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FACILITY SELECTION

Process Selection

�A process is a group of related tasks with specific inputs andoutputs.

�Process design defines what tasks need to be done and howthey are to be coordinated among functions, people, andorganizations.

�Process strategy is an organization’s overall approach forphysically producing goods and providing services.

�Vertical integration� Capital intensity� Process flexibility�Customer involvement

�Process planning determineshow a product will be producedor a service provided.

� Product-process choice is a balance betweenvariety,flexibility, and volume with acceptable unit cost & coststructure.

�The position of a process on the volume–variety continuumshapes its overall design and the general approach to managingits activities. These ‘general approaches’ to designing andmanaging processes are calledprocess types.

Process Selection in Manufacturing

Jobbing process

Project Process

Batch Process

Variety

Volume

Manufacturing process types

Low

Low High

High

Repeated/Divided

Diverse/Complex

Continuous

Intermittent

Process Tasks

Process Flow

Mass Process

Continuous Process

Process Types in Manufacturing

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� Project Process�One-of-a-kind production of a product to customer order.

�Example: shipbuilding, most construction companies, movieproduction companies, large fabrication operations such asthose manufacturing turbo generators, installing a computersystem.

� Jobbing Process� A job shop is the producer of unique products of an

individual nature according to customer's design andspecifications.

�Example: print shop, emergency room, specialisttoolmakers, furniture restorers, tailors.

�Batch Process�Systems process many different jobs through the system ingroups or batches.�Example: machine shops, bakeries, education, machine toolmanufacturing, the production of some special gourmet frozenfoods, the manufacture of most of the component parts whichgo into mass-produced assemblies such as automobiles.

�Assembly Process�Produces large volumes of a standard product for a massmarket.�Example: automobile, televisions, most food processes, DVDproduction.

�Continuous Process�Used for very-high volume commodity products.�Example: paint, chemical, steel & heavy, petrochemicalrefineries, electricity utilities, paper making

Criteria Project Jobbing Batch Mass Continuous

Flow of product No flow Jumbled flowDisconnected

line flowConnected line

flowContinuous flow

Type of Product UniqueMake –to-order,

one of a kindMake-to-order

Assemble-to-order

Make-to-stock

Type of customer

One at a time Few individual Few individual Mass market Mass market

Product demand Infrequent Fluctuates Fluctuates Stable Very stableDemand volume

Very low low Low to medium High Very high

Variety Infinite variety Large, varied Many, varied Limited Very limited

Standardization Highly customized CustomizedSemi-

standardizeStandardize

Highly standardize

Labor skill Low to high High Moderate Low Low to highEquipment Varied General purpose General purpose Special purpose Special purposeFixed cost Varied Low Moderate High Very high

Variable cost High High Moderate Low Very lowWork-in-process

inventoryVariable High High Low Low

AdvantagesCustom work,

latest technology

Able to handle a wide variety of

work

Flexibility, quality

Efficiency,speed,

Low cost

Highly efficient,large capacity,ease of control

DisadvantagesNon-repetitive, small customer base, expensive

Slow, high cost per unit, complex

planning and scheduling

Costly, slow,difficult toManage

High capitalInvestment,

lack ofresponsiveness

Difficult to change,

far-reaching errors,

limited variety

� Service process selection has two dimensions,

� Degree of interaction and customization ability of theclient to affect specialization.

� Degree of labor intensity the ratio of labor cost to capitalcost.

�A low level can be highly standardized but a high levelcannot be highly standardized.

Process Selection in Service

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Service Shops

Professional Services

Mass Services

Service process types

Low

High

Low

High

Interaction and

CustomizationLabour Intensity

Variety

Volume

Low

Low High

High

Process Types in Service �Professional services�Have the lowest efficiency because each case requires a great deal ofinteraction with the customer.�Example: management consultants, lawyers’ practices, architects,doctors’ surgeries, auditors, health and safety inspectors and somecomputer field service operations.

�Mass services�Have a lower efficiency than the service factory because of the lowerautomation.�Example: banks, high street shops, holiday tour operators,car rentalcompanies, schools, most restaurants, hotels and travel agents.

�Service shop�Interaction and customization is increased, but those can use a highdegree of automation. (somewhat analogous to the job shop).�supermarkets, a national rail network, an airport, telecommunicationsservices, libraries, television stations, the police service and the enquirydesk at a utility.

Product-Process Matrix

� Facility layout refers to the arrangement of activities, processes,departments, workstations, storage areas, aisles, and common areaswithin an existing or proposed facility.

�To a large extent the objectives of any layout will depend on the strategic objectives of the operation, but there are some general objectives which are relevant to all operations:

•Inherent safety•Length of flow•Clarity of flow•Staff conditions•Management coordination•Accessibility•Use of space•Long-term flexibility

Layout of Facilities

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Basic Layout Types

Process layout in service

Product Layout

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Fixed Position Layout

� Product remains stationary, and workers, materials andequipment are moved.

� Typical to Project.

� Product is fragile, bulky or heavy to move.

� Requires high skilled labor.

� Equipment utilization low.

� Fixed cost low, but variable cost high.

Cellular Layout

�Cellular layouts attempt to combine the flexibility of a process layoutwith the efficiency of a product layout.

�A cellular layout is based on the concept of group technology(GT)where dissimilar machines are grouped into work centers, called cells, toprocess parts with similar shapes or processing requirements.

�Cellular layouts identify families of parts with similar flow paths andsimilar shapes or processing requirements.

�Advantages of cellular layouts include reduced material handling andtransit time, reduced setup time, reduced work-in-processinventory,better use of human resources, easier to control, easier to automate.

�Disadvantages of cellular layouts include inadequate partfamilies,poorly balanced cells, expanded training and scheduling ofworkers,increased capital investment.

Key:Key:

SS = Saw= SawLL = Lathe= LatheHMHM = Horizontal milling machine= Horizontal milling machineVMVM = Vertical milling machine= Vertical milling machineGG = Grinder= Grinder

Paths of three Paths of three workers moving workers moving within cellwithin cell

Material Material movementmovement

InIn OutOutWorker 1Worker 1

Worker 2Worker 2

Worker 3Worker 3

Direction of part movement within cellDirection of part movement within cell

S

L

HM

VM

G

VM

L

Final inspection

Finished part

Cellular layout in manufacturing

The volume–varietycharacteristics of theoperation will, to alarge extent, narrowthe choice down toone or two layoutoptions.

What Type of Layout Should an Operations Choose?

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The decision as towhich layout typeto adopt will beinfluenced by anunderstanding oftheir relativeadvantages anddisadvantages.

The most generally significant are the unit cost implications oflayout choice distinguishing between fixed and variable costs.

Location Selection

�Decisions regarding where to locate a business facility orplant are not made frequently, but they tend to be crucial interms of a firm’s profitability and long-term survival.

� Location choice have impact on investment requirements,operating costs, revenues, and operations.

�Location decisions are usually made more frequently forservice operations than manufacturing facilities.

�Location decisions for services tend to be an important partof the overall market strategy for the delivery of their productsor services to customers.

� Strategic importance to supply chain for manufacturing.

Reasons for Location Decisions

�Changes in Demand

�Changes in Supply

The Objectives of The Location Decisions

�The spatially variable costs of the operation (spatiallyvariable means that something changes with geographicallocation).

�The service the operation is able to provide to its customers.

�The revenue potential of the operation.

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Regional Factors in Location Selection

�Labour

�Raw material

�Proximity to customers

�Taxations and legal restrictions

�Climate

�Political strategic considerations

�Free trade zones

�Trading blocks

Site Related Factors in Location Selection

�Availability of suitable land

�Transport facilities

�Infrastructure

�Image of the site

Community Related Factors in Location Selection

�Environmental impact and effluent disposal

�Local community considerations�capital movement restrictions�government financial assistance�government planning assistance�political stability�local attitudes to ‘inward investment’�language�local amenities (schools, theatres, shops, etc.)�availability of support services�history of labour relations and behaviour�environmental restrictions and waste disposal�planning procedures and restrictions.

�Business Climate

�Competitive Advantage

Location Analysis Techniques

� Identify important factors.

� Weight factors (0.00 - 1.00).

� Subjectively score each factor (0 - 100).

� Sum weighted scores.

Factor Rating Method

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The Dynaco Manufacturing Company is going to build a new plant to Manufacture ring bearings (used in automobiles and trucks). The site selection team is evaluating three sites, and they have scored the important factors for each as follows. They want to use these ratings to compare the locations.

Scores (0 to 100) Location Factor Weight Site1 Site2 Site3

Labor pool and climate 0.30 80 65 90Proximity to suppliers 0.20 100 91 75Wage rates 0.15 60 95 72Community environment 0.15 75 80 80Proximity to customers 0.10 65 90 95Shipping modes 0.05 85 92 65Air service 0.05 50 65 90

Example 1

� Locate facility at center of geographic area.

� Based on weight and distance traveled establish grid-mapof area.

� Identify coordinates and weights shipped for each location.

� The center is found by calculating the (x,y) coordinates.

Center-of-Gravity Technique

where,where,xx, , y y == coordinates of new facility coordinates of new facility

at center of gravityat center of gravityxxii, y, yii == coordinates of existing coordinates of existing

facility facility iiWWii == annual weight shipped from annual weight shipped from

facility facility ii

∑∑∑∑∑∑∑∑nn

WWiii = i = 11

∑∑∑∑∑∑∑∑ xxiiWWiii = i = 11

nn

x =x =

∑∑∑∑∑∑∑∑nn

WWiii = i = 11

∑∑∑∑∑∑∑∑ yyiiWWiii = i = 11

nn

y =y =

xx11 xx22 xx33 xx

yy22

yy

yy11

yy33

1 (1 (xx11, , yy11), ), WW11

2 (2 (xx22, , yy22), ), WW22

3 (3 (xx33, , yy33), ), WW33

Example 2

The Burger Doodle restaurant chain purchases ingredients from,four different food suppliers. The company wants to construct a newcentral distribution center to process and package the ingredientsbefore shipping them to their various restaurants. The supplierstransport ingredient items in40-foot truck trailers, eachwith acapacity of 38000 lb. The locations of the four suppliers, A,B, C,and D, and the annual number of trailer loads that will betransported to the distribution center are given as follows. Using thecenter-of-Gravity Method, determine a possible location for thedistribution center.

A B C DXA=200 XB=100 XC=250 XD=500YA=200 YB=500 YC=600 YD=300WA=75 WB= 105 WC=135 WD=60