Session Summary-Operation Management
Week
Subject
Content
Gunadarma University
:4
: LOCATION PLANNING & FACILITY LAYOUT
:
LOCATION PLANNING
WHAT
Facility location plan is determining the best geographic location for a company’s facility.
WHY NEED PLAN
Require long-term commitments in buildings & facilities, which means that mistakes can be difficult to
correct.
These decisions require sizable financial investment & can have a large impact on operating costs &
revenues.
WHY NEED NEW LOCATION
Business activity centre movement
Better facility
Residential area movement
Additional capacity requirement
Community culture movement
Competition
Government regulation
Operation Cost
A. DETERMINING LOCATION
There is no one best location for a facility, but acceptable locations.
The business nature will determine which factors in deciding location: service & manufacturing,
1. FACTORS INFLUENCING DETERMINING LOCATION
a. Proximity to Sources of Supply, with reasons
has no choice
perishable nature of goods
to avoid high transportation costs
b. Proximity to Customer
High accessible to their customers, service company
Perishable nature of goods
To avoid high transportation costs
c. Proximity to Source of Labor
blue-collar vs skilled labor
Local wage rates, the presence of local unions, & attitudes of local workers.
Labor Productivity
o Wage rates are not the only cost
o Lower production may increase
total cost
Bekasi
Wonosobo
d. Community Considerations
Communities welcome new businesses if viewing them as providing benefit sources (tax
revenues, jobs, & as contributing to the overall well-being of the community
Communities do not want businesses that bring pollution, noise, & traffic & that lower the
quality of life.
e. Site Considerations
for a particular location include factors such as utility costs, taxes, zoning restrictions, soil
conditions, & even climate.
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Session Summary-Operation Management
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2. DETERMINING LOCATION PROCESS
Step 1 : Identify Dominant Location Factors that are dominant for the business. This requires
managerial judgment & knowledge.
Step 2 : Develop Location Alternatives.
Step 3 : Evaluate Location Alternatives.
A. EVALUATE LOCATION ALTERNATIVES : FACTOR RATING
Steps:
1. Identify dominant factors
2. Assign weights to factors reflecting the importance of each factor relative to the other
factors. The sum of these weights must be 100.
3. Select a scale by which to evaluate each location relative to each factor. A commonly used
scale is a five-point scale, with 1 being poor & 5 excellent.
4. Evaluate each alternative relative to each factor, using the scale selected in.
5. For each factor & each location, multiply the weight of the factor by the score for that factor
& sum the results for each alternative.
6. Select the alternative with the highest score.
B. Example :
Pecel Lele Lela is evaluating three different locations for restaurant. Costs are comparable at all
three locations. He has identified seven factors that he considers important & has decided to use
factor rating to evaluate his three location alternatives based on a five-point scale, with 1 being
poor & 5 excellent. Table below shows the factors, the weights he has assigned to each factor, as
well as the factor score for each factor at each location.
B. EVALUATE LOCATION ALTERNATIVES : THE LOAD–DISTANCE MODE
A procedure for evaluating location alternatives based on distance.
Formula :
! "# "# where
"# = load between i & j
"# = distance
Step 1 Identify Distances with Rectilinear distance The shortest distance between two points
measured by using only north–south & east–west movements
$% &'$ ( '% & ) &$ ( % &
Example coord location A (30, 40) & B (10, 15) then
$% &* ( & ) &+ ( & +
Step 2 Identify Loads.
Step 3 Calculate the Load–Distance Score for Each Location.
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Session Summary-Operation Management
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Example : Indomaret want to open 2 warehouse serving 4 cities Jakarta, Cirebon, Tasik,
Sukabumi. 2 possible sites is Bandung & Bogor
o Step 1 Identify Distances with grid map
Step 2 Identify Loads.
Step 3 Calculate the Load–Distance Score for Each Location.
CHOOSE THE MINIMUM : BOGOR!
C. EVALUATE LOCATION ALTERNATIVES : THE CENTER OF GRAVITY APPROACH
The load–distance model to find other locations that may give an even lower load–distance
score than Bogor by testing the location at the center of gravity of the target area. The X & Y
coordinates that give us the center of gravity for a particular area are computed in
! '"
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,-. " /0-. "
! "
! "
Cg = center of gravity
Example
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+
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1
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+
,-. edwin_rachmat@staff.gunadarma.ac.id
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Session Summary-Operation Management
Gunadarma University
D. EVALUATE LOCATION ALTERNATIVES COST ANALYSIS
Break-even analysis Technique used to compute the amount of goods that must be sold just to
cover cost, then the factors under consideration can be expressed in terms of costs.
2 3 ) 4 dan 25 4
F = fixed cost
3
4
c = variable cost /unit
(
Q = number of units sold
P = Price/unit
Steps :
o Step 1: For Each Location, Determine Fixed & Variable Costs
o Step 2: Plot the Total Costs for Each Location on One Graph.
o Step 3: Identify Ranges of Output for Which Each Location Has the Lowest Total Cost.
o Step 4: Solve Algebraically for the Break-Even Points over the Identified Ranges.
Example :
Lejel home shopping is is considering four possible
sites for its new operation. The annual fixed & variable
costs for each site have been estimated as follows:
If demand is expected to be 10,000 units per year,
which is the best location?
Step 2: Plot the Total Costs for Each Location on One Graph.
See the approximate ranges for each location, by
finding the exact output level for which locations C
& B are equal & for which locations B & A are equal.
26 2%
2% 2$ 7
7 8 ) +4
8 ) 4 8 ) 4 7 4
*8 ) 4 7 4 +8
18s
The breaking point between B & A is 9000 units,
which means that location A would provide the
lowest cost if we produce 9000 units or more. If we
plan to meet a demand of 10,000 units, we should
select location A.
E. EVALUATE LOCATION ALTERNATIVES : TRANSPORTATION MODEL
The transportation method of linear programming can be used to solve specific location problems
It is discussed in your Operation Research Course.
---o0O0o--LAYOUT
WHAT Layout planning = Deciding on the best physical arrangement of all resources that consume space
within a facility.
WHY
Proper layout planning
To increase productivity
cuts costs by eliminating unnecessary Higher utilization of space, equipment, & people
steps
Improved flow of information, materials, or people
increasing efficiency
Improved employee morale & safer working conditions
improving worker attitude
Improved customer/client interaction
creating a positive organizational climate Flexibility
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Session Summary-Operation Management
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Four basic layout types consisting of;
Type
Description
Process layouts Group similar resources together
Product layouts Designed to produce a specific product efficiently
Hybrid layouts
Combine aspects of both process & product layouts
Fixed-Position
Product is too large to move; e.g. a building
Factors
Resource
Facilities
Space
Requirement
Flexibility
relativeness
to market
Processing
Rates
Material
Handling
Cost
Process Layout
General Purpose
Need to be capable of producing many
different products.
Labor intensive
Rely on higher-skilled workers who can
perform different functions.
High
This type of layout needs more space
due to higher inventory storage needs.
High
easily add or delete products from their
existing product line, depending on
market demands.
Slow
Produces many different products, &
there is greater movement between
workstations. Consequently, it takes
longer to produce a product.
Higher
It costs more to move goods from one
process to another.
Example
Hospital, university
Assembly line, car wash, cafetaria
Hypermart
Hambalang, Boeing
Product Layout
Specialized
Uses specialized resources designed to
produce large quantities of a product.
Capital Intensive
make heavy use of automation, which is
specifically designed to increase production.
Low
Product layouts have much faster processing
rates & less need for inventory storage
Low
Product layouts have much faster processing
rates & less need for inventory storage
Fast
as all resources are arranged in sequence for
efficient production.
Lower
Due to the arrangement of work centers in
close proximity to one another, material
handling costs are significantly lower than for
process layouts.
A. PROCESS LAYOUTS
Process layouts are layouts that group resources based on similar processes or functions
Challenge : to arrange resources to maximize efficiency & minimize waste of movement.
DESIGNING PROCESS LAYOUTS
Step 1 Gather information.
Identify Space Needed by each of the organization’s Identify Available Space using Block plan
Schematic showing the placement of resources
key resources
in a facility.
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Session Summary-Operation Management
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Using REL chart : Table that reflects opinions of Identify Closeness Measures to fulfil the
managers with regard to the importance of having importance of proximity between resource
any two departments close together.
Using From–To Matrix with daily trips made
between each pair of departments
Step 2 Develop a block plan or schematic of the layout using Trial & Error then load-distance
model or using software
Step 3 Develop a detailed layout.
SPECIAL CASES OF PROCESS LAYOUT
Warehousing & Storage Layouts
Objective is to optimize trade-offs between
handling costs & costs associated with
warehouse space
Material Handling Costs = All costs associated
with the transaction (Incoming transport,
Storage, Finding & moving material, Outgoing
transport, Equipment, people, material,
supervision, insurance, depreciation)
Maximize the total “cube” of the warehouse
– utilize its full volume while maintaining low
material handling costs
Minimize damage & spoilage
Office Layout
Proximity versus Privacy
Grouping of workers, their equipment, &
spaces to provide comfort, safety, &
movement of information
Movement of information is main distinction
Flexible layouts Layouts that remain desirable
many years into the future or can be easily
modified to meet changing demand.
B. PRODUCT LAYOUTS
Layouts that arrange resources in sequence (a straight-line) to allow for an efficient buildup of the
product.
They are called product layouts because all resources are arranged to meet the production needs of the
product. In product layouts the material moves continuously & uniformly through a sequence of
operations until the work is completed.
DESIGNING PRODUCT LAYOUTS
Step 1: Identify Tasks & Their Immediate Predecessors,
o focus on time each task takes to perform & task sequence.
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Session Summary-Operation Management
Step 2: Determine Output Rate
o Output rate The number of units we wish to produce over a specific period of time.
o If Gian wants to produce 60 pizzas in an hour
Step 3: Determine Cycle Time
o The maximum amount of time each workstation has to complete its assigned tasks.
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Step 4: Compute the Theoretical Minimum Number of Stations
o Theoretical minimum umber of stations number of stations needed to achieve 100% efficiency
(every second is used)
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Step 5: Assign Tasks to Workstations (Balance the Line)
Step 6: Compute Efficiency, Idle Time, & Balance Delay
Efficiency (%) is the ratio of total productive Balance delay (%) is the amount by which the line
time divided by total time
falls short of 100%
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Other Considerations
° Shape of the Line, The actual shape of the line can be an S shape, a U shape, an O, or an L
° Paced versus Unpaced Lines, Paced line (with movin belt/conveyor)
° Number of Product Models Produced, Single vs mixed -model line : line designed to produceonly
one /mixed version of a product. Example : Supra X & Fit
C. HYBRID LAYOUTS
Combine aspects of both process & product layouts to bring the efficiencies of a product layout to a
process layout environment
Group Technology (Cell) Layouts
° Group technology is the process of creating
groupings of products based on similar processing
requirements. place all the resources needed for
each group in a separate area, called a cell
° The first picture is a process layout with different
product routes for the many products a company
produces.
° The second picture shows the implementation of
group technology in that environment.
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Session Summary-Operation Management
Gunadarma University
Supermarket Retail Layout
° Objective is to maximize profitability per square foot of floor space
° Sales & profitability vary directly with customer exposure
° Locate high-draw items around the periphery of the store
° Use prominent locations for high-impulse & high-margin items
° Use end-aisle locations
D. FIXED-POSITION LAYOUTS
A layout in which the product cannot be moved due to its
size & all the resources have to come to the production site.
Example : building construction, dam or bridge construction,
shipbuilding, or large aircraft manufacture
BUILDING
Single Floor Bulding
Multifloor Buildings
Flexible/expandable
Not spacious, expandable to up
Easy Man Material movement
Good for service & office with limited
Good for heavy equipment (installation,
production machine
operation) & mass production with conveyor
Attractive to consumer
Easy supervision
Motivate employee
More space, lightning, ventilation needed
High cost (additional for lift)
Less aestethic
Difficult to expand
Difficult material handling/no conveyor
Difficult supervision
Safety & security
INFLUENCING FACTORS IN BUILDING DEVELOPMENT/FACILITY
Cost
Internal Communicatiopn system
Security
Space requirement (machine, raw mat, service, overhead etc)
Material Handling tool & equipment
Reference
Reid, R & Sanders, N.R., 2002, Operations Management an Integrated Approach 4th Ed., John Wiley &
Sons, Inc., NJ
Heizer Render, 2004, Principles of Operations Management, 5e, Prentice Hall, Inc., N.J.
EXERCISE
Shoeless Joe is a specialty retailer that is deciding
where to locate its new facility. The annual FC & VC
for each site have been estimated in the table.
If demand is
expected to be
2000
units,
which location
is best?
edwin_rachmat@staff.gunadarma.ac.id
An assembly line is
designed to produce 50
unit/hour
with
the
Information in the table.
Draw
a
precedence
diagram and compute
the Cycle Time (in sec), the Theoretical Minimum
Number of stations & the percentage of efficiency &
balance delay!
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Session Summary-Operation Management
edwin_rachmat@staff.gunadarma.ac.id
Gunadarma University
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