University of Southern California
Department of Industrial and Systems Engineering
ISE 310L Production I; Facilities and Logistics
Spring 2000
January Lecture Handouts
Dr. Ardavan Asef-Vaziri
Notes on chapters 1, 2, 14
Facilities Planning
Facilities Planning deals with the design of industrial plants. It start with analysis of the
Product and end up with the plan of the factory to manufacture the proposed product. The
outcome of this process is a set of drawings and procedures.
Although in this course we talk about manufacturing plants, all ideas, principles,
and procedures are similarly applied to service industry.
Facilities design engineer have to
design
Size
Location
Orientation
of all physical sub-systems of the plant.
from Macro level to micro level.
Two examples of micro level design are work station layout and cell layout.
Two examples of macro level are block layout and Site plan.
Let us start from macro level;
Regarding the whole plant
a) Plant Location
Important factors in plant location
Location
Orientation
Size
1-Location of raw material
Raw material oriented factories; weight of input >>> weight of output
Iron ore
Steel plant
Iron & Steel
Coal
Alumina
Coal
Aluminum plant
Aluminum
Electricity
These types of plants tends to be closer to the raw material resources. Indeed row
material or any other important input. For example, in the case of aluminum industry, the
most important input is electricity, it dominates all other raw material.
2-Location of market
Market oriented plants;
Space required for output >>> space required for input.
Car manufacturing
Appliances
3-Climate; nuclear plants
Dept.
1
Dept.
2
Dept.
4
Dept.
3
Dept.
5
Dept.
6
Dept.
7
Dept.
8
A block layout
A machine layout
A site plan
A work station detail design
4-Availability of labor, electricity, water, ……
Aluminum plant is strongly dependent to the electricity
Blast furnace is requires a high flow of water
5-Regional regulations
financial support
construction costs
………..
6-Cost of leaving
health care
education,
……………….
b) Plant Orientation
or
Important factors in defining the appropriate orientation of the plant
1-Locatiion of infrastructure facilities.
2-green area, landscape
3-Direction of rain, wind, ………….
c) Plant Size
To define the size of the plant, we first have to identify the size of its sub-systems
Manufacturing plant
Service subsystems
Production subsystems
1- Production subsystems
Production
Cellular layout
Product layout
Process layout
Part family B
Product A
(Refrigerator)
re
Assembly
Product B
(Dryer)
re
Painting
Part family A
Machining
Turning
Grinding
Milling
Manufacturing work stations
Concept of classification of parts into groups
2- Service Sub-systems
Services
Plant services
Production services
Administrative services
Personnel services
Production Services
Storage
Receiving
Shipping
Warehouse
Engineering
Product
design
Process
design
Industrial
Engineering
Facilities
planning
Production service work stations
Capacity
planning
Personnel services
Recreation services
Health care
Food services
Personnel services work stations
Administrative
services
Purchasing
Accounting
Management
Sales & marketing
Accounts
receivable
Assets
Accounting
Accounts
payable
Administrative work stations
Cost
accounting
Plant services
Compressors
Sewage treatment
Power plant
Water tanks
Plant services work stations
Size
Designs
Location
Orientation
Plant
work stations
In this bi-directional and repetitive process, from micro to macro, from macro to
micro and in all intermediate subsystems, the following issues should be addressed.
0-Given a specific physical subsystem
1-What factors play an important role in the size of this subsystem
2-What is the appropriate size
3-What factors play an important role in the location of this subsystem
4-Where is the appropriate location
5-What factors play an important role in the orientation of the subsystem
6-What is the appropriate orientation of this subsystem
For example, location of service activities are determined based on their relationships
with each others. i.e. Managerial offices close to conference room, away from kitchen.
For example, orientation of work stations are defined based on the integration of the flow
within the work stations and general flow pattern
Work
station
Work
station
Poor
Good
Orientation of work station with respect to the general flow pattern
Service area orientation, for example, managerial offices oriented towards landscape.
Objectives of Facilities planning
1-Reduce Material Handling
- Move in straight lines, shortest routes
- Directly to the next station
- As soon as possible
- From receiving smoothly towards shipping
2-Increase Flexibility
-Change in customer preferences
-Technological revolution
Minor changes
New model
New product
New processes
New material
New machines
Manufacturing
Material handling
3-Reduce investment in land / building / equipment, and operating costs
4-Improve working condition and safety to increase employee loyalty, employees are
asset not cost. In the JIT philosophy, employees have the most important role in the
success of the enterprise
Scope of facilities planning
The enclosed 3 column generating table shows the extend of facilities planning activities.
A combination of 3 words each from one column creates a potential activity in facilities
planning.
Some combinations are
-Allocate auxiliary service budget
-Analyze building requirements
-Classify warehousing facilities
-Coordinate transportation activities
-Design equipment layout
-Develop flow system
-Evaluate process costs
-Measure manufacturing capacities
-Minimize material flow
-Estimate construction costs
Some combinations of 3 columns are the same. Some combinations are meaningless.
Notes on Chapter 3
Product design
Market research
Break-even analysis
Process design
Schedule design
Product design
Value analysis
Tools for product definition
Break-Even Analysis
Variable costs
Fixed costs
Market research
4 key pieces of information for facilities design
Process design
Make or buy decision
Graphical tools for process representation
Route sheet
Volume variety (ABC) analysis
Schedule design
Scrap analysis
Machine requirement planning
Product Design
From one point of view, facilities planning is a transformation process. It transforms a
product (or a group of products) into a manufacturing plant.
Product
Facilities Planning and Design
Plant
It is a function which images a product into a plant
Plant = f ( Product)
y = f (x)
Domain of x : parts, components,….
Domain of y : Machines, material handling equipment, RM, WIP, FG, operators, etc
The product engineer defines the general characteristics of the product in terms of
appearance, function, material, quality [performance, conformance, reliability (quality
over time), extra features], process consideration. These general features are later
translated into engineering specifications such as dimensions, tolerances, hardness, etc…
A simplified representation of product design process:
Management
Marketing
Engineering
Screening
Minor Changes
Major Changes
New Model
New Product
Definition
General
Function
Engineering
Appearance
Rough characteristic
Physical/chemical
Properties
Dimensions
Tolerances
Value Analysis
Following the product design, product engineer, process engineer, industrial engineer,
purchasing and marketing managers participate in a process known as value analysis or
value engineering.
Each part of the product is analyzed in deep details to find ways to retain the
quality of the part at the same level or higher, while making it in a cheaper way. Ways
like
-Substitute expensive row material with less expensive ones.
-Find row material with their initial shape closer to the final shape of the part.
-Relax tolerances.
Less expensive machine
Less assembly time
Relax tolerances
Less material
Less scrap
Less machinery
Less labor
Tools for product identification
1-Model (prototype)
-Physical (wood, actual material, …)
-Graphic (on computer)
2-Pictorial representation
-Exploded assembly drawing
-Exploded parts photograph
3-Drawings
4-Parts list
5-Product tree
Parts list
Product name : A
Part #
Description
# of parts / product
Raw material
Remarks
Each department may add its own field of interest to the common fields of the parts list.
-Product engineering; may record substitutable material
-Process engineering; may record Make/Buy decision
-Purchasing; may record suppliers, price at best time to purchase
Market research
Facilities design engineer requires 4 key pieces of information from market research
1-Present demand
2-Demand trend
3-Seasonality
4-Time horizon of forecasting
1-Present demand
Low demand
Simple technology
Job shop, process layout
General purpose machines
Intermediate demand
Group Technology
Cellular manufacturing
Moderate technology
High demand
Sophisticated and capital intensive technology
Mass production techniques
Special purpose machines
Product layout
The facility designer needs 4 main pieces of information regarding the market. The first
piece was present demand, and we need it to decide about capacity of the plant. The other
pieces of information are,
2-Future trend
Demand
-be prepared for expansion
-buy more land
-If you are on the boarder
points of the break-even
graph, select the right hand
side alternative
-be prepared for product
diversification
-buy general purpose and
more flexible machines
Time
3-Seasonality
Demand
Time period ( 1 year, 1 week, etc)
Time period ( 1 year, 1 week, etc)
Seasonally means fluctuations of demand over a time period.
Why facility planner needs information regarding the seasonally of demand?
Higher seasonally means higher inventory, more space (land and building) for Raw
Material, WIP, and Finished Goods inventory.
4-Horizon of forecasting
10 years
2 years
Are we able to forecast for a long period or only for a short period?
If horizon of forecasting is low, then we should make an agile plant. If we can predict a
long period in future with acceptable confidence interval, then we may design a more
targeted layout.
Market demand and break even analysis are quite related. Let's have a quick review on
BEA.
Break-Even Analysis
Manufacturing costs are divided into 2 main group; Fixed costs, variable costs
Fixed costs
Rent, property tax, property insurance, wage of permanent employees, depreciation
(except in working hour depreciation)
These costs are fixed throughout the year, they do not depend on the production level.
When we have a plant, then the above costs are fixed, no matter we produce one unit or
one million units.
Fixed costs
per unit of
production
(F/Q)
Total fixed
costs (F)
Production volume (Q)
Production volume (Q)
In reality they are not completely fixed, usually we have semi-fixed cost.
Total fixed
costs (F)
Production volume (Q)
However, in BEA we assume they are fixed (at least over the manufacturing range that
we are concerned with).
Variable costs
Costs of raw material, packaging material, direct labor, machine utilities are main
variable costs.
These costs are fixed per unit of production. The total variable costs depend on the
production level. The higher the production, the higher the total variable costs.
Variable costs per
unit of production
(V)
Production volume (Q)
Total variable costs (TV)
Production volume (Q)
The total revenue depends on the production level. The higher the production, the higher
the total variable costs. In BEA, it is assumed that price of product is fixed.
Price per unit (P)
Total revenue (TR)
Production (and sales ) volume (Q)
Production (and sales) volume (Q)
Therefore, the overall break-even analysis can be pictorially represented in the following
graph
Profit
Total costs (F+VQ)
BEP: F+VQ=PQ
loss
Total revenue (PQ)
Production (and sales) volume (Q)
TC=TR
TC=F+VQ
TR=PQ
F+VQ=PQ
QBEQ = F/ (P-V)
Example
500,000$ total yearly fixed costs.
150$ / unit variable costs
200$ / unit sale price
QBEQ=500000/(200-150) =10000 units
If our market research indicates that the present demand is > 10000, then this
manufacturing system is economically feasible.
Break-even analysis for multiple alternatives.
Such an analysis is implemented to compare say
A Simple technology, an Intermediate Technology, and an Advanced technology.
General purpose machines, Multi-purpose machines, and Special purpose machines
Process layout, Cellular layout, and Production line layout.
In general more advanced technology or more special purpose technology means higher
fixed costs and lower variable costs
Product layout
Cellular layout
Process layout
Q1
Q2
An example of a physical model of a product
An example of exploded diagram
Component part drawing of a plunger
Component part drawing of a seat
Air flow
regulator
Level 0
A-3
1
1
Main
assembly
Pipe
plug
A-2
1
1
Lock
nut
Body
assembly
4250
Level 2
A-1
1
1
Body
Seat
ring
3250
O-ring
3255
Level 1
1025
Plunger
3252
Plunger
assembly
2200
Spring
3253
Plunger
housing
3254
O-ring
3251
Level 3
SA-1
Plunger
retainer
Level 4
4150
An example of product tree
Capacity Planning
Factors influencing capacity
Market
Budget
Standard size of machinery
Material, water and power, expertise, ….requirements
Relationship between production costs and capacity
Short term average cost: diminishing marginal product
Long term average cost: economy and diseconomy of scale, dinosaur effect
Process design
Make / Buy decision
Some companies have complete vertical integration; they manufacture all their parts.
Some others buy every thing and just assemble them.
Most companies are some where between two extremes of this continuum.
Make or buy decision is made after value analysis and mostly by the same people
involved in value analysis.
In the final analysis we should know whether it is techno-economically better to make the
part or buy it.
-Is the required process compatible with other processes?
-Do we have the knowledge and expertise to run this process?
-Do we have extra capacity to allocate to this process?
-Do we have the required budget to invest in this process?
-Does the process reaches its BEP?
-Is manufacturing costs lower than sub-contracting?
The product is identified, its parts are identified, the make / buy decision is made. The
next question is how to manufacture each part?
Process design is a transformation process.
Process Design
Parts list
Production routing
It is a function which maps parts list into production routing.
Parts list has the name of the product at title, and the specifications of parts at rows.
Production routing has the name of a part at title, and the operations required to make
the part at its rows.
Production Routing
Part name : 101
Operation #
Description
Machine
Pictorial tools to represent processes
-Assembly chart
-Operations process chart
-Precedence diagram
Standard time
Machine capacity
A-1
A-2
SA-1
SSA-1
A-3
SA-2
A-4
A-1 : A part is assembled to the main part.
A-2 : Several parts are assembled together to the main assembly.
SA-1 : Several parts are sub-assembled, then assembled to main assembly.
SSA-1 : Several parts are sub-assembled, then another part is sub-assembled to them, then they
all are assembled to the main sub-assembly.