Facilities planning and design lecture notes

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IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University IENG441 FACILITIES PLANNING AND DESIGN LECTURE NOTES Prepared by: Asst. Prof. Dr. Orhan KORHAN EASTERN MEDITERRANEAN UNIVERSITY DEPARTMENT OF INDUSTRIAL ENGINEERING 0 Prepared by: Asst. Prof. Dr. Orhan Korhan IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University CHAPTER 1 FACILITIES Facilities can be broadly defined as buildings where people, material, and machines come together for a stated purpose – typically to make a tangible product or provide a service. The facility must be properly managed to achieve its stated purpose while satisfying several objectives. Such objectives include producing a product or producing a service • at lower cost, • at higher quality, • or using the least amount of resources. 1.1. Definition of Facilities Planning 1.1.1. Importance of Facilities Planning & Design Manufacturing and Service companies spend a significant amount of time and money to design or redesign their facilities. This is an extremely important issue and must be addressed before products are produced or services are rendered. A poor facility design can be costly and may result in: • poor quality products, • low employee morale, • customer dissatisfaction. 1.1.2. Disciplines involved in Facilities Planning (FP): Facilities Planning (FP) has been very popular. It is a complex and a broad subject. Within the engineering profession: • civil engineers, • electrical engineers, • industrial engineers, • mechanical engineers are involved in FP. Additionally, • architects, • consultants, Prepared by: Asst. Prof. Dr. Orhan Korhan 1 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University • general contractors, • managers, • real estate brokers, and • urban planners are involved in FP. 1.1.3. Variety of Facility Planning (FP) Tools: Facility Planning (FP) tools vary from checklists, cookbook type approaches to highly sophisticated mathematical modeling approaches. In this course, a practical approach to facilities planning will be employed taking advantage of empirical and analytical approaches using both traditional and contemporary concepts. 1.1.4. Applications of Facilities Planning (FP): Facilities Planning (FP) can be applied to planning of: • a new hospital, • an assembly department, • an existing warehouse, • the baggage department in an airport, • department building of IE in EMU, • a production plant, • a retail store, • a dormitory, • a bank, • an office, • a cinema, • a parking lot, • or any portion of these activities etc… Facilities Planning (FP) determines how an activities tangible fixed assets best support achieving the activity’s objectives. i.e. what is the objective of the facility? How the facility achieves that objective? • In the case of a manufacturing firm: Facilities Planning (FP) involves the determination of how the manufacturing facility best supports production. • In the case of an airport: Facilities Planning (FP) involves determining how the airport facility is to support the passenger-airplane interface. • In the case of a hospital: Facilities Planning (FP) for a hospital determines how the hospital facility supports providing medical care to patients. Prepared by: Asst. Prof. Dr. Orhan Korhan 2 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Facilities Planner considers the facility as a dynamic entity. Therefore continuous improvement is an integral element of FP cycle. Figure 1.1. Continuous improvement facilities planning cycle It is important to recognize that we do not use the term facilities planning as a synonym for such related terms as facilities location, facilities design, facilities layout, or plant layout. It is convenient to divide a facility into its location and design components. Prepared by: Asst. Prof. Dr. Orhan Korhan 3 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Facilities Planning ≠ Facility Location Facilities Design Facilities Layout Plant Layout Facilities Planning Hierarchy: 1.1.5. Facilities Location (Macro Aspect of FP): Location of the facility refers to its placement with respect to customers, suppliers, and other facilities with which it interfaces. 1.1.6. Facilities Design (Micro Aspect of FP): Design components of a facility consists of the facility systems, the layout and the handling systems. Facilities Systems: Consists of the structural systems, the atmospheric systems, the lighting/electricity/communication systems, the life safety systems and the sanitation systems. Layout: Consists of all equipment, machinery and furnishings within the building. Handling Systems: Consists of the mechanism need to satisfy the required facility interactions. e.g. for a manufacturing system: Prepared by: Asst. Prof. Dr. Orhan Korhan 4 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University • Facility Systems – the structure (of building), power, light, gas, heat, ventilation, air-conditioning, water and sewage needs. • Layout – the production areas, related support areas, personnel areas. • Handling Systems – the materials- personnel, information, and equipment to support manufacturing. 1.1.7. Application of FP Hierarchy to a Number of Different Types of Facilities: FP Hierarchy: Facilities Planning for specific types of facilities: a) Manufacturing plant b) Office c) Hospital d) Emergency room Prepared by: Asst. Prof. Dr. Orhan Korhan 5 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Figure 1.3. Facilities planning for specific types of facilities 1.2. Significance of Facilities Planning To understand the significance of Facilities Planning (FP) consider the following questions: • What impact does facilities planning have on handling and maintenance cost? • What impact does facilities planning have on employee morale, and how does employee morale impact operating costs? Prepared by: Asst. Prof. Dr. Orhan Korhan 6 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University • In what do organizations invest the majority of their capital, and how convertible is their capital once invested? • What impact does facilities planning have on the management of a facility? • What impact does facilities planning have on facility’s capability to adapt to change and satisfy future requirements? 1.3. Objectives of Facilities Planning Objectives of FP is to plan a facility that achieves both facilities location and design objectives. 1.3.1. Objectives of Industrial Facility Location: Objective of Industrial Facility Location is to determine the location which, in consideration of all factors affecting deliver-to-customers cost of the products to be manufactured, will be minimized. 1.3.2.Some Typical Facilities Design Objectives are to: 1. Support the organization’s vision through improved material handling, material control, and good housekeeping. 2. Effectively utilize people, equipment, space and energy. 3. Minimize capital investment. 4. Be adaptable and promote ease of maintenance. 5. Provide for employee safety and job satisfaction. 1.4. Facilities Planning Process Although facility is planned only once, it is frequently replanned to synchronize the facility and its constantly changing objectives. Planning and Replanning are linked by the continuous improvement FP cycle (Figure 1). FP is not an exact science, but it can be approached using an organized and systematic approach. Traditionally, the ENGINEERING DESIGN PROCESS (EDP) can be applied (similar to problem solving approach). It consists of following 6 steps: • Define the problem, • Analyze the problem, • Generate alternative designs, • Evaluate the alternatives, • Select the preferred design, • Implement the design. Prepared by: Asst. Prof. Dr. Orhan Korhan 7 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Applying the engineering design process to facilities planning results in the following process: 1. Define (or redefine) the objective of the facility, 2. Specify the primary and support activities to be performed in accomplishing the objective. Requirements in terms of: • Operations, • Equipment, • Personnel, • Material flows should be satisfied. 3. Determine the interrelationships among all activities, 4. Determine the space requirements for all activities, 5. Generate alternative facilities plans, 6. Evaluate alternative facilities plans (alternative locations and alternative designs), 7. Select a facilities plan, 8. Implement the facilities plan, 9. Maintain and adapt the facilities plan, 10. Redefine the objective of the facility. An Organization’s Model of Success: Experience has shown that in order for the facilities plan to be successful, not only a clear understanding of the vision is needed, but also the mission, the requirement of success, the guiding principles, and the evidence of success. Five elements that form an organization’s model of success: • Vision: a description of where you are headed. • Mission: how to accomplish the vision. • Requirements of success: the science of your business. • Guiding principles: the values to be used, while pursuing the vision. • Evidence of success: measurable results that will demonstrate when an organization is moving towards their vision. Prepared by: Asst. Prof. Dr. Orhan Korhan 8 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Figure 1.4. The model of success “winning circle” SUMMARY • FP determines how an activity’s tangible fixed assets should contribute to meeting the activity’s objectives. • FP consists of facilities location and facilities design. • Partly art, partly science. • Can be approached using the engineering design process. • Represents one of the most significant opportunity for cost reduction and productivity improvement. Prepared by: Asst. Prof. Dr. Orhan Korhan 9 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University CHAPTER 2 FACILITIES IN THE MANUFACTURING CONTEXT In the manufacturing context, a facility is a place where raw materials, processing equipment, and people come together to make a finished product. 2.1. Logistics Management Logistics management can be defined as the management of the transportation and distribution of goods. Goods  Raw materials Subassemblies obtained from suppliers Finished goods shipped from plants to warehouses or customers Logistics management includes all distribution and transportation activities from suppliers through to customers. Logistics management is the management of a series of macro-level transportation and distribution activities with the main objective of delivering the right amount of material at the right place at the right time at the right cost using the right methods. The decisions typically encountered in logistics management concern facility location, transportation and goods handling and storage. Logistics management problems can be classified into three categories: 1. Location Problems: Location Problems involve determining the location of one or more new facilities in one or more of several potential sites. The number of sites must at least equal the number of new facilities being located. The cost of locating each new facility at each of the potential sites is assumed to be unknown. It is the fixed cost of locating a new facility at a particular site plus the operating and transportation cost of serving customers from this facility-site combination. Prepared by: Asst. Prof. Dr. Orhan Korhan 10 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University 2. Allocation Problems: Allocation Problems assume that the number and location of facilities are known and attempt to determine how each customer is to be served. That is, given the demand for goods at each customer center, the production or supply capacities at each facility, and the cost of serving each customer from each facility, the allocation problem determined how much each facility is to supply to each customer center. 3. Location – Allocation Problems: Location – Allocation Problems involve determining not only how much each customer is to receive from each facility but also the number of facilities along with their locations and capacities. 2.2. Classification of Facility Location Problems Facility Location problems can be classified as: • Single-Facility Location Problems Single-Facility location problems deal with the optimal determination of the location of a single facility. • Multifacility Location Problems Multifacility location problems deal with the simultaneous location determination for more than one facility. Generally, single-facility location problems are location problems, but multifacility location problems can be location as well as location- allocation problems. Another classification of location problems is based on whether the set of possible locations for a facility is finite or infinite • Continuous Space Location Problem If a facility can be located anywhere within the confines of a geographic area, then the number of possible locations is infinite, and such a problem is called a Continuous Space Location Problem. • Discrete Space Location Problem Discrete Space Location Problems have a finite feasible set of sites in which to locate a facility. Prepared by: Asst. Prof. Dr. Orhan Korhan 11 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Because facilities can be located anywhere in a two-dimensional space, sometimes the optimal location provided by the continuous space model may be infeasible. For example, a continuous space model may locate a manufacturing facility on a lake 2.3. Facility Location Problem The facility location problem consists of selecting a site for new facilities that will minimize the production and distribution cost of products and/or services to potential customers. 2.3.1. Reasons for considering Location Problems • Significant changes in the level of demand, • Significant changes in the geographical distribution of demand, • Changes in the cost or quality requirements of critical production inputs (labor, raw materials, energy or others), • Significant increases in the real-estate value of existing or adjacent sites or in their taxation, • Need to change as a result of fire or flood for reasons of prestige or improved public relations. 2.3.2. Alternatives to New Location • The increase of existing capacity by additional shifts or overtime, especially for capital-intensive systems. • The use of seasonal inventories to reduce the need for maintaining capacity for peak demand. • The use of subcontractors. • The purchase of new equipment for the present location. 2.3.3. Important Factors in Location Decisions • Production inputs (raw materials, human resources, etc…), • Process techniques, • Environmental factors o The availability and reliability of supporting systems o Social and cultural conditions o Legal and political considerations. Example: Consider the NIKE distribution center in Laakdal, Belgium. • This warehouse employs 800 people, • It has an annual turnover of 10.5 million of units of footwear and apparel, • It covers 25 acres, • It cost 139 million to build. Prepared by: Asst. Prof. Dr. Orhan Korhan 12 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University A location and design study was done in 1992 and the building was completed in two phases – the last in 1995. WHY Nike selected Laakdal from several available locations in Europe? 1. Nike’s main business objective was to service 75% of its customers in less than 24 hours. Because of its proximity to major customer markets. Laakdal was a natural choice. 2. Proximity to ports of entry for footwear and apparel manufactured overseas, the road network in and around Laakdal, and access to major highways were superb. 3. Because its citizens are required to go to school until at least age of 18, Belgium has an educated workforce. 4. Other factors also favored Laakdal. In practice, many factors have an important impact on location decisions. The relative importance of these factors depends on whether the scope of a particular location problems is international, national, statewide, or communitywide. Example: If we are trying to determine the location of a manufacturing facility in a foreign country, factors such as; • Political stability, • Foreign exchange rates, • Business climate, • Duties, and • Taxes play a role. If the scope of the location problem is restricted to few communities, the factors like; • Community services, • Property tax incentives, • Local business climate, and • Local government regulations are important. 2.3.4. Factors that affect Location Decisions • Proximity to source of raw materials, • Cost and availability of energy and utilities, • Cost, availability, skill and productivity of labor, • Government regulations at the federal, state, county and local levels, • Taxes at the federal, state, county and local levels, • Insurance, Prepared by: Asst. Prof. Dr. Orhan Korhan 13 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University • Construction costs and land price, • Government and political stability, • Exchange rate fluctuation, • Export and import regulations, duties and tariffs, • Transportation system, • Technical expertise, • Environmental regulations at the federal, state, county and local levels, • Support services, • Community services – schools, hospitals- recreation and so on, • Weather, • Proximity to customers, • Business climate, • Competition-related factors. Example: Suppose that the Waterstill Manufacturing Company has narrowed its choice down to two locations, city A and city B. all cost calculations have been made and there is no clear-cut distinction. In fact, for simplicity, assume that all costs are equal at the two locations. How can the decision be made? Step 1: make a list of all important factors. Noncost factors in plant location: (1) Nearness to market (12) Churches and religious facilities (2) Nearness to unworkerked goods (13) Recreational opportunities (3) Availability of power (14) Housing (4) Climate (15) Vulnerability to air attacks (5) Availability of water (16) Community attitude (6) Capital availability (17) Local ordinances (7) Momentum of early start (18) Labor laws (8) Fire protection (19) Future growth of community (9) Police protection (20) Medical facilities (10) Schools and colleges (21) Employee transportation facilities (11) Union activity Step 2: assign relative point values for each of the factor for specific company and plant to be located. Therefore, maximum point values for each factor: Factor-Value Factor-Value Factor-Value 1 - 280 8 - 10 15 - 10 2 - 220 9 - 20 16 - 60 3 - 30 10 - 20 17 - 50 4 - 40 11 - 60 18 - 30 5 - 10 12 - 10 19 - 30 6 - 60 13 -20 20 - 10 7 - 10 14 - 10 21 - 20 Step 3: assign degrees and points within each factor. Usually, from 4 to 6 degrees are used with linear assignment of points between degrees. Prepared by: Asst. Prof. Dr. Orhan Korhan 14 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Degrees and points for factor 16 (community attitude): Degrees Point Assignment 0 Hostile, bitter, noncooperative 0 1 Parasitic in nature 15 2 Noncooperative 30 3 Cooperative 45 Maximum Friendly and more than cooperative 60 At this point Waterstill has its evaluation scheme completely defined, so it now must assign each of the two locations (A and B) degrees and corresponding points for each factor. The hypothetical results are; CITY A CITY B Factor Degree Points Degree Points 1 Maximum 280 3 168 2 4 176 4 176 3 2 12 4 24 4 0 0 4 24 5 4 8 2 4 6 3 36 4 48 7 2 4 1 2 8 Maximum 10 2 4 9 4 16 2 8 10 2 8 3 12 11 3 36 3 36 12 2 6 2 6 13 3 15 Maximum 20 14 4 8 0 0 15 1 2 2 5 16 3 45 2 30 17 2 20 4 40 18 3 23 1 8 19 0 0 3 18 20 1 2 1 2 21 4 12 2 8 Total 719 643 Waterstill now can compare these results with the cost calculations and make a decision. City A has a total point value of 719 compared to 643 for City B. City A would probably be preferred since all cost calculations were assumed equal. It is often extremely difficult to find a single location that meets all these objectives at the desired level. For example, a location may offer a highly skilled labor pool, but construction and land costs may be too high. Similarly, another location may offer low tax rates and minimal government regulations but may be too far from the raw materials source or customer base. Prepared by: Asst. Prof. Dr. Orhan Korhan 15 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Thus, facility location problem is to select a site (among several available alternatives) that optimizes a weighted set of objectives. If we examine the inputs required to produce a product or provide a service, two things stand out: • People, and • Raw materials. For a location to be effective, it must be in close proximity to relatively less expensive, skilled labor pools and raw materials sources. Example: • One of the reasons for electronics and software companies locating in Silicon Valley is availability of highly skilled computer professionals. • Similarly, many U.S. companies are opening manufacturing facilities in Mexico and Far East to take advantage of lower labor wage rates. Many companies look for labor pools with higher productivity, a strong work ethic, and absence of unionization. With respect to raw materials, some industries find it more important to be close to raw materials sources than others. These tend to be industries for which raw materials are bulky or otherwise expensive to transport. Companies that have implemented just-in-time (JIT) strategies are likely to be located near inventories and thereby reduce costs. Other inputs that have an impact on location decisions are cost and availability of energy and utilities, land prices and construction costs. In addition to the input-related factors, one output-related factor plays an important role in the evaluation of location – proximity to customers. This factor is important because the product’s shelf life may be short, the finished product may be bulky or may require special care during transportation, and duties and tariffs may be high, necessitating that the facility location be close to the market area. 2.4. Techniques for Discrete Space Location Problems Our focus is on the single-facility location problem. The single facility for which we seek a location may be; • The only one that will serve all the customers, • An addition to a network of existing facilities that are already serving customers. 1. Qualitative Analysis 2. Quantitative Analysis 3. Hybrid Analysis Prepared by: Asst. Prof. Dr. Orhan Korhan 16 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University 2.4.1. Qualitative Analysis Qualitative Analysis = Location Scoring Method This is a very popular, subjective decision-making tool that is relatively easy to use. Qualitative Analysis consists of these steps: Step 1: List all the factors that are important – that have an impact on the location problem. Step 2: Assign an appropriate weight (typically between 0 and 1) to each factor based on the relative importance of each. Step 3: Assign a score (typically between 0 and 100) to each location with respect to each factor indentified in step 1. Step 4: Compute the weighted score for each factor for each location by multiplying its weight by the corresponding score. Step 5: Compute the sum of the weighted scores for each location and choose a location based on these scores. Example: A payroll processing company has recently won several major contracts in the Midwest region of the United States and Central Canada, and wants to open a new, large facility to serve these areas. Because customer service is so important, the company wants to be as near its “customers” as possible. A preliminary investigation has shown that Minneapolis, Winnipeg, and Springfield are the three most desirable locations, and the payroll company has to select one of these. Using the location scoring method (Qualitative Analysis), determine the best location for the new payroll processing facility. Solution: A through investigation of each location with respect to eight important factors generated the raw scores and weights listed in the table below. Table 1: Factors and weights for three locations: Score Weight Factor Minneapolis Winnipeg Springfield 0.25 Proximity to customer 95 90 65 0.15 Land and construction prices 60 60 90 0.15 Wage rates 70 45 60 0.10 Property taxes 70 90 70 0.10 Business taxes 80 90 85 0.10 Commercial travel 80 65 75 0.08 Insurance costs 70 95 60 0.07 Office services 90 90 80 Prepared by: Asst. Prof. Dr. Orhan Korhan 17 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University Steps 1, 2, and 3 have been completed. That is, all the factors that are important (which have an impact on the location decision) are listed. Appropriate weights (typically between 0 and 1) are assigned to each factor based on the relative importance of each. A score (typically between 0 and 100) is assigned to each location with respect to each factor identified above. We now need to compute the weighted score for each location-factor pair, add these weighted scores and determine the location based on the scores. Table 2: Weighted scores for the three locations: Weighted Score Factor Minneapolis Winnipeg Springfield Proximity to customer 23.75 22.50 16.25 Land and construction prices 9.00 9.00 13.50 Wage rates 10.50 6.75 9.00 Property taxes 7.00 9.00 7.00 Business taxes 8.00 9.00 8.50 Commercial travel 8.00 6.50 7.50 Insurance costs 5.60 7.60 4.80 Office services 6.30 6.30 5.60 Sum of Weighted Scores 78.15 76.65 72.15 From the analysis in the table above, it is clear that Minneapolis is the best location on the subjective information. Although step 5 calls for the location decision to be made solely on the basis of the weighted scores, those scores were arrived at in a subjective manner, and hence a final location decision must also take into account objective measures such as transportation costs, loads and operation costs. 2.4.2. Quantitative Analysis Several quantitative techniques are available to solve the discrete space, single-facility location problem. Each is appropriate for a specific set of objectives and constraints. e.g. the so-called minimax location model is appropriate for determining the location of an emergency service facility (such as a fire station, police station, hospital), where the objective is to minimize the maximum distance travelled between the facility and any customer. If the objective is to minimize the total distance travelled, the transportation model is appropriate. That is, we have m plants in a distribution network that serves n customers. Due to an increase in demand at one or more of these n customers, it has become necessary to open an addition plant. The new plant could be located at p possible sites. To evaluate which of the p sites will minimize distribution (transportation) costs, we can set up p Prepared by: Asst. Prof. Dr. Orhan Korhan 18 IENG441 Facilities Planning&Design, Department of Industrial Engineering, Eastern Mediterranean University th transportation models, each with n customers and m+1 plants, where (m+1) plant corresponds to the new location being evaluated. Solving the model will tell us not only the distribution of goods from the m+1 plants (including the new one from the location being evaluated) but also the cost of distribution. The location that yields the least overall distribution cost is the one where the new facility should be located. Example: Seers Inc. has two manufacturing plants at Albany and Little Rock that supply Canmore brand refrigerators to four distribution centers in Boston, Philadelphia, Galveston and Raleigh. Due to an increase in the demand for this brand or refrigerators that is exported to last for several years, Sears Inc. has decided to build another plant in Atlanta or Pittsburgh. The unit transportation costs, expected demand at the four distribution centers and the maximum capacity at the Albany and Little Rock plants are given in the following table. Determine which of the two locations, Atlanta o Pittsburgh, is suitable for the new plant Seers Inc. wishes to utilize all of the capacity available at its Albany and Little Rock locations. Costs, demand and supply capacity information: Solution: Manufacturing Plants Distribution Centers Albany Boston Little Rock Philadelphia + Galveston New Plant Raleigh in Atlanta? or in Pittsburgh? Maximum capacity of the new plant required at either location is 330 because the capacity at Albany and Little Rock is to be fully utilized. Total demand = 200 + 100 + 300 + 280 = 880 Total supply = 250 + 300 + χ = 550 + χ 550 + χ = 880 χ = 330 Prepared by: Asst. Prof. Dr. Orhan Korhan 19

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