Chapter 4: Facility Layout and Capacity Planning

Facility Layout

Facility layout is one of the key decisions that affect the success of an organization. According to the business processes and objectives of the facilities, many facility layouts can be applied. For example, the proximity of employees in an office environment, customer satisfaction in the retail sector, minimizing the amount of material transport in a warehouse layout plays an important role in determining the layout. Facility layout refers to the arrangement of the location of production resources, workstations, stock areas within an existing or proposed facility in an enterprise that produces products or services.

Facility layout planning is to decide how to place the physical production resources used in the transformation process such as labor, machinery, raw material, product, intermediate product and personnel.

Although the targets in the facility layout may differ according to the strategic plans of the enterprises, there are basic targets that apply to all systems in the efficient and safe execution of the production process;

• Safety
• Flow of Movement
• Comfort of employees
• Ease of communication
• Access
• Space usage
• Flexibility
• Bottlenecks

Types of Facility Layouts

Facility layout planning is the decision to determine the location of machines in a manufacturing facility, the location of tables and office machines in an office, and the locations of polyclinics in a hospital. An effective layout plan means the best flow of materials, people and information between departments. In order to achieve this aim, different approaches have been developed according to production processes and characteristics. Four basic approaches in this chapter are discussed.

• Fixed-position layouts
• Process Layouts
• Product Layouts
• Cell layouts

Fixed-position layout is also called project-type layout. While the product or the basic raw material is fixed in the fixed arrangement, the machinery, equipment, labor and other materials that perform the production are moved to the fixed position. The main reason for this is that the product or service produced is too large to carry. Construction of dams and buildings, ship and airplane manufacturing, highway construction, oil and mineral extraction, production processes in which agricultural production resources are transferred to products or services.

Process layout is a group of production resources based on similar processes and functions. Process layout, also called functional layout, is a suitable layout for workshop and batch production processes. In workshop and batch production, where the number of parts is high and production volume is low, it is advantageous to group and place the production resources according to their functions.

In contrast to the functional layout, in the product layout, production resources are based on the product rather than the process. The machines and processes used in production are ordered according to the processes carried out from the processing of the raw material to the final product.

The general characteristics of the product layout are summarized below.

• Production resources are designed for the purpose of high-speed production.
• Automation systems used to improve production speed and performance result in high installation costs.
• The process rate is faster as all the resources are ordered for efficient production.
• The arrangement of production resources according to the product, the proximity of the production lines to each other leads to lower material transportation costs compared to the process layout.
• The warehouse requirement for inventory is lower.
• Since all facilities and resources are customized for the production of certain products, there is no flexibility when a new product is added to the system or when substantial changes to the product are required.

The cell layout, also called hybrid layout, is the layout that applies the advantages of both product layout and process layout together. In the cell layout, it is possible to process product groups formed by similar geometry or similar methods in the same section. Machines with different functions are used to produce a group of products together in a cell. In this way, each cell benefits from the advantages of the product layout when forming a production line. The simultaneous operation of more than one cell also means the flexibility of the process layout.

Designing Facility Layouts

The path followed by the raw material until it becomes a product is the most important factor in determining the facility layout. This movement, also known as flow, is defined as a material movement in manufacturing facilities and customer movement in service producing facilities. The performance of the facility where the flows are well planned is also high. Production volume and product variety are important in planning the flows in the facility layout. The models and solution techniques used in designing the detailed layout are briefly listed below in the following titles.

1. Fixed Position Layout Design
2. Process Layout Design
3. Product Layout Design
4. Cell Layout Design

Capacity Planning

The main purpose of a production system is to provide production to meet the current and future demand in its market. The production systems that provide the right balance between capacity and demand are able to offer products at an affordable cost to their customers. Systems that are unable to achieve this balance may be unable to meet demand or reflect large idle capacity costs to their customers. In this case, the global competition is intense today, which can lead to the failure of enterprises.

The capacity of a production system is defined as the maximum output rate that can be achieved in a given period of time.

The decisions made in capacity planning are important decisions that may affect the performance of the system. These decisions are closely related to cost, revenue, capital, quality, speed of meeting customer demand, dependability of supply and flexibility.

a. Costs are affected by the balance between capacity and demand. If the capacity is higher than demand, the unit cost of the product increases.
b. Revenues are also affected by the balance between capacity and demand. If the capacity level is equal to or greater than the demand, it prevents loss of income.
c. Making a production decision on stock to meet high demand will adversely affect working capital. This decision will ensure that the demand is met but there will be no income inflow until the products are sold. d. A capacity plan that meets fluctuations in demand through the use of temporary personnel may adversely affect product or service quality. Employing inexperienced personnel increases error rates.
e. Quick response to customer demands can be made by overproduction. Many customers want to get ready for the product instead of waiting for the product.
f. Dependability of supply is also affected by the close proximity of capacity and demand levels. This proximity makes it difficult to remedy disruptions in product or service deliveries.
g. Flexibility, in particular volume flexibility, is closely related to excess capacity. The balance between demand and capacity may make it impossible to respond to unexpected increases in demand.

Capacity Planning Decisions

Capacity planning is about identifying short term and long-term capacity needs and how to meet these needs. Short-term demand fluctuations can be solved by production to stock, labor balancing, and external capacity utilization. In short term capacity planning, the main production facilities cannot be changed radically and the basic capacity is considered constant.

Short- and medium- term capacity strategies are listed below:

• Stock
• Delay
• Labor Level
• Employee training
• Subcontractor use
• Process Design

Development and Evaluation of Capacity Options

Companies are developing options to regulate their capacity after determining their future capacity needs. One of these options is to make no changes. Current capacity is to be re-evaluated in the future. Other options may be the purchase or expansion of a new facility. At this stage, the options for the size and characteristics of the new plant or the expansion of the existing plant should be evaluated. Decision tree is a modeling tool used to evaluate independent decisions that must be made in sequence. The four elements of the decision trees are given below:

• Decision points: The node that represents the moment when the decision is made. For example, a decision in which the growth decision of the enterprise evaluated is indicated by the square figure in the diagram.
• Decision options : Provides two possible options in the decision tree, such as the purchase of a large or small plant. It is shown as arrows or lines separated from the decision point.
• Random events: Events that may affect the value of a decision. There is a possibility for each event to occur. For example, it can be predicted that an enterprise’s demand for a particular product will fall by 40% in the coming year, with an increase of 60%. Random events are shown in decision trees as two or more branches separated from a circle.
• Outputs: The decision tree lists the output for each possible option. Depending on the resolution resolved, this value can be attributed to revenue, cost, and so on. It consists of numerical values.