CHAPTER FOUR

4.1.1. Facility Location and layout

Facility location may be defined as a place where the facility will be set up for producing goods
or services. The need for location selection may arise under any of the following conditions:
a. When a business is newly started.
b. When the existing business unit has outgrown its original facilities and expansion is not
possible; hence a new location has to be found.
c. When the volume of business or the extent of market necessitates the establishment of
branches.
d. When the lease expires and the landlord does not renew the lease.
e. Other social or economic reasons.
4.1.2. Need for Facility Location Planning
 Facility location planning is also required for providing a cost benefit to the organization.
 The location planning should help in reducing the transportation cost for the organization. This
ultimately helps in decreasing the cost of production and generating cost advantage for the
organization.
 It is also needed to identify proximity to the sources of raw materials and transportation
facilities.
 A facility should ideally be located at a place where raw materials are available. This is
necessary for maintaining continuity in the production process.
4.1.3. Factors Affecting Facility Location Decisions
While selecting a facility location, an organization should consider various factors that may have
significant impact on its performance. These factors are explained below:
➢ €Availability of power
➢ Transportation
➢ Suitability of climate
➢ Government policy
➢ Competition between states
➢ Availability of labor
Civic amenities for workers
➢ Existence of complementary and competing industries
➢ Finance and research amenities
➢ Availability of water and fire-fighting facilities.
Procedures and Techniques for Selecting Facility Location
 An organization follows certain steps to make a correct location choice. These steps are:
I. Decide on the criteria for evaluating location alternatives
II. Identify important factors Develop location alternatives
III. Evaluate the alternatives
IV. Make a decision and select the location
Following are some main techniques used in making location decisions:
➢ Location rating factor technique: In this technique, first of all an organization needs to
identify the factors that influence its location decision. Next, each factor is provided a weight
between ‘0’ to ‘1’ according to the level of importance, where ‘0’ denotes least important and ‘1’
denotes most important.
➢ Centre-of-gravity technique: This technique emphasizes on transportation cost in the
determination of facility location. Transportation cost mainly depends on distance, weight of
merchandise and the time required for transportation. Centre-of-gravity maps various supplier
locations on a Cartesian plane and suggests a central facility location with respect to the
locations of suppliers.
➢ Transportation technique: In simple words, the transportation technique evaluates multiple
transportation routes of shipping goods from multiple origins to multiple destinations and finds
or develops the least cost route. The technique is often used in determining facility locations for
evaluating transportation costs of routes by selecting different facility locations. In the
transportation technique, multiple facility locations fits are identified and their relative
transportation costs are calculated. Finally, the location that is related to the lowest cost routes is
selected.
IV.2. Concept of Facility Layout
Facility layout may be defined as the arrangement of machinery, equipment, and other amenities
in a facility, which should ensure a smooth movement of materials.  According to Moore,
facility layout is the plan of or the act of planning an optimum arrangement of facilities,
including personnel, operating equipment, storage space, material handling equipment, and all
other supporting services along with the design of the best structure to contain these facilities.
 Facility layout decision entails determining the placement of departments, workstations,
machines, and stockholding points within a productive facility.
The general objective of layout decision is to ensure a smooth flow of work, material,
people, and information through the system.
Layout decisions are important for three basic reasons:
(1) They require substantial investments of money and effort,
(2) They involve long-term commitments, which make mistakes difficult to overcome, and
(3) They have a significant impact on the cost and efficiency of short-term operations.
The Need for Layout Decisions
The need for layout planning arises both in the process of designing new facilities and in
redesigning existing facilities. The most common reasons for redesign of layouts include:
1. Inefficient operations (e.g., high cost, bottlenecks).
2. Accidents or safety hazards.
3. Changes in the design of products or services.
4. Introduction of new products or services.
5. Changes in the volume of output or mix of outputs.
6. Changes in methods or equipment.
7. Changes in environmental or other legal requirements.
8. Morale problems (e.g., lack of face-to-face contact).
Facility Layout Objective
A model facility layout should be able to provide an ideal relationship between raw material,
equipment, manpower and final product at minimal cost under safe and comfortable
environment. An efficient and effective facility layout can cover following objectives:
 To provide optimum space to organize equipment and facilitate movement of goods and
to create safe and comfortable work environment.
 To promote order in production towards a single objective
 To reduce movement of workers, raw material and equipment
 To promote safety of plant as well as its workers
 To facilitate extension or change in the layout to accommodate new product line or
technology upgradation
 To increase production capacity of the organization
An organization can achieve the above-mentioned objective by ensuring the following:
 Better training of the workers and supervisors.
 Creating awareness about of health hazard and safety standards
 Optimum utilization of workforce and equipment
 Encouraging empowerment and reducing administrative and other indirect work
Objectives of an Effective Facility Layout
A. Minimum Material Handling
B. Elimination of Bottlenecks
C. Shorter Production Cycles
D. Reduction in Production Delays
E. Improved Quality Control
F. Efficient Utilization of Labor
G. Improved Employee Morale
4.2.2 Strategic importance of layout decisions
An effective layout can help a firm to achieve the following:
1. Higher utilization of space, equipment, and people.
2. More convenience to the customer.
3. Improved employee morale and safer working conditions
4. Minimize material handling costs
5. Eliminate bottlenecks
6. Facilitate communication and interaction between workers, between workers and
supervisors, or between workers and customers
7. Reduce manufacturing cycle time and customer service time
8. Eliminate wastage or redundant movement
9. Facilitate the entry, exit, and placement of material, products, and people
10. Incorporate safety and security measures
11. Encourage proper maintenance activities
12. Provide a visual control of activities
13. Provide flexibility to adapt to changing conditions and Increase capacity
IV.2.1. Types of layouts
There are four basic layout types: process, product, hybrid, and fixed position. In this section we
look at the basic characteristics of each of these types. Then we examine the details of designing
some of the main types.
A. Process layouts
Process layouts: are layouts that group resources based on similar processes or functions. This
type of layout is seen in companies with intermittent processing systems.
Process layout, also called functional layout or batch production layout, is characterized by the
grouping together of similar machines, based upon their operational characteristics.
You would see a process layout in environments in which a large variety of items are
produced in a low volume.
Since many different items are produced, each with unique processing requirements, it is
not possible to dedicate an entire facility to each item.
It is more efficient to group resources based on their function. The products are then
moved from one resource to another, based on their unique needs.
The challenge in process layouts is to arrange resources to maximize efficiency and
minimize waste of movement. If the process layout has not been designed properly, many
products will have to be moved long distances, often on a daily basis.
Process layouts are very common. A hospital is an example of process layout.
Departments are grouped based on their function, such as cardiology, radiology,
laboratory, oncology, and paediatrics. The patient, the product in this case, is moved
between departments based on his or her individual needs.
A university is another example. Colleges and departments are grouped based on their
function. You, the student, move between departments based on the unique program you
have chosen.
Advantage of process layout
 Flexibility of equipment and labour assignment
 Breakdown of one machine does not stop the whole process
Disadvantage of process layout
 Orders take more time and money
 High labour skill increases required level of training and experience
Recall that process layouts are designed to produce many different items, often to customer
specifications. To achieve this goal, they have certain unique characteristics:
1. Resources used are general purpose. The resources in a process layout need to be capable of
producing many different products.
2. Facilities are less capital intensive. Process layouts have less automation, which is typically
devoted to the production of one product.
3. Facilities are more labor intensive. Process layouts typically rely on higher-skilled workers
who can perform different functions.
4. Resources have greater flexibility. Process layouts need to have the ability to easily add or
delete products from their existing product line, depending on market demands.
5. Processing rates are slower. Process layouts produce many different products, and there is
greater movement between workstations. Consequently, it takes longer to produce a product.
6. Material handling costs are higher. It costs more to move goods from one process to another.
7. Scheduling resources is more challenging. Scheduling equipment and machines is particularly
important in this environment. If it is not done properly, long waiting lines can form in front of
some work centers while others remain idle.
8. Space requirements are higher. This type of layout needs more space due to higher inventory
storage needs.
Improper design of process layouts can result in costly inefficiencies, such as high
material handling costs. A good design can help bring order to an environment that might
otherwise be very chaotic.
B. Product Layouts
Product layouts are layouts that arrange resources in a straight-line fashion to promote efficient
production. In product layout, also called straight line layout, machinery is arranged in one line
as per the sequence of production operations. Materials are fed into the first machine and
finished products come out of the last machine.
They are called product layouts because all resources are arranged to meet the production
needs of the product.
This type of layout is used by companies that have repetitive processing systems and
produce one or a few standardized products in large volume.
 Examples of product layouts are seen on assembly lines, in cafeterias, or even at a car
wash. In product layouts the material moves continuously and uniformly through a series
of workstations until the product is completed.
The challenge in designing product layouts is to arrange workstations in sequence and
designate the jobs that will be performed by each station in order to produce the product
in the most efficient way possible.
Advantage of product layout
 High rate of output
 Low unit due to high volume
 Labor specialization reduces training costs and time
 High utilization of labour and equipment
Disadvantage of product layout
 Poorly skilled workers exhibit little interests in maintaining equipment or in the
quality of output
 The system is inflexible in response to changes in the volume of output or changes in
product or process design.
Remember that product layouts are designed to produce one type or just a few types of products
in high volume. Product layouts have the following characteristics:
1. Resources are specialized. Product layouts use specialized resources designed to produce large
quantities of a product.
2. Facilities are capital intensive. Product layouts make heavy use of automation, which is
specifically designed to increase production.
3. Processing rates are faster. Processing rates are fast, as all resources are arranged in sequence
for efficient production.
4. Material handling costs are lower. Due to the arrangement of work centers in close proximity
to one another, material handling costs are significantly lower than for process layouts.
5. Space requirements for inventory storage are lower. Product layouts have much faster
processing rates and less need for inventory storage.
6. Flexibility is low relative to the market. Because all facilities and resources are specialized,
product layouts are locked into producing one type of product. They cannot easily add or delete
products from the existing product line.
The differences between process and product layouts
Process layouts Product layout
Able to produce a large number of Able to produce a small number of
different products products efficiently
Resource used are general purpose Resource used are specialized
Facilities are more labour intensive Facilities are more capital intensive
Greater flexibility relative to the Low flexibility relative to the market
market
Slower processing rate Processing rates are faster
High material handling cost Lower material handling cost
Higher space requirements Lower space requirements

C. Combination (hybrid) layout

Hybrid layouts combine aspects of both process and product layouts. This is the case in
facilities where part of the operation is performed using an intermittent processing system and
another part is performed using a continuous processing system. It is difficult to use the
principles of product layout, process layout, or fixed location layout in facilities that involve
fabrication of parts and assembly. Fabrication tends to employ the process layout, while
assembly areas often employ the product layout.
D. Fixed-position layout
Fixed-position layout is used when the product is large and cannot be moved due to its size.
This type of facility layout is used to assemble products that are too large, heavy or fragile to
move to a location for completion. In the fixed position layout, machinery, men, as well as other
pieces of material, are brought to the location where the product is to be assembled.
All the resources for producing the product including equipment, labour, tools, and all
other resources have to be brought to the site where the product is located.
Examples of fixed-position layouts include building construction, dam or bridge
construction, shipbuilding, or large aircraft manufacture. The challenge with a fixed-
position layout is scheduling different work crews and jobs and managing the project.
E. Cellular manufacturing layout: In Cellular Manufacturing (CM) layout, machines are
grouped into cells, which function somewhat like a product layout in a larger shop or a process
layout. Each cell in the CM layout is formed to produce a single part family, that is, a few parts
with common characteristics.
Designing product layout
Recall that product layouts arrange resources in sequence so that the product can be made as
efficiently as possible. This type of layout is used in repetitive processing systems that produce a
large volume of one standardized product.
Line balancing - the process of assigning tasks to workstations in a product layout in order to
achieve a desired output and balance the workload among stations.
Factors affecting Facility Layout

Facility layout designing and implementation is influenced by various factors. These factors vary
from industry to industry but influence facility layout. These factors are as follows:

 Materials
 Product Machinery
 Type of Industry
 Management Policies
 The design of the facility layout should consider overall objectives set by the
organization.
 Optimum space needs to be allocated for process and technology.
 A proper safety measure as to avoid mishaps.
 Overall management policies and future direction of the organization

Prerequisites for Developing a Facility Layout

 Developing process charts: A process chart is the graphical representation of production

activities performed by an organization. Process charts facilitate a systematic analysis and
demonstration of the entire production process. These charts are further classified into two
categories, namely operation process chart and flow process chart.

 Making process flow diagrams: A process flow diagram represents the movement of
materials on a floor layout. These diagrams help an organization in avoiding needless material
movement and rearranging facility operations.
 Developing machine data cards: A machine data card helps in developing equipment layout
(pieces of equipment layout in relation to everything including the persons using them) by
providing information related to power and materials handling requirements and capacity and
dimensions of different machines.

 Visualizing the layout: It represents the most common technique that is deployed for layout
planning. It involves creating duplication of machines and equipment and arranging them in two-
or three-dimensional plans for determining the effectiveness of a layout.

1. Process of Facility Layout Designing

2. Information Gathering
3. Production and Material Flow Analysis
4. Support Services
5. Implementation and Evaluation

Design of Facility Layout

Principles which drive design of the facility layout need to take into the consideration objective
of facility layout, factors influencing facility layout and constraints of facility layout. These
principles are as follows:

 Flexibility: Facility layout should provide flexibility for expansion or modification.

 Space Utilization: Optimum space utilization reduces the time in material and people
movement and promotes safety.

 Capital: Capital investment should be minimal when finalizing different models of

facility layout.

Design Layout Techniques

There are three techniques of design layout, and they are as follows:

1. Two or Three Dimensional Templates: This technique utilizes development of a

scaled-down model based on approved drawings.
 2. Sequence Analysis: This technique utilizes computer technology in designing the facility
layout by sequencing out all activities and then arranging them in circular or in a straight
line.

3. Line Balancing: This kind of technique is used for assembly line.

Revision of a Current Layout

 The following developments necessitate the revision of the existing layout:

I. Expansion
II. Technological Advancement
III. Improvement of the Layout
IV.3. Service Facility Layouts

The objectives of service facility layouts differ from those of manufacturing facility layouts. 
This is because a manufacturing facility aims to make on-time delivery of products to customers,
whereas customers come to a service facility to receive services. Therefore, customers usually
prefer a service facility that is close to them, especially when the service delivery process
requires considerable customer contact. For example, if you are hungry, you would prefer to go
to a restaurant near you.

Service facility layouts are often categorized under three heads, which are:

➢ Product layout: This type of layout is used only in cases where services are organized in a
sequence.

➢Process layout: These layouts are highly common in-service facilities as they successfully deal
with the varied customer processing requirements.

➢ Fixed position layout: In this type of service layout, materials, labor and equipment are
brought to the customer’s place. This layout is used in services like appliance repair,
landscaping, home re modelling, etc.

➢ Warehouse and storage layouts: The layouts of warehouse and storage facilities are designed
by considering the frequency of order. Items that are ordered frequently are placed near the
facility entrance. However, items that are not ordered frequently are placed at the rear of the
facility. Apart from this, correlation between two merchandises is also important while designing
a layout for a warehouse and storage facility.

➢ Retail layouts: A retail store layout refers to a systematic arrangement of merchandise groups
within a store. A well-planned retail store layout provides a description of the size and location
of each department of the store, fixture locations, and traffic patterns. It also helps consumers
find products of their choice in a short time. Different retail layouts are:

Grid layout
Free-form layout
Loop layout
Spine layout

➢ Office layouts: Designing of office layouts is witnessing revolutionary changes as paperwork

is now replaced with different modes of electronic communications. Today, office layouts focus
more on creating an image of openness. Low-rise partitions are preferred between departments to
facilitate easy communication among workers.