1.7 PLANT LAYOUT
Plant Layout, also known as layout of facility refers to the configuration of departments, work-centres and
equipment and machinery with focus on the flow of materials or work through the production system.
Plant layout or facility layout means planning for location of all machines, equipments, utilities, work
stations, customer service areas, material storage areas, tool servicing areas, tool cribs, aisles, rest rooms,
lunch rooms, coffee/tea bays, offices, and computer rooms and also planning for the patterns of flow of
materials and people around, into and within the buildings. Layout planning involves decisions about the
physical arrangement of economic activity centres within a facility. An economic activity centre can be
anything that consumes space, a person or group of people, a machine, a work station, a department, an
aisle, a store room and so on. The goal or layout planning is to allow workers and equipments to operate
more effectively.
The questions to be addressed in layout planning are:
• HOW much space and capacity does each centre need?
• How should each center’s space be configured?
• What centres should the layout include?
• Where should each centre be located?
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The location of a centre has two dimensions:
• Absolute location or the particular space that the centre occupies within the facility.
• Relative location i.e., the placement of a centre relative to other centers.
The importance of layout decisions:
The need for layout planning arises both in the process of designing new plants and the redesigning existing
plants or facilities.
Most common reasons for design of new layouts are:
(i) Layout is one of the key decisions that determine the long-run efficiency in operations.
(ii) Layout has many strategic implications because it establishes an organisation’s competitive priorities
in regard to capacity, processes, flexibility and cost as well as quality of work life, customer contact
and image (in case of service organisations).
(iii) An effective layout can help an organisation to achieve a strategic advantage that supports
differentiation, low cost, fast response or flexibility.
(iv) A well designed layout provides an economic layout that will meet the firm’s competitive requirements.
Need for redesign of layout arises because of the following reasons:
• Accidents, health hazards and low safety,
• Changes in environmental or legal requirements,
• Changes in processes, methods or equipments,
• Changes in product design/service design,
• Changes in volume of output or product-mix changes,
• Inefficient operations (high cost, bottleneck operations),
• Introduction of new products/services,
• Low employee morale.
Good Plant layout- Objectives:
• Efficient utilisation of labour reduced idle time of labour and equipments,
• Higher flexibility (to change the layout easily),
• Higher utilisation of space, equipment and people (employees),
• Improved employee morale and safe working conditions,
• Improved flow of materials, information and people (employees),
• Improved production capacity,
• Reduced congestion or reduced bottleneck centers,
• Reduced health hazards and accidents,
• Reduced material handling costs,
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• To allow ease of maintenance,
• To facilitate better coordination and face-to-face communication where needed,
• To improve productivity,
• To provide ease of supervision,
• To provide product flexibility and volume flexibility,
• To utilise available space efficiently and effectively.
Choices of Layout:
Layout choices can help greatly in communicating an organisation’s product plans and competitive priorities.
Layout has many practical and strategic implications. Altering a layout can affect an organisation and how
well it meets its competitive priorities by:
• Facilitating the flow of materials and information,
• Improving communication,
• Improving employee morale,
• Increasing customer convenience and sales (in service organisations such as retail stores),
• Increasing the efficient utilisation of labour and equipment,
• Reducing hazards to employees.
The type of operations carried out in a firm determines the layout requirements.
Some of the fundamental layout choices available to managers are:
• Whether to plan the layout for the current or future needs?
• Whether to select a single-story or multistory building design?
• What type of layout to choose?
• What performance criteria to emphasise?
Factors influencing layout choices:
Primarily the layout of a plant is influenced by the relationship among materials, machinery and men.
Other factors influencing layout are type of product, type of workers, the type of industry, management
policies etc.
Some of these factors are discussed in detailed below:
• Location: The size and type of the site selected for the plant, influences the type of buildings (single
story or multi story) which in turn influences the layout design. Also, the location of the plant
determines the mode of transportation from and into the plant (such as by goods trains, truck, or
ships) and the layout should provide facilities for mode of transport used. Also, the layout should
provide for storage of fuel, raw materials, future expansion needs, power generation requirements
etc.
• Machinery and Equipments: The type of product, the volume of production, type of processes and
management policy on technology, determines the type of machines and equipments to be installed
which in turn influence the plant layout.
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• Managerial Policies: regarding volume of production, provision for future expansion, extent of
automation, make-or-buy decisions, speed of delivery of goods to customers, purchasing and inventory
policies and personnel policies influence the plant layout design.
• Materials: Plant layout includes provision for storage and handling of raw materials, supplies and
components used in production. The type of storage areas, racks, handling equipments such as cranes,
trolleys, conveyors or pipelines etc., used - all depend on the type of materials used - such as solid,
liquid, light, heavy, bulky, big, small etc.
• Product: The type of product i.e., whether the product is light or heavy, big or small, liquid or solid
etc., it influences the type of layout. For example, Ship building, Aircraft assembly, Locomotive
assembly etc., requires a layout type different from that needed to produce refrigerators, cars, scooters,
television sets, soaps, detergents, soft drinks etc. The manufacturing process equipments and machines
used and the processing steps largely depend on the nature of the product and hence the layout
design depends, very much on the product.
Type of Industry:
Figure : Type of Industry Process
I is intermittent type of industry
C is continuous type of industry
Whether the industry is classified under (a) Synthetic, (b) Analytical, (c) Conditioning and (d) Extraction
industries and again whether the industry has intermittent production or continuous production has a
relevance to the type of layout employed.
• Workers : The gender of employees (men or women), the position of employees while working (i.e.,
standing or sitting), employee facilities needed such as locker rooms, rest rooms, toilets, canteens,
coffee/tea bays etc., are to be considered while designing the plant layouts.
Plant Layout- Principles:
The layout selected in conformity with layout principles should be an ideal one. These principles are:-
• Principle of Minimum Travel: Men and materials should travel the shortest distance between operations
so as to avoid waste of labour and time and minimise the cost of materials handling.
• Principle of Sequence: Machinery and operations should be arranged in a sequential order. This principle
is best achieved in product layout, and efforts should be made to have it adopted in the process
layout.
• Principle of Usage: Every unit of available space should be effectively utilised. This principle should
receive top consideration in towns and cities where, land is costly.
Industry
Synthetic Analytical Conditioning Extractive
I C I C I C I C
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• Principle of Compactness: There should be a harmonious fusion of all the relevant factors so that the
final layout looks well integrated and compact.
• Principle of Safety and Satisfaction: The layout should contain built in provisions for safety for the
workmen. It should also be planned on the basis of the comfort and convenience of the workmen so
that they feel satisfied.
• Principle of Flexibility: The layout should permit revisions with the least difficulty and at minimum
cost.
• Principle of Minimum Investment: The layout should result in savings in fixed capital investment,
not by avoiding installation of the necessary facilities but by an intensive, use of available facilities.
Types of Layout:
A layout essentially refers to the arranging and grouping of machines which are meant to produce goods.
Grouping is done on different lines. The choice of a particular line depends on several factors. The methods
of grouping or the types of layout are:
(i) Process layout or functional layout or job shop layout; (ii) Product layout or line processing layout or
flow-line layout; (iii) Fixed position layout or static layout; (iv) Cellular manufacturing (CM) layout or
Group Technology layout and (v) Combination layout or Hybrid layout.
Process Layout:
Also called the functional layout, layout for job lot manufacture or batch production layout, the process
layout involves a grouping together of similar machines in one department. For example, machines
performing drilling operations are installed in the drilling department; machines performing turning
operations are grouped in the turning department; and so on. In this way, there would be an electroplating
department, a painting department, a machining departments and the like, where similar machines
or equipments are installed in the plants which follow the process layout. The process arrangement is
signified by the grouping together of like machines based upon their operational characteristics. For example,
centre lathes will be arranged in one department, turret lathes in a second department, and milling machines
in a third departments.
Figure of Prosses Layout
A quantity of raw material is issued to a machine which performs the first operation. This machine may be
situated anywhere in the factory. For the next operation, a different machine may be required, which may
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be situated in another part of the factory. The material should be transported to the other machine for the
operation. Thus, material would move long distances and along crisscrossing paths. At one stage, the
material may be taken to a separate building, say, for heat treatment, and then brought back for grinding.
If machines in one department are engaged, the partly finished product awaiting operations may be taken
to the store and later reissued for production. Partly finished goods would be waiting for processing in
every department, like commuters waiting for buses in a city.
Machines in each department attend to any product that is taken to them. These machines are, therefore,
called general purpose machines. Work has to be allotted to each department in such a way that no machine
in any department is idle. In a batch production layout, machines are chosen to do as many different jobs
as possible, i.e., the emphasis is on general purpose machines. The work which needs to be done is allocated
to the machines according to loading schedules, with the objective of ensuring that each machine is fully
loaded. The process layout carries out the functional idea of Taylor and from the historical point of view,
process layout precedes product layout. This type of layout is best suited for intermittent type of production.
While grouping machines according to the process type, certain principles must be kept in mind. These
are:
• Convenience for inspection.
• Convenience for supervision. Process layout may be advantageously used in light and heavy
engineering industries, made-to-order furniture industries and the like.
• The distance between departments needs to be as short as possible with a view to avoiding longdistance
movement of materials.
• Though similar machines are grouped in one department, the departments themselves should be
located in accordance with the principle of sequence of operations. For example, in a steel plant, the
operations are smelting, casting; rolling etc. These different departments may be arranged in that
order to avoid crossovers and backtracking of materials.
Product Layout:
Also called the straight-line layout or layout for serialised manufacture, the product layout involves the
arrangement of machines in one line depending upon the sequence of operations. Material is fed into the
first machine and finished products come out of the last machine. In between, partly finished goods move
from machine to machine, the output of one machine becoming the input for the next. In a sugar mill,
sugar cane, fed at one end of the mill comes out as sugar at the other end. Similarly, in paper mill, bamboos
are fed into the machine at one end and paper comes out at the other end.
In product layout, if there are more than one, line of production, there are as many, lines of machines. The
emphasis here, therefore, is on special purpose machines in contrast to general purpose machines, which
are installed in the process layout. Consequently, the investment on machines in a straight line layout is
higher than the investment on machines in a functional layout.
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Figure of Product Layout
The grouping of machines should be done, on product line, keeping in mind the following principles:
• All the machine tools or other types of equipment must be placed at the point demanded by the
sequence of operations.
• All the operations, including assembly, testing and packing should be, included in the line.
• Materials may be fed where they are required for assembly but not necessarily all at one point; and
• There should be no points where one line crosses another line;
The product layout may be advantageously followed in plants manufacturing standardised products on a
mass scale such as chemical, paper, sugar, rubber, refineries and cement industries.
Layout in the form of Fixed Position:
As the term itself implies, the fixed position layout involves the movement of men and machines to the
product which remains stationary. In this type of layout, the material or major component remains in a
fixed location, and tools, machinery and men as well as other pieces of material are brought to this location.
The movement of men and machines to the product is advisable because the cost of moving them would
be less than the cost of moving the product which is very bulky.
Also called static layout, this type is followed in the manufacture, if bulky and heavy products, such as
locomotives, ships, boilers, air crafts and generators.
Product (Ship) Ship
Assembly
Material
Machine
M en
Too ls
To be moved towards
the material
Mixed Layout or Combined Layout:
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The application of the principles of product layout, process layout or fixed location layout in their strict
meanings is difficult to come across. A combination of the product and process layouts, with an emphasis
on either, is noticed in most industrial establishments. Plants are never laid out in either pure form. It is
possible to have both types of layout in an efficiently combined form if the products manufactured are
somewhat similar and not complex.
Fig. Component flow in combined layout
Layout of Service Facility:
The fundamental difference between service facility and manufacturing facility layouts is that many service
facilities exist to bring together customers and services. Service facility layouts should provide for easy
entrance to these facilities from freeways and busy thoroughfares. Large, well organized and amply lighted
parking areas and well designed walkways to and from parking areas are some of the requirements of
service facility layouts.
Because of different degree of customer contact, two types of service facility layouts emerge, viz., those
that are almost totally designed around the customer receiving and servicing function (such as banks) and
those that are designed around the technologies, processing of physical materials and production efficiency
(such as hospitals).
Other facilities with reference to Plant Layout:
A plant layout involves, besides the grouping of machinery, an arrangement for other facilities as well.
Such facilities include receiving and shipping points, inspection facilities, employee facilities and storage.
Not all the facilities are required in every plant. The requirements depend on the nature of the product
which is manufactured in a particular plant.
Importance of layout:
The importance of a layout can be described as under:
• Avoidance of Bottlenecks: Bottlenecks refer to any, place in a production process where materials
tend to pile up or produced at rates of speed less rapid than the previous or subsequent operations.
Bottlenecks are caused by inadequate machine capacity, inadequate storage space or low speed on
the part of the operators. The results of bottlenecks are delays in production schedules, congestion,
accidents and wastage of floor area. All these may be overcome with an efficient layout.
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• Avoidance of Unnecessary and Costly Changes: A planned layout avoids frequent changes which are
difficult and costly. The incorporation of flexibility elements in the layout would help in the avoidance
of revisions.
• Better Production Control: Production control is concerned with the production of a product of the
right type at the right time and at reasonable cost. A good plant layout is a requisite of good production
control and provides the plant control officers with a systematic basis upon which to build organisation
and procedures.
• Better Supervision: A good plant layout ensures better supervision in two ways: (a) Determining the
number of workers to be handled by a supervisor and (b) Enabling the supervisor to get a full view of
the entire plant at one glance. A good plant layout is, therefore, the first step in good supervision.
• Economies in Handling: Nearly 30 per cent to 40 per cent of the manufacturing costs are accounted for
by materials handling. Every effort should, therefore, be made to cut down en this cost. Long distance
movements should be avoided and specific handling operations must he eliminated.
• Effective Use of Available Area: Every unit of the plant area is valuable, especially in urban areas.
Efforts should be therefore, be made to make use of the available area by planning the layout properly.
• Improved Employee Morale: Employee morale is achieved when workers are cheerful and confident.
This state of mental condition is vital to the success of any organisation. Morale depends on better
working conditions; better employee facilities; reduced number of accidents; and increased earnings.
• Improved Quality Control: Timely execution of orders will be meaningful when the quality of the
output is not below expectations. To ensure quality, inspection should be conducted at different stages
of manufacture. An ideal layout provides for inspection to ensure better quality control.
• Improved Utilisation of Labour: A good plant layout is one of the factors in effective utilisation of
labour. It makes possible individual operations, the process and flow of materials handling in such a
way that the time of each worker is effectively spent on productive operations.
• Minimisation of Production Delays: Repeat order and new customers will be the result of prompt
execution of orders. Every management should try to keep to the delivery schedules.
• Minimum Equipment Investment: Investment on equipment can be minimised by planned machine
balance and location, minimum handling distances, by the installation of general purpose machines
and by planned machine loading. A good plant layout provides all these advantages.
Good Layout - Characteristics:
• Effective coordination and integration among men, materials and machinery to maximise utilisation
and output.
• Facilitates supervision and control.
• Flexibility for change of layout, expansion, changes in product design and process.
• Good working conditions - lighting, ventilation, temperature, humidity etc., are as per requirements.
• Maximum utilisation of available space.
• Proper location of storage areas.
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• Provision of safety and reduction of accidents.
• Smooth flow of production (i.e., raw materials and workers).
• Smooth movement of men, materials and machinery from place to place.
Layout planning and design:
The layout process starts with an analysis of the product to be manufactured and the expected volume of
its production. An analysis of the product includes a study of the parts to be manufactured and/or bought
and the stages at which they should be assembled to obtain the end product (i.e., finished product). The
volume of production is estimated based on the demand and the installed capacity.
For a given product, at a desired volume of production the most appropriate process is determined. The
process which is selected, in turn determines the type of equipments or machinery that would be required
to manufacture the product at ‘given volume. The type of machines or equipments could be of general
purpose or special purpose depending on the number of products produced (i.e., a standard product or a
product-line or product-mix) and the volume of production (i.e., batch production, mass production or
continuous production). The type of production determines the type of layout which is most suitable to
the type of production and the process selected. The capacity planning determines the number of machines
of each type required to produce a given volume of the product or products. The modern trend is to go for
advanced manufacturing technology and automation with a trend to use capital intensive production
facilities rather than labour-intensive. This results in increased production, better quality products, higher
productivity, shorter manufacturing cycles and reduced interruptions in production due to labour problems
etc.
Once the process and equipments needed to carryout the process are determined, the number of direct
operators and indirect labour for activities such as planning, material handling, quality control , maintenance,
industrial engineering, tool room, tool servicing etc., are determined. The facility planning and design
must take into consideration the space requirements for all the direct and indirect facilities including,
equipments, machinery, labour, inspection areas, storage areas, utilities and services and so on. Once all
these requirements are planned, the Civil Engineers, Architects, Plant Engineering personnel all work
together to prepare the Blue prints for the layout design of manufacturing shops and the entire plant.
Problems & Solutions
Problem: 1
A company is planning to undertake the production of medical testing equipments has to decide on the
location of the plant. Three locations are being considered, namely, A, B and C. The fixed costs of three
locations are estimated to be Rs. 300 Lakhs, 500 Lakhs and 250 Lakhs respectively. The variable costs are
Rs. 3000, Rs. 2000 and Rs. 3500 per unit respectively. The average sales price of the equipment is Rs. 7000
per unit. Find
(i) The range of annual production/sales volume for which each location is most suitable.
(ii) Select the best location, if the sales volume is of 18,000 units.
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Solution:
Determination of total costs of three locations.
Total cost = Fixed cost + [volume or quantity produced] × [variable cost]
= F + x.v where ‘x’ is the quantity to be produced.
a. Total cost at A = 3,00,00,000 + 3,000x ....................................................... (1)
b. Total cost at B = 5,00,00,000 + 2,000x ....................................................... (2)
c. Total cost at C = 2,00,00,000 + 3,500x ....................................................... (3)
For the various volumes of production, i.e., 5,000, 10,000, 15,000, 20,000 and 25,000 units, the total costs are
computed at the three locations and they are plotted as shown in figure.
Table: Total costs at different volumes for three locations
(Rs. in Lakhs)
Volume (Nos) 5,000 10,000 15,000 20,000 25,000
A 450 600 750 900 1,050
B 600 700 800 900 1,000
C 425 600 775 950 1,125
Decision Rules
For quantities upto 20,000 units, C is the most economical location. For quantities above 22,000, A is the
preferred location.
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Problem: 2
The present layout is shown in the figure. The manager of the department is intending to interchange the
departments C and F in the present layout. The handling frequencies between the departments is given.
All the departments are of the same size and configuration. The material handling cost per unit length
travel between departments is same. What will be the effect of interchange of departments C and F in the
layout?
A C E
B D F
From / To A B C D E F
A – 0 90 160 50 0
B – – 70 0 100 130
C – – _ 20 0 0
D – – – _ 180 10
E – – – – 40
F – – – – – –
From / To A B C D E F
A 1 1 2 2 3
B 2 1 3 2
C 1 1 2
D 2 1
E 1
F –
(ii) Computation of total cost matrix (combining the inter departmental material handling frequencies
and distance matrix.
From / To A B C D E F Total
A 0 90 320 100 0 510
B 140 0 300 260 700
C 20 1 0 20
D 360 10 370
E 40 40
F –
Total 1,640
If the departments are interchanged, the layout will be represented as shown below.
A C E
B D F
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The distance matrix and the cost matrix are represented as shown.
From / To A B C D E F
A 1 3 2 2 1
B 2 1 3 2
C 1 1 2
D 2 1
E 1
F
Total cost matrix for the modified layout.
From / To A B C D E F Total
A – 0 270 320 100 0 690
B 140 0 300 260 700
C 20 1 0 20
D 360 10 370
E 40 40
F –
Total 1,820
The interchange of departments C and F increases the total material handling cost. Thus, it is not a
desirable modification.
Problem: 3
A defence contractor is evaluating its machine shops current process layout. The figure below shows
the current layout and the table shows the trip matrix for the facility. Health and safety regulations
require departments E and F to remain at their current positions.
E B F
A C D
Current Layout
From / To A B C D E F
A 8 3 9 5
B - 3
C - 8 9
D - 3
E - 3
F -
Can layout be improved? Also evaluate using load distance (ld) score.
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Solution:
Keep the departments E and F at the current locations. Because C must be as close as possible to both
E and F, put C between them. Place A directly south of E, and B next to A. All of the heavy traffic
concerns have been accommodated. Department D is located in the remaining place. The proposed
layout is shown in figure below. The load distance (ld) scores for the existing and proposed layout are
shown below. As Id score for proposed layout is less, the proposed layout indicates improvement
over existing.
E C F
A B D
Proposed Layout
Dept. Pair No. of Existing plan Proposed plan
Trips Distance Load × Distance Distance Load × Distance
(1) (2) (1 × 2) (3) (1 ×3)
A–B 8 2 16 1 8
A–C 3 1 3 2 6
A–E 9 1 9 1 9
A–F 5 3 15 3 15
B–D 3 2 6 1 3
C– E 8 2 16 1 8
C–F 9 2 18 1 9
D–F 3 1 3 1 3
E–F 3 2 6 2 6
Total 92 67
Problem: 4
Location A would result in annual fixed cost of Rs. 3,00,000 variable costs of Rs. 63 per unit and
revenue Rs. 68 per unit. Annual fixed cost at Location B are Rs. 8,00,000 variable costs are Rs. 32 per
unit and revenues are Rs. 68 per unit. Sales volume is estimated to be 25000 units/year, which location
is attractive?
Solution:
Location A: BEP (units) =60,000 and Location B: BEP (units) =22,222.
At the expected demand of 25000 units, profits (loss) for the alternatives are:
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Alternatives
Location B is most attractive, even though annual fixed costs are much higher than A.
Problem: 5
A manufacturer is considering four locations for a new plant. It has attempted to study all costs at the
various locations and find that the costs of the following items vary from one location to another. The
firm will finance the new plant from deposits bearing 10 percent interest.
A B C D
Labour (Rs. per unit) 0.75 1.10 0.80 0.90
Plant (Rs. crores) 0.46 0.39 0.40 0.48
Materials & equipment * (Rs. per unit) 0.43 0.60 0.40 0.55
Electricity (per year) (Rs.) 30.00 26.00 30.00 28.00
Water (per year) (Rs.) 7.00 6.00 7.00 7.00
Transportation (per unit) (Rs.) 0.02 0.10 0.10 0.05
Taxes (per year) (Rs.) 33.00 28.00 63.00 35.00
* This cost includes a projected depreciation, but no interest.
Determine the most suitable location (economically) for output volumes in the range of 50,000 to
1,30,000 units per year.
Costs A B C D
Fixed Cost (per year) :
10% of investment 4,60,000 3,90,000 4,00,000 4,80,000
Electricity 30,000 26,000 30,000 28,000
Water 7,000 6,000 7,000 7,000
Taxes 33,000 28,000 63,000 35,000
Total Fixed Cost 5,30,000 4,50,000 5,00,000 5,50,000
Variable Cost :
Labour 0.75 1.10 0.80 0.90
Material & equipment 0.43 0.60 0.40 0.55
Transportation 0.02 0.10 0.10 0.05
Total Variable Cost (per unit) 1.20 1.80 1.30 1.50
Total Cost: 5,30,000 4,50,000 5,00,000 5,50,000
+ 1.2/unit + 1.8/unit + 1.3/unit 1.5/unit
A B
Revenue 1,700,000 1,700,000
Costs:
Variables 1,575,000 800,000
Fixed 300,000 800,000
1,875,000 1,600,000
Profit/(Loss) (175,000) 100,000
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The point for a plant plans location break-even analysis chart are as follows:
At zero unit of output, use fixed cost values. At 100000 units of output:
A = 6,50,000; B = 6,30,000; C = 6,30,000; D = 7,000,000.
Plot the graph of these linear functions.
Solution:
From the graph it is clear that, for minimum cost, use site B for a volume of 50,000 to 1,00,000 units,
use site C for a volume of 1,00,000 to 1,30,000 units.
Problem: 6
Mr. X, the factory Manager of S.K.Industries, is considering an interchange of departments 3 and 6 in the
present layout. The present layout and the interdepartmental materials handling frequencies are furnished
below [All the departments are of the same size and configuration in the following matrix, respectively.]
1 3 5
2 4 6
Present Layout
Weekly frequencies of interdepartmental Material handling
From / To 1 2 3 4 5 6
1 – 0 90 160 50 6
2 – – 70 0 100 130
3 – – _ 20 0 0
4 – – – _ 180 10
5 – – – – 40
The per unit length inter departmental cost of materials of materials handling are equal. What is the effect
of the interchange of the departments 3 and 6 in the layout?
Solution:
The distance matrix for the present layout can be given as follows (Considering only the departments
that share a border as adjacent departments).
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Distance matrix (for initial layout)
From / To 1 2 3 4 5 6
1 1 1 2 2 3
2 – 2 1 3 2
3 – – 1 1 2
4 – – – 2 1
5 – – – 1
6 – – – – –
The total cost matrix can be easily calculated combining the inter-departmental materials handling
frequencies and the distance matrices.
Total cost matrix (for the initial layout)
From / To 1 2 3 4 5 6
1 0 90 320 100 0 510
2 140 0 300 260 700
3 20 0 0 20
4 360 10 370
5 40 40
6
Total 1,640
If the department 3 and 6 are interchanged, the layout would be as follows:
1 6 5
2 4 3
From / To 1 2 3 4 5 6
1 – 1 3 2 2 1
2 – – 2 1 3 2
3 – – _ 1 1 2
4 – – – _ 2 1
5 – – – – 1
From / To 1 2 3 4 5 6 Total
A 0 270 320 100 0 690
B 140 0 300 260 700
C 20 1 0 20
D 360 10 370
E 40 40
F –
Total 1,820
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By interchanging the departments 3 and 6 the total cost has been increased. So it is not advisable.
Problem: 6
A company planning, to manufacture a household cooking range, has to decide on the
location of the plant. Three locations are being considered viz., Patna, Ranchi, and Dhanbad. The fixed
costs of the three locations are estimated to be Rs. 30 lakh, 50 lakh, and 25 lakh per annum respectively. The
variable costs are Rs.300, Rs.200 and Rs.350 per unit respectively.
The expected sales price of the cooking range is Rs.700 per unit find out
(a) the range of annual production/sales volume for which each location is the most suitable and
(b) Which one of the three locations is the best location at a production/sales volume of 18,000 units?
Solution:
The total cost of the three locations are:
At Total cost = Fixed cost + Variable cost for a volume “X”
Patna => Total cost = 30,00,000 + 300 × X
Ranchi => Total cost = 50,00,000 + 200 × X
Dhanbad => Total cost = 25,00,000 +350 ×X
We can compute and plot the total costs per annum at the three different locations for the various
cases of production volume of 5000, 10000, 15000, 20000, 25000 units.
a) Patna
Volume (Units) 5,000 10,000 15,000 20,000 25,000
Total =30,00,000+ 30,00,000+ 30,00,000+ 30,00,000+ 30,00,000+
Cost (Rs.) 300(5,000) 300(10,000) 300(15,000) 300(20,000) 300(25,000)
=Rs.45 lakhs =Rs.60 lakhs =Rs.75 lakhs =Rs.90 lakhs =Rs.105lakhs
b) Ranchi
Volume (Units) 5,000 10,000 15,000 20,000 25,000
Total = 50,00,000+ 50,00,000+ 50,00,000+ 50,00,000+ 50,00,000+
Cost (Rs.) 200(5,000) 200(10,000) 200(15,000) 200(20,000) 200(25,000)
=Rs.60
lakhs
=Rs.70
lakhs
=Rs.80
lakhs
=Rs.90
lakhs
=Rs. 100
lakhs
c) Dhanbad
Volume (Units) 5000 10000 15000 20000 25000
Total = 25,00,000+ 25,00,000+ 25,00,000+ 25,00,000+ 25,00,000+
Cost (Rs.) 350(5,000) 350(10,000) 350(15,000) 350(20,000) 350(25,000)
=Rs.42.5
1akhs
=Rs.60
1akhs
=Rs.77.5
1akhs
=Rs.95
1akhs
=Rs.112.5
1akhs
If the volume distribution be as follows:
up to 10,000
unit
between 10,000 units
to 20,000 units
above 20,000 units
Favourable
Location
Dhanbad Patna Ranchi
Overview of Production Process
46
Cost Matrix
From To A B C
A 1 1
B 1 1
C 1 1
Flow Matrix Distance Matrix
To A B C To A B C
From From
A 1 2 A 1 2
B 1 3 B 1 1
C 3 3 C 2 1
For a volume 18000 units favourable location is Patna which can be substantiated by the followings:
Patna => 30,00,000 +300 × 18000 = Rs. 84 lakhs
Ranchi => 50,00,000+200 × 18000 = Rs. 86 lakhs
Dhanbad => 25,00,000 +350 × 18000 = Rs. 88 lakhs
Problem: 7
Find an improved layout for the initial layout given in figure by using CRAFT pair wise exchange
technique. The interdepartmental flows are also furnished along with the interdepartmental cost matrix.
From To A B C Total
A 1 4 5
B 1 3 4
C 6 3 9
Total Cost 18
Solution:
For the initial layout let us find the total cost matrix (which is the product of the cost flow and distance
matrices given).
Total Cost Matrix (Initial)
CRAFT considers exchanges between a pair of departments which have
i) either a common border, or ii) the same area.
Since in the given problem, all the three departments A, B and C have the same area they can be
interchanged with each other in pairs. The interchanges that are possible are between, (i) A and B, (ii)
A B C
1 1 1
Initial Layout
1
Operation Management
47
Distance Matrix
To
From A B C
A 1 1
B 1 2
C 1 2
Therefore, the total cost matrix will be
Cost Matrix
To
From A B C Total
A 1 2 3
B 1 6 7
C 3 6 9
Total Cost = 19
The total cost is now more than that for the initial layout and so this exchange is not desirable. We
may next try the exchange between A and C. However, this exchange results in only a mirror image
of the initial layout. As such, that is not giving to change the total cost, and layout. Therefore we try
the next possible exchange, viz., between B and C (Figure).
A C B
This matrix is an improvement over that for the initial layout and is thus accepted. The improved
layout flow is shown in figure.
To
From A B C Total
A 2 2 4
B 2 3 5
C 3 3 6
Total 5 5 5 15
A and C, and (iii) B and C.
Let us interchange A and B (Figure).
New Layout
New Distance Matrix
The total cost matrix is given below
Total Cost Matrix
A B C
1 1 1
Initial Layout
1
Overview of Production Process
48
Final Layout
Material Handling System:
Material handling is an integral part of manufacturing process. In order to manufacture any product, it is
essential to move the material from one place to that of another. Materials must be turned, moved, and
positioned on the respective machines to produce the required output. Materials must also be inevitably
moved from one machine to another. Though operators can be employed to move the materials, the common
practice is to move the materials from one processing area to another and from one department to another.
To start with, material must-be moved, prior to the production process, from the storage room to the first
processing operation. There may also be inter-departmental transfer of materials or finned goods from the
final conversion operation performed to final inspection. Finally, they go to the finished goods room and
then shipped to customers.
In a general sense, materials handling includes all movement of materials in a manufacturing situation.
Materials handling is defined as the art and science involving the moving, packing, and storing of substances
in any form.
The primary objective of materials handling is to improve production performance by speeding up material
flow. Lower unit cost of production less work in progress, reduced labour costs of handling materials,
better utilization of shop floor and warehouse, fewer breakages, reduced fatigue of operatives and other
shop floor personnel, better facilities and reduced accidents, improved product quality, better customer
service, and general safety are the other objectives of the materials handling system. The twin objectives
therefore can be:
• Improvement of production performance and reduction of costs.
• Improvement of conditions for shop floor personnel.
These are discussed as under:
• Better control of the flow of goods: Effective materials handling system results in better control of the
flow of goods.
• Higher productivity at lower manufacturing cost: The material handling system in any manufacturing
organization should be primarily designed to improve productivity and avoid inordinate delays in
furnishing the required materials at the manufacturing place. The fastest most efficient and economical
movement of materials result in higher productivity at lower manufacturing cost.
• Improved working conditions and greater safety in the movement of materials: The manufacturing
organizations are required to follow the safe handling practices. Safe handling of materials limits the
cases of industrial accidents and employees feel safe and secure to work in manufacturing units.
• Increased storage capacity: Scientific movement and storage of materials result in the effective
utilization of available storage space.
• Lower the unit materials handling costs: It is quite obvious that the overall materials handling costs
will be reduced if the unit costs are reduced.
A C B
Operation Management
49
• Provide for fewer rejects: Careful handling of the product will contribute to a better quality level of
the goods, produced. Ineffective handling of materials results in breakage, and damage, to the goods
produced. Production of defective pieces acts as a major cost to manufactures.
• Reduce the manufacture cycle time: Through effective handling of materials, the total time required to
make a product move from the receipt of raw materials to the finished goods. Movement of materials
can be speeded up or may be handled over shorter distances. Substantial reduction of the manufacturing
cycle time will eventually reduce the inventory costs and the other production costs incident thereto.
Principles of Material Handling
Materials handling is a service function; it is not an end in itself. The principles of materials handling can
be grouped under three broad headings:
• Principles relating to the elimination of wasteful methods,
• Principles relating to the laying out the plant,
• Principles relating to the selection and application of materials handling equipment.
Wasteful methods can be eliminated by following the undermentioned principles.
• Avoiding the unnecessary transfer of materials from floor to workplace or from container to container,
• Eliminating unnecessary mixing and subsequent storing,
• Increasing the speed of handling the materials,
• Utilizing gravity as a moving force, wherever practicable,
• Introduction of automaticity into the materials handling system,
• Reducing to a minimum the number of handlings of materials,
• Using mechanical aids to eliminate the use of hand labour in the movement of materials.
Principles of Material Handling
Related to
Planning
Related to
Equipment
Related to
Operation
• Planning Principle
• Systems Principle
• Material Flow Principles
• Simplification Principle
• Gravity Principle
• Space Utilisation Principle
• Safety Principle
• Mechanisation/
Automation Principle
• Equipment Selection
Principle
• Flexibility Principle
• Dead Weight Principle
• Motion Principle
• Idle Time Principle
• Maintenance Principle
• Obsolesence Principle
• Control Principle
• Capacity Principle
• Performance Principle
Fig. Principles of Material Handling
Overview of Production Process
50
Selection of Materials handling equipment
The following principles should be borne in mind; while, selecting and applying various materials handling
equipment:
• As far as possible, management should avoid; using the complicated mechanisms and controls; it is
better, to use the simplest possible equipment to handle the materials.
• Before considering the purchase of new equipment; the activities must be planned and the equipment
needs must be analysed.
• Before purchasing the equipment, comparative costs of various equipments must be determined and
analysed.
• Different equipment must be used for different jobs.
• Equipment selected for handling materials must be flexible in its application.
• It is necessary that equipment must be managed and maintained properly.
• It is necessary to ensure that obsolete methods and equipment are replaced periodically.
• Management should ensure that the new handling equipment must be put to effective use.
• Management should try to standardize equipment, if possible.
• Selection of equipment should be based on the principle that the equipment should minimize the
ratio of mobile equipment dead weights to payloads.
• The building must big enough to keep the materials handling equipment.
Various types of materials handling equipment used in manufacturing organisations:
Materials handling requires some equipment especially designed to meet the requirements of handling
different materials. The general types of materials handling equipment include the conveyors, cranes,
elevator and hoists; positioning; weighing and control equipment; industrial vehicles motor vehicles; railroad
cars; marine carriers; aircraft; containers and supports. The main types of equipment can be conveniently
classified under the following heads;
• Aerial ropeways and cable-ways
• Conveyors: These include
(i) Chutes
(ii) Roller Conveyors
(iii) Belt conveyors
(iv) Drag lines
(v) Bar or slot
(vi) Tow
(vii) Screw
(viii) Pneumatic.
(ix) Bracket or tray elevators
(x) Car and chair conveyors
Operation Management
51
(xi) Monorails
The conveyors are expensive to install, but cheap to run. Further, they are reliable in operation. Most of the
conveyors are inflexible and restrict plant layout changes. They have one positive advantage - they require
little maintenance.
• Hoists and lifts
• Cranes: Actually, it is very difficult to precisely define cranes as they shade in one direction into hoists
and in the other direction into conveyors. Several possibilities could be:
(i) Portable or mobile
(ii) Fixed track travelling
(iii) Fixed
(iv) Other sub-types including the job, gantry, bridge, and derrick.
• Trucks and tractors: These include
(i) Straddle
(ii) Pedestrian controlled
(iii) Hand operated
(iv) Industrial tractors
• Pallet handling trucks and pallets: A pallet is a portable platform on which goods are placed to form a
‘unit’ load for handling and stacking. A variety of trucks has been designed for handling pallets,
including the following:
(i) Forklift trucks: A generic term covering all types of trucks capable of using forks to lift pallets.
(ii) Reach trucks: These are used where the forks are telescopic to facilitate stacking.
(iii) Stackers: These are designed in such a way that they can be operated from batteries or mains
in a fixed position.
(iv) Hand pallet trucks
(v) Stillage trucks: A stillage is a simple form of pallet, usually disposable and therefore cheaply
constructed. Stillage trucks are usually hand-operated trucks.
The devices that can be used with forklift trucks include:
(i) Side shifter attachments for correct lateral positioning,
(ii) Special loading and off-loading attachments,
(iii) Clamping arms and grabs,
(iv) Tilting, rocking and rollover devices.
• Earth moving equipment: These are of little concern in material handling.
• Various miscellaneous equipment: These include:
(i) Lorry floor conveyors,
Overview of Production Process
52
(ii) Van loader,
(iii) Lorry loader,
(iv) Lifting tail gates,
(v) Vibrating screens,
(vi) Hydraulic bridges.
• Automatic transfer equipment: The quest for automation has resulted in rapid development of
automatic transfer equipment in the recent past.
Factors affecting the selection of materials handling equipment:
The primary objective of employing the materials handling equipment is to arrive at the lowest cost per
unit of material handled. This entails attaining a happy balance between the production problem, the
capabilities of the equipment available, and the people involved in using the equipment. The factors
concerning the production problem include the volume of production, the types and classes of materials
needed, the layout of the plant and building premises. The factors to be taken into account while employing
the equipment for handling the materials includes:
• Adaptability: The load-carrying and movement characteristics of the equipment selected should fit
the materials handling problem.
• Cost: The most important factor in the selection of materials handling equipment is the cost of the
equipment. The cost must not be prohibitive; rather it should be reasonable. A manager should consider
several factors here; the initial purchase price, direct and indirect labour required in operating the
equipment, installation costs, maintenance costs, power requirements, insurance requirements, space
requirements, depreciation charges, salvage value, time value of money invested, and any other costs,
that are to be incurred in future of course, it is expected that the anticipated annual savings from
installing the materials handling equipment must exceed the total annual costs of investment.
• Ease of maintenance: The maintenance of equipment selected and purchased at reasonable cost is
another important factor.
• Environment: Equipment selected must conform to the environmental requirements of an organization.
• Flexibility: It is better if the equipment selected is flexible enough to handle more than one type of
material.
• Power: Enough power should be available to do the job.
• Space requirements: While selecting the equipment space required to install shall have to be taken
into account.
• Speed: Within the limits of the production process of plant safely, materials must be moved at a
reasonable speed.
• Supervision: Depending on the degree of automaticity, supervision must be exercised on the machines
installed to handle the materials.
• The load capacity: The load capacity of the selected equipment must be adequate enough to perform
the job effectively. However, the equipment should not be too heavy and result in excessive operating
costs.
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