IEM Notes Unit 2
IEM Notes Unit 2
IEM Notes Unit 2
Introduction
Plant location decisions deal with where the plant is to be located.
Plant layout refers to the method in which the machinery is laid out within a given plant
area.
Both these decisions are taken at the top management level as they affect the cost of
production significantly.
Factors affecting Plant Location
(1) Closeness to raw materials:
If the plant is located close to the source of raw materials, the cost of transporting
the raw material can be reduced.
The location of the plant should be such that the supply of raw material is
continuous and uninterrupted.
If the material is fragile, perishable, bulky, or heavy, it is easy to transport it if the
plant is located close to the source of raw materials.
If the raw material is imported from other countries, it is advisable to locate the
plant near the ports.
(2) Nearness to the markets:
If the plant is close to the markets, the cost of transportation of finished goods can
be minimized.
If the plant is located near to the market, there will be a better knowledge about
the customers tastes and preferences. Further, the customers profiles in terms of
age, gender, income group etc., and the type of households and the number of
households can be collected. This enables the organization to mould its sales
strategies accordingly.
(3) Availability of fuel and power:
If the factory is dependent on a particular fuel (like coal), it is preferable if the
plant is located close to the source of power.
It is better to locate the plant at a location with less frequent power breakdowns.
(4) Better access to modes of transport:
It is advantageous to locate a plant at such a place, which is well connected by
different modes of transport.
It would help in transporting products and employees well.
(5) Availability of skilled labour:
1 Prepared by Prof. T.S.Nageswara Rao, Department of Management Studies, DVR &
Dr. HS MIC College of Technology, Kanchikacherla as a class notes. Adapted from
various sources.
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Availability of skilled labour reduces the need for training to an extent, thus
reducing the cost of production.
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Based on these criteria, the three alternative sites were scored between 0 and 100 points:
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Site A
Score
Weighted
70
35
60
18
70
14
Total
weighted
score
67
Site B
Score
Weighted
70
35
40
12
95
19
Total
weighted
score
66
Site C
Score
Weighted
50
25
90
27
60
12
Total
weighted
score
64
From these results, the largest total weight is for Site A. It appears to be the best location.
What happens if we change the factor weights? Lets use the following factor weights:
Skilled labor: 0.45; Raw Materials: 0.40; and Market: 0.15.
Then the following results are obtained:
Factor
Skilled Labour
Raw Materials
Proximity to
markets
Site A
Score
Weighted
70
31.5
60
24
70
31.5
Total
weighted
score
66
Site B
Score
Weighted
70
31.5
40
16
95
14.25
Total
weighted
score
61.75
Site C
Score
Weighted
50
22.5
90
36
60
9
Total
weighted
score
67.5
In this case, Site C appears to be the best choice with largest weight score. Therefore, factor
rating method is very sensitive to the weights assigned to each factor. Since factor weights,
selected factors, and assigned scores are all determined subjectively, the managers should be
very careful in selecting these items and numbers.
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(= Rs 1 crore)
(= Rs 25 lakhs)
(= Rs 60 lakhs)
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The graph shows that annual production cost changes with different production volumes.
If the expected annual production volume is below 1,50,000 units, then choose site A.
If the expected annual production volume is between 1,50,000 and 3,50,000 units, then choose
site B.
If the expected annual production volume is over 3,50,000 units, then choose site C.
(3) CENTER OF GRAVITY METHOD
The center of gravity method is used to find a location that minimizes the Sum of Transportation
Cost in between new facility and old facilities.
Transportation cost is assumed to be a linear function of the Number of Units Shipped and the
Traveling Distance.
The locations of the firms existing facilities are converted into x and y coordinates.
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The following center of gravity equations are then used for calculating the x and y coordinates
for the new facility:
Here,
Cx : x coordinate for new location; Cy : y coordinate for new location
i: index for existing locations; n: total number of existing locations
xi: x coordinate of existing ith location , and yi: y coordinate of existing ith location.
Example 2
Aldrich Manufacturing Company plans to build a Warehouse to serve its Distribution Centers in
Columbus (Ohio), Frankfort (Kentucky), Nashville (Tennessee), and Richmond (Virginia).
The number of units to be shipped monthly from Harrisburg to the Distribution Centers is shown
in the following table:
Location
Annual Shipping
Volume
Coordinates
Coordinates
Harrisburg
5000
270
160
Columbus
750
170
130
Frankfort
1250
120
90
Nashville
2500
110
50
Richmond
500
275
100
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PLANT LAYOUT
Definition:
A plant layout refers to the arrangement of physical facilities such as machinery, equipment,
furniture etc. within the factory building in such a manner so as to have the quickest flow of
material at the lowest cost and with the least amount of handling in processing the product from
the receipt of material to the shipment of the finished product.
Importance of plant layout
A plant layout is an important decision as it represents a long-term commitment.
An ideal plant layout should provide the optimum relationship among output, floor area
and manufacturing process.
It facilitates the production process, minimizes material handling time and cost, and
allows flexibility of operations, easy production flow, makes economic use of the
building, promotes effective utilization of manpower, and provides for employees
convenience, safety, comfort at work, maximum exposure to natural light and ventilation.
Plant layout is also important because it affects the flow of material and
processes, labour efficiency, supervision and control, use of space and expansion
possibilities etc.
Objectives of a plant layout
An efficient plant layout is one that can be instrumental in achieving the following objectives:
(a) Proper and efficient utilization of available floor space
(b) To ensure that work proceeds from one point to another point without any delay
(c) Provide enough production capacity
(d) Reduce material handling costs
(e) Reduce hazards to personnel
(f) Utilize labour efficiently
(g) Increase employee morale
(h) Reduce accidents
(i) Provide for volume and product flexibility
(j) Provide ease of supervision and control
(k) Provide for employee safety and health
(l) Allow ease of maintenance
(m) Allow high machine or equipment utilization
(n) Improve productivity.
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The process or functional layout is followed from historical period. It evolved from the
handicraft method of production. The work has to be allocated to each department in such
a way that machines are chosen to do as many different jobs as possible i.e. the emphasis
is on general purpose machine.
The work, which has to be done, is allocated to the machines according to loading
schedules with the object of ensuring that each machine is fully loaded.
The grouping of machines according to the process has to be done keeping in mind the
following principles
(a) The distance between departments should be as short as possible for avoiding long
distance movement of materials
(b) The departments should be in sequence of operations
(c) The arrangement should be convenient for inspection and supervision
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Certain manufacturing units may require all three processes namely intermittent process
(job shops), the continuous process (mass production shops) and the representative
process combined process [i.e. miscellaneous shops].
In most of industries, only a product layout or process layout or fixed location layout
does not exist. Thus, in manufacturing concerns where several products are produced in
repeated numbers with no likelihood of continuous production, combined layout is
followed. Generally, a combination of the product and process layout or other
combination are found, in practice, e.g. for industries involving the fabrication of parts
and assembly, fabrication tends to employ the process layout, while the assembly areas
often employ the product layout.
In soap manufacturing plant, the machinery manufacturing soap is arranged on the
product line principle, but ancillary services such as heating, the manufacturing of
glycerin, the power house, the water treatment plant etc. are arranged on a functional
basis.
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MAINTENANCE
The activity carried out to prevent the occurrence of failure and the activity carried out after
failure to rectify the defect are called the maintenance activities.
Need for Maintenance
Need for maintenance arises for two reasons:
(i) To prevent the occurrence of any possible failures.
(ii) To correct a failure in the shortest possible time.
Objective of Maintenance
The primary objective of maintenance is to increase the operational reliability and safety
of personnel at minimum cost.
Plant and machines in any organisation are expected to run continuously without any
interruption during the production period.
The total production that can be obtained from a plant depends upon its capacity and the
number of working hours.
Therefore
Production = Capacity x Availability.
Interruptions on account of breakdown reduce the total time available for production.
Interruptions are frequently felt on account of machine break downs due to failures of
machine parts / components. There is always some loss of production on account of
machine failure.
The frequent failures cause frequent interruption in the production and the plant and
machines become unreliable.
This degree of uncertainty in production due to machines failures is termed as reliability.
Higher the reliability in operation, lesser will be the failure or vice versa.
If the breakdowns are less, the availability of machinery would increase thus increasing
the production.
Thus maintenance of the machinery, which reduces the breakdowns, is of prime
importance.
The duration by which any machine goes out of production due to break down is called
down time.
The down time is the total time taken on account of maintenance to rectify the fault.
The total time taken on account of maintenance involves the time actually spent by the
respective maintenance team to correct the fault and waiting time for want of spares
required for rectify the defect.
Waiting time
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The waiting time is the most unproductive element of total down time.
The reason for waiting time could be :(i) Want of spares
(ii) Want of crew members
(iii) Lack of communication.
(iv) Lack of proper supervision.
This is the average time a machine can operate without the occurrence of any failure.
MTBF indicates the operational reliability of the machine.
Higher the value of MTBF, higher will be the operational reliability of the machine
because of lesser number of failures.
To improve the operational reliability, the number of failures should be reduced. Failures
can be reduced if the machines are maintained properly with adequate care and attention.
TYPES OF MAINTENANCE
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Most of the common failures which are likely to occur during running of machinery can
be arrested. However, this cannot give 100% operational reliability because there are
always chances of unexpected failures to occur.
By constantly monitoring the observable characteristics, any major faults / failures that
are gradually developing can be detected beforehand.
The activities which are carried out after the occurrence of failures to correct the failures
are known as corrective maintenance.
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