileage and that it is required to maximise
contribution .The solution would be reached as follows.(In each case the step number
corresponds to the solution given for Example No 1.)

Original data

Page 17 of 28
Kenya Institute of Management DCM623: Operations Management

Table 8

W X Y Z
A 25 18 23 14 Contributions
B 38 15 53 23 to be gained
C 15 17 41 30
D 26 28 36 29

Step 1: Reduce each column by the largest figure in that column and ignore the resulting signs.

Table 9

W X Y Z
A 13 10 30 16
B 0 13 0 7
C 23 11 12 0
D 12 0 17 1

Step 2. Reduce each row by smallest figures in that row.

Table 10

W X Y Z
A 13 0 20 16
B 0 13 0 7
C 23 11 12 0
D 12 0 17 1

Step 3.Cover zeros by minimum possible number of lines.

Table 11

W X Y Z
A 13 0 20 6
B 0 13 0 7
C 23 11 12 0
D 12 0 17 1

Step 4. I
f a number of lines equals the number of assignments to be made go to step 6.If less, (as in this
example), carry out the ‘uncovered element’ procedure previously described. This results in the
following table:

Table 12

W X Y Z

Page 18 of 28
Kenya Institute of Management DCM623: Operations Management

A 0 0 17 6
B 0 16 0 10
C 20 11 9 0
D 9 0 14 1

Table 13

W X Y Z
A 0 0 17 6
B 0 16 0 10

C 20 11 9 0
D 9 0 14 1

Step 6. Make assignment in accordance with the rules previously described which result in the
following assignment:

C to Z
D to X
A to W
B to Y
Step 7.Calculate contribution to gained from the assignments.

C to Z 30
D to X 28
A to W 25
B to Y 53
136

Notes:
a) It will be apparent that maximising assignment problems can be solved in virtually the
same manner as minimising problems.
b) The solution methods given are suitable for any size of matrix. If a problem is as small as
the illustration used in this chapter, it can probably be solved merely by inspection.

Unequal sources and destinations

5. To solve assignments problems in the manner described the matrix must be square, i.e. the
supply must equal the requirements. Where the supply and requirements are not equal, an
artificial source or destinations must be created to square the matrix. The
cost/mileage/contributions etc for the fictitious column or row be zero throughout.

Solution method
Having made the sources equal the destinations, the solutions method will be as normal, treating
the fictitious elements as though they were real. The solution method will automatically assign a
source or destination to the fictitious row or column and the resulting assignment will incur zero
cost or gain zero contribution.

Page 19 of 28
Kenya Institute of Management DCM623: Operations Management

Points to note
a) The assignment technique can be used for repairing type of problems, e.g. taxis to
customers, jobs to personnel.
b) Most practical problems of size illustrated could be solved fairly readily using
nothing more than commonsense. However, the technique illustrated can be used to
solve much larger problems.

Exercises with answers

1. A foreman has four fitters and has been asked to deal with five jobs. The times for each job
are estimated as follows:

Fitters

Alf Bill Charlie Dave

Job 1 6 12 20 12
Job 2 22 18 15 20
Job 3 12 16 18 15
Job 4 16 8 12 20
Job 5 18 14 10 17

Allocate the men to the jobs so as to minimise the total time taken and identify the job which will
not be dealt with.

2. A company has four salesmen who have to visit four clients. The profits records from
previous visits are shown in the table and it is required to maximise profits by the best
assignments.

A B C D

Customer 1 6 12 20 12 22
18 15 20 12 16
18 15 16 8 12
20

Answers to exercises

1. Dummy fitter inserted to square matrix

A B C D DUMMY
1 6 12 20 12 0
2 22 18 15 20 0
3 12 16 18 15 0
4 16 8 12 15 0
5 18 14 10 17 0

Page 20 of 28
Kenya Institute of Management DCM623: Operations Management

Reduce columns by the smallest element and cover by lines

0 4 10 0 0
16 10 5 8 0
6 8 8 3 0
10 0 2 8 0
12 6 0 5 0

4 lines so not optimum, smallest element 3

Therefore reduce uncovered elements by 3 and increase elements crossed by 2 lines by 3

0 4 10 0 3
13 7 2 5 0
3 5 5 0 0
10 0 2 8 3
12 6 0 5 3

5 Lines so optimum.

Assignments
B to 4
C to 5
A to 1
Dummy to 2

TRANSPORTATION MODEL

A transportation problem deals with a number of sources of supply (e.g a manufacturing

company, warehouse) and a number of destinations (e,g shops, houses). The usual objective is
minimizing transportation costs of supplying items from a set of source points to a set of
destinations.
A major characteristic of this problem is the linearity requirement, i.e. transport cost fom one
point to another must be clearly defined, if it will cost sh.50 to transport a bag from a warehouse
to shop A then it will cost sh.250 to transport 5 bags.

Assumptions
 The model assumes a homogeneous commodity, one type of commodity
 Total supply is equal to total demand

Example 1
64 chambers, computer support firm has three branches at different parts of the city, it receives
orders for a total of 15 desktop computers from four customers. In total in the three branches
there are 15 machines available. the management wish to minimise delivery costs by dispatching
the computers from the appropriate branch for each customer.

Page 21 of 28
Kenya Institute of Management DCM623: Operations Management

Details of the availabilities, 'requirements, and transport costs per filing computer are given in
the following table.

Table 1
Customer Customer Customer Customer Total
A B C D
Computers 3 3 4 5 15
Branch X. 2 Sh.13 11 15 20 transportation
Available Branch Y 6 Sh.17 14 12 13 cost
Branch Z 7 Sh.18 18 15 12 per unit
Total 15
Solution
Step 1 Make an initial feasible allocation of deliveries by selecting the cheapest route first, and
allocate as many as possible then the next cheapest and so on. The result of such an
allocation is as follows.
Table 2
Requirement
A B C D
3 3 4 5
X 2 Units 2(1)
Available Y 6 Units 1(4) 1(3) 4(2)
Z 7 Units 2(5) 5(2)

Note: the number in the table represent deliveries of cabinets and the number in the brackets (1),
(2), etc represent the sequence in which they are inserted, lowest cost first i.e.
Sh.
1. 2 units X → B sh.11/unit Total cost 22
2. 4 units Y → C sh.12/unit Total cost 48
5 units Z → D sh.12/unit Totals cost 60
3. The next lowest cost move which is feasible i.e. doesn’t exceed row or column totals is 1
unit Y → B sh.14/unit 14
4. similarly the next lowest feasible allocation 1 unit Y→ A
sh.17/unit 17
5. finally to fulfill the row /column totals 2 units Z → A sh.18/unit __36
197

Step 2. Check solution obtained to see if it represents the minimum cost possible. This is done by
calculating ‘shadow costs’ (i.e. an imputed cost of not using a particular route) and
comparing these with the real transport costs to see whether a change of allocation is
desirable.

This is done as follows:

Calculate a nominal 'dispatch' and 'reception' cost for each occupied cell by making an
assumption that the transport cost per unit is capable of being split between dispatch and
reception costs thus:

D(X) + R(B) = 11
D(Y) + R(A) = 17
Page 22 of 28
Kenya Institute of Management DCM623: Operations Management

D(y) + R(B) = 14
D(Y) + R(C) = 12
DZ) + R(A) = 18
D(Z) + R(D) = 12

Where D(X), D(Y) and D(Z) represent Dispatch cost from depots X, Y and Z, and R(A) R(B),
R(C) and R(D) represent Reception costs at customers A, B, C, D.
By convention the first depot is assigned the value of zero i.e. D(X) = 0 and this value is
substituted in the first equation and then all the other values can be obtained thus

R(A) = 14 D(X) = 0
R(B) = 11 D(Y) = 3
R(C) = 9 D(Z) = 4
R(D) = 8

Using these values the shadow costs of the unoccupied cells can be calculated. The unoccupied
cells are X : A, X : C, X : D, Y : D, Z : B, Z : C.

Shadow
costs
:. D(X) + R(A) = 0 + 14 = 14
D(X) + R(C) = 0 + 9 = 9
D(X) + R(D) = 0 + 8 = 8
D(Y) + R(D) = 3 + 8 = 11
D(Z) + R(B) = 4 + 11 = 15
D(Z) + R(C) = 4 + 9 = 13

These computed 'shadow costs' are compared with the actual transport costs (from Tab- I),
Where the actual costs are less than shadow costs, overall costs can be reduced by allocating
units into that cell.

Actual Shadow + Cost increase

cost - cost - Cost reduction
CellX:A 13 - 14 = -1
X:C 15 - 9 = +6
X:D 20 - 8 = + 12
Y: D 13 - 11 = +2
Z:B 18 - 15 = +3
Z:C 15 - 13 = +2

The meaning of this is that total costs could be reduced by sh.1 for every unit that can be
transferred into cell X : A. As there is a cost reduction that can be made the solution , Table 2 is
not optimum.

Step 3: Make the maximum possible allocation of deliveries into the cell where actual costs are
less than shadow costs using occupied cells i.e.
Cell X : A from Step 2, The number that can be allocated is governed by the need to keep within
the row and column totals. This is done as follows:

Table 3

Page 23 of 28
Kenya Institute of Management DCM623: Operations Management

Requirement
A B C D
3 3 4 5
X 2 Units + 2-
Available Y 6 Units 1- 1+ 4
Z 7 Units 2 5

Table 3 is a reproduction of Table 2 with a number of + and - inserted. These were inserted for
the following reasons.
Cell X : A + indicates a transfer in as indicated in Step 2
Cell X : B - indicates a transfer out to maintain Row X total.
Cell Y : B + indicates a transfer in to maintain Column B total
Cell Y : A - indicates a transfer out to maintain Row Y and Column A totals.

The maximum number than can be transferred into Cell X : A is the lowest number in the
Minus cells i.e. cells Y : A, and X : B which is 1 unit.
Therefore 1 unit is transferred in the + and - sequence described above resulting in the following
table

Table 4
Requirement
A B C D
3 3 4 5
X 2 Units 1 1
Available Y 6 Units 2 4
Z 7 Units 2 5

The total cost of this solution is

Sh.
Cell X:A 1 unit @ sh.13 = 13
Cell X:B 1 Unit @ sh.11 = 11
Cell Y:B 2 Units @ sh.14 = 28
Cell Y:C 4 Units @ sh.12 = 48
Cell Z:A 2 Units @ sh.18 = 36
Cell Z:D 5 Units @ sh.12 = 60
196

The new total cost is sh.1 less than the total cost established in Step 1. This is the result expected
because it was calculated in Step 2 that sh.1 would be saved for every unit we were able to
transfer to Cell X : A and we were able to" transfer 1 unit only.

Notes: Always commence the + and - sequence with a + in the cell indicated by the (actual cost -
shadow cost) calculation. Then put a - in the occupied cell in the same row which has an
occupied cell in its column. Proceed until a - appears in the same column as the original +.

Step 4. Repeat Step 2 i.e. check that solution represents minimum cost. Each of the processes in
Step 2 are repeated using the latest solution (Table 4) as a basis, thus: Nominal dispatch
and reception costs for each occupied cell.

Page 24 of 28
Kenya Institute of Management DCM623: Operations Management

D(X) + R(A) = 13
D(X) + R(B) = 11
D(y) + R(B) = 14
D(Y) + R(C) = 12
DZ) + R(A) = 18
D(Z) + R(D) = 12

On setting D(X) to be 0, the rest of the values are found to be

R(A) = 13 D(X) = 0
R(B) = 11 D(Y) = 3
R(C) = 9 D(Z) = 5
R(D) = 7
Using these values the shadow costs of the unoccupied cells are calculated. The unoccupied cells
are X:C , X:D, Y:A, Y:D, Z:B, and Z:C

Therefore;
D(X) + R(C) = 9
D(X) + R(D) = 7
D(Y) + R(A) = 16
D(Y) + R(D) = 10
D(Z) + R(B) = 16
D(Z) + R(C) = 14

The computed shadow costs are compared with actual costs to see if any reduction in cost is
possible.

+ Cost
Actual Shadow
increase
cost - cost - Cost reduction
Cell X :C 15 - 9= +6
X:D 20 - 7= +13
Y:A 17 - 16 = +1
Y:D 13 - 10 = +3
Z:B 18 - 16 = +2
Z:C 15 - 14 = +1

It will be seen that all the answers are positive, therefore no further cost reduction is possible and
optimum has been reached.
thus the optimal solution is represented by table 4

UNEQUAL SUPPLY AND DEMAND QUANTITIES

Consider the following example.

Example 2
Wanjiru books supplies is a firm dealing with import of books and it has three stores strategically
situated around the country. Yesterday the company received orders to supply 100 books from 4
schools, of the books ordered the firm has 110 books in stock. The firm wishes to minimize cost
and its seeking your advice, advise.
Page 25 of 28
Kenya Institute of Management DCM623: Operations Management

Below is a table of availability and requirement;

Required
Sch. A Sch. B Sch. C Sch. D Total
Books 25 25 42 8 100
Store I 40 Sh.3 16 9 transport
Store II 20 Sh.1 9 3 8 costs per
Available Store III 50 Sh.4 5 2 5 Book
Total 110

Solution
Step 1: add a dummy destination to table 5 with zero transport costs and requirements equal to
the surplus availability.

Required
Sch. A Sch. B Sch. C Sch. D Dummy Total
Books 25 25 42 8 10 100
Store I 40 Sh.3 16 9 0 transport
Store II 20 Sh.1 9 3 8 0 costs per
Available Store III 50 Sh.4 5 2 5 0 Book
Total 110

Step 2. Now that the quantity available equals the quantity required (because of insertion of the
dummy) the solution can proceed in exactly the same manner described in the first
example. First set up an initial feasible solution

Requirement
A B C D Dummy
25 25 42 8 10
I 40 5(4) 17(6) 8(3) 10(7)
Available II 20 20(1)
III 50 8(5) 42(2)

The numbers in the table represent the allocations made and the numbers in brackets represent
the sequence they were inserted based on lowest cost and the necessity to maintain row/column
totals. The residue of 10 was allocated to the dummy. The cost of this allocation is
Sh. Sh.
I→A 5 units @ 3 15
I→B 17 units @ 16 272
I→D 8units @ 2 16
I→Dummy 10 units @ zero cost
II→A 20 units @ 1 20
III→B 8 units @ 5 40
III→C 42 units @ 2 84
447

Page 26 of 28
Kenya Institute of Management DCM623: Operations Management

Step 3. Check solution to see if it represents the minimum cost possible in the same manner as
previously described i.e.
Dispatch & Reception Costs of used routes:

D(I) + R(A) =3
D(I) + R(B) = 16
D(I) + R(D) =2
D(I) + R(Dummy) = 12
D(II) + R(A) =1
D(III) + R(B) =5
D(III) + R(C) =2

Setting D(I) at zero the following values are be obtained

R(A) =3 D(I) =0
R(B) =16 D(I) =-2
R(C) =13 D(III) =-11
R(D) =2
R(Dummy) =0

Using these values the shadow costs of the unused routes can be calculated .The unused routes
are I:C,II:B,II:C,II:D,II:Dummy,III:D,and Dummy

Shadow
Costs
£
D (I) + R(C) = 0+13 =13
D (II). + R (B) = -2+16 =14
D (II). + R(C) = -2+13 =11
D (II) + R (D) = -2+ 2 =0
D (II) + R (Dummy) = -2+0 =-2
D (III) + R (A) = -11+3 =-8
D (III) + R (D) = -11+2 =-9
D (III) + R (Dummy) = -11+0 =-11

The shadow costs are then deducted from actual costs

It will be seen that total cost can be reduced by £8 per unit for every unit that can be transferred
into Cell II:C

Step4.Make the maximum possible allocation of deliveries into Cell II:C.This is done by
inserting a sequence of +and -,maintaining row and column totals.

Requirements
A B C D Dummy
25 25- 42 8 10
I 40 5+ 17- 8 10

Page 27 of 28
Kenya Institute of Management DCM623: Operations Management

Available II 20 20-
III 50 8+ 42-

The maximum transferable number is the lowest number in the minus cell, i.e. 17. after the
transfer is made we get;

A B C D Dummy
25 25- 42 8 10
I 40 22 0 8 10
Available II 20 3 17
III 50 25 25

Step 3 is repeated again to check if the cost is minimum after setting D(I) = 0.

In our case after deducting shadow costs from actual costs we find that there are no more
negative numbers thus we deduce from the last table that the minimum transportation cost is,

(22×3) + (8×2) + (10×0) + (3×1) + (17×3) + (25×5) + (25×2) = Sh.311

Maximization using Transportation

Transportation problems are usually minimizing problems, on occasions problems are framed so
that the objective is to make the allocations from sources to destinations in a manner which
maximizes contribution or profit. These problems are dealt with similar to minimizing problems
but the reverse of it. i.e.
a) Make initial feasible allocation on basis of maximum contribution first, then next highest and
so on.
b) For optimum, the differences between actual and shadow contributions for the unused routes
should be all negative. If not, make allocation into cell with the largest positive difference.
c) In case there are more items available than are required, a dummy destination with zero
contribution should be introduced and the maximizing procedure in a). followed

Page 28 of 28