Capacity is the maximum capability to produce. Capacity planning takes place at several levels of detail. We discuss long-term capacity planning in this chapter, intermediate term capacity planning in Chapter 14, and short-term capacity planning in Chapters 15 and 16.

•Capacity: the maximum capability to produce.

Long-term capacity planning is a strategic decision that establishes a firm's overall level of resources. It extends over a time horizon long enough to obtain those resources—usually a year or more for building or expanding facilities or acquiring new businesses. Capacity decisions affect product lead times, customer responsiveness, operating costs, and a firm's ability to compete. Inadequate capacity can lose customers and limit growth. Excess capacity can drain a company's resources and prevent investments in more lucrative ventures. When to increase capacity and how much to increase it are critical decisions.

•Capacity planning: establishes the overall level of productive resources for a firm.

Figure 7.1 a, b, and c show three basic strategies for the timing of capacity expansion in relation to a steady growth in demand.

As demand grows, a lead, lag, or average capacity strategy can be applied.

Figure 7.1. Capacity Expansion Strategies

Consider higher education's strategy in preparing for a tripling of the state's college-bound population in the next decade. An established university, guaranteed applicants even in lean years, may follow a capacity lag strategy. A young university might lead capacity expansion in hopes of capturing students not admitted to the more established universities. A community college may choose the average capacity strategy to fulfill its mission of educating the state's youth but with little risk.

Capacity can be increased incrementally or in large steps.

How much to increase capacity depends on (1) the volume and certainty of anticipated demand; (2) strategic objectives in terms of growth, customer service, and competition; and (3) the costs of expansion and operation.

Capacity can be increased incrementally or in one large step as shown in Figure 7.1d. Incremental expansion is less risky but more costly. An attractive alternative to expanding capacity is outsourcing, in which suppliers absorb the risk of demand uncertainty.

The best operating level for a facility is the percent of capacity utilization that minimizes average unit cost. Rarely is the best operating level at 100% of capacity—at higher levels of utilization, productivity slows and things start to go wrong. Average capacity utilization differs by industry. An industry with an 80% average utilization would have a 20% capacity cushion for unexpected surges in demand or temporary work stoppages. Large-capacity cushions are common in industries in which demand is highly variable, resource flexibility is low, and customer service is important. Utilities, for example, maintain a 20% capacity cushion. Capital-intensive industries with less flexibility and higher costs maintain cushions under 10%. Airlines maintain a negative cushion by overbooking flights. Best operating level can also refer to the most economic size of a facility.

•Best operating level: is the percent of capacity utilization that minimizes unit costs.

•Capacity cushion: is the percent of capacity held in reserve for unexpected occurrences.

Figure 7.2 shows the best operating level—in this case, the number of rooms for a hotel—as the point at which the economies of scale have reached their peak and the diseconomies of scale have not yet begun.

•Diseconomies of scale: when higher levels of output cost more per unit to produce.

Economies of scale occur when it costs less per unit to produce or operate at high levels of output. This holds true when:

•Economies of scale: when it costs less per unit to produce high levels of output.

The electronics industry provides a good case example of economies of scale. The average cost per chip placement for printed circuit-board assembly is 32 cents in factories with a volume of 25 million placements, 15 cents in factories with 200 million placements, and only 10 cents in factories with 800 million placements.^[13]

Capacity decisions provide a framework for further facility decisions, such as where to locate a new facility and how to arrange the flow of work in the facility. Facility location is discussed in the supplement to this chapter. The remainder of the chapter presents various alternatives for laying out a facility.

Kuala Lumpur International (KLIA) is a Green certified airport with spectacular architecture. Shown here, the outside of the terminals resemble Bedouin tents. Inside, trees and other vegetation, along with waterfalls and streams, recreate a rain forest environment. The airport can handle 25 million passengers a year, and is a major cargo hub for the Asian-Pacific region.

Facilities make a difference. They can provide a competitive edge by enabling and leveraging the latest process concepts. For example, Bank of America, featured in the "Along the Supply Chain" box has created an exemplary facility showcasing green design. Green buildings can save energy costs and increase worker productivity. Facility design has an impact on both quality and productivity. Facilities affect how efficiently workers can do their jobs, how much and how fast goods can be produced, how difficult it is to automate a system, and how responsive the system can be to changes in product or service design, product mix, or demand volume. Facilities must be planned, located, and laid out.

Facility layouts are more flexible than ever before. Factories that once positioned shipping and receiving departments at one end of the building, now construct t-shaped buildings so that deliveries can be made directly to points of use within the factory. Stores sport portable kiosks for customer inquiry and checkout at various locations throughout the facility. Classrooms incorporate desks on wheels to be repositioned for different teaching styles and student interaction. Effective layouts can have many different objectives.

OBJECTIVES OF FACILITY LAYOUT

Facility layout refers to the arrangement of activities, processes, departments, workstations, storage areas, aisles, and common areas within an existing or proposed facility. The basic objective of the layout decision is to ensure a smooth flow of work, material, people, and information through the system. Effective layouts also:

•Facility layout: the arrangement of areas within a facility.

• Minimize movement and material handling costs;

• Utilize space efficiently;

• Utilize labor efficiently;

• Eliminate bottlenecks;

• Facilitate communication and interaction between workers, between workers and their supervisors, and between workers and customers;

• Reduce manufacturing cycle time and customer service time;

• Eliminate wasted or redundant movement;

• Facilitate the entry, exit, and placement of material, products, and people;

• Incorporate safety and security measures;

• Promote product and service quality;

• Encourage proper maintenance activities;

• Provide a visual control of activities;

• Provide flexibility to adapt to changing conditions;

• Increase capacity.

Facility layout decisions involve multiple objectives.

Layout decisions affect quality and competitiveness.

ALONG THE SUPPLY CHAIN

Bank of America's Towering Achievement in Green Design

Green facility design is evolving fast, demanding that designers and builders adapt to new methods and technologies with every project. To date, the Bank of America Tower in New York City is the world's greenest skyscraper. Its unprecedented use of recycled and energy-saving materials in construction, along with incredible advances in water and energy efficiency, earned the building a platinum certification under the LEED (Leadership in Energy and Environment Design) rating system. LEED is part of the U.S. Green Building Council's code for the best practices, materials, and systems in green buildings. A platinum rating is the Council's highest measure of achievement.

While Bank of American (BoA) estimates it costs an extra 5%, or around $65 million, to green the building, with millions of dollars in energy savings each year, and tens of millions in savings from fewer sick days and increased productivity, the project is expected to pay for itself within two to three years.

Nearly 48 inches of rain falls on New York City every year. At BoA Tower, most of this water is recycled for the building's use. The tower funnels precipitation from its tall slanting roofs and low green-roofed atrium into four holding tanks. The tanks, positioned at various locations throughout the building's core, are used to feed the A/C system, flush toilets, and irrigate plants. Water is also harvested from condensation on the air conditioning system, and from the small flow of groundwater that seeps through the bedrock of the tower's basement. With rainwater capture, clean water recycling and water conservation (such as waterless urinals), BoA expects to save 10.3 million gallons of water per year, enough to meet the annual water needs of 125 households.

Studies show that students and workers perform better in fresh-air, naturally-lit environments. At BoA Tower, 9.5- foot-tall floor-to-ceiling windows made of "low iron" glass are both more transparent and more insulating than conventional glass. Transparent walls separating work areas flood the building with light and give most workers some view of daylight. Ceiling-mounted photo and motion sensors continually adjust overhead lights, turning them down when natural light is bright or when rooms are empty. The system helps the building cut its demand for electric lighting by 25%.

It is a fact that heat rises. Yet most buildings pump cooled air into overhead ductwork and extract warm air through another set of ceiling exhaust vents. At BoA tower, one set of ductworks is eliminated. Cool air is pumped into a space below the building's raised floors. As workers and office equipment warm the air in their workspace, the heated air rises to the ceiling exhaust vents. This in turn pulls chilled air up from below. The system improves air quality, as well, by eliminating miles of chilled, moist ductwork, where bacteria, mold, and mildew often grow.

Clean, oxygen-rich air delivers big productivity gains. The BoA tower acts like a 55-story air purifier, with filters that catch 95% of particulate matter, allergens, ozone, and other compounds that can cause illness. Oxygen sensors trigger injections of fresh air into crowded spaces to energize workers and prevent "meeting room coma."

Shipping electricity via power lines over long distances can waste 70% of the fuel's energy. Not so at BoA tower where they make most of their own electricity. Inside the tower's podium level is a super-efficient 5.1 megawatt power plant running on clean-burning natural gas, and housed in the smaller of the two spires of the tower is a wind turbine. Together these power sources generate enough energy to meet four-fifths of the tower's peak needs.

Reducing peak energy needs is another one of BoA's goals. To chill the A/C system, the tower makes ice during nonpeak periods and stores it in 44 10' × 10' cylindrical ice tanks. The old-fashioned ice-house cuts power consumption by 50% during the hottest of summer days.

Normally, a tower of this scale built in New York City would include hundreds of basement parking spots. By design, at BoA Tower, there are zero parking spaces. Instead, new pedestrian tunnels connect the building to 17 subway lines, more than any other station in New York City. The tower also has secure bike storage and shower access for those employees bicycling to work.

The Bank of America Tower in New York City is not only a visually stunning 1000-foot-tall skyscraper built in the heart of Manhattan; it is also a model of environmental awareness in facility design and operation.

Find out which buildings in your area are LEED certified.

Source: Adapted from Adam Ashton, "Bank of America's Bold Statement in Green," BusinessWeek, March 19, 2007, pp. 22–23.

Layouts can take many different forms. In the next section, we discuss three basic layout types: process, product, and fixed-position. Later in the chapter, we discuss three hybrid layouts: cellular layouts, flexible manufacturing systems, and mixed-model assembly lines.

PROCESS LAYOUTS

•Process layouts: group similar activities together according to the process or function they perform.

Process layouts, also known as functional layouts, group similar activities together in departments or work centers according to the process or function they perform. For example, in a machine shop, all drills would be located in one work center, lathes in another work center, and milling machines in still another work center. In a department store, women's clothes, men's clothes, children's clothes, cosmetics, and shoes are located in separate departments. A process layout is characteristic of intermittent operations, service shops, job shops, or batch production, which serve different customers with different needs. The volume of each customer's order is low, and the sequence of operations required to complete a customer's order can vary considerably.

Figure 7.3. A Process Layout in Services

The equipment in a process layout is general purpose, and the workers are skilled at operating the equipment in their particular department. The advantage of this layout is flexibility. The disadvantage is inefficiency. Jobs or customers do not flow through the system in an orderly manner, backtracking is common, movement from department to department can take a considerable amount of time, and queues tend to develop. In addition, each new arrival may require that an operation be set up differently for its particular processing requirements. Although workers can operate a number of machines or perform a number of different tasks in a single department, their workload often fluctuates—from queues of jobs or customers waiting to be processed to idle time between jobs or customers. Figures 7.3 and 7.4 show schematic diagrams of process layouts in services and manufacturing.

Material storage and movement are directly affected by the type of layout. Storage space in a process layout is large to accommodate the large amount of in-process inventory. The factory may look like a warehouse, with work centers strewn between storage aisles. In-process inventory is high because material moves from work center to work center in batches waiting to be processed. Finished goods inventory, on the other hand, is low because the goods are being made for a particular customer and are shipped out to that customer on completion.

Process layouts in manufacturing firms require flexible material handling equipment (such as forklifts, carts or AGVs) that can follow multiple paths, move in any direction, and carry large loads of in-process goods. A forklift moving pallets of material from work center to work center needs wide aisles to accommodate heavy loads and two-way movement. Scheduling of forklifts is typically controlled by radio dispatch and varies from day to day and hour to hour. Routes have to be determined and priorities given to different loads competing for pickup.

Figure 7.4. A Process Layout in Manufacturing

Process layouts in service firms require large aisles for customers to move back and forth and ample display space to accommodate different customer preferences.

The major layout concern for a process layout is where to locate the departments or machine centers in relation to each other. Although each job or customer potentially has a different route through the facility, some paths will be more common than others. Past information on customer orders and projections of customer orders can be used to develop patterns of flow through the shop.

PRODUCT LAYOUTS

Product layouts, better known as assembly lines, arrange activities in a line according to the sequence of operations that need to be performed to assemble a particular product. Each product has its own "line" specifically designed to meet its requirements. The flow of work is orderly and efficient, moving from one workstation to another down the assembly line until a finished product comes off the end of the line. Since the line is set up for one type of product or service, special machines can be purchased to match a product's specific processing requirements. Product layouts are suitable for mass production or repetitive operations in which demand is stable and volume is high. The product or service is a standard one made for a general market, not for a particular customer. Because of the high level of demand, product layouts are more automated than process layouts, and the role of the worker is different. Workers perform narrowly defined assembly tasks that do not demand as high a wage rate as those of the more versatile workers in a process layout.

•Product layouts: arrange activities in a line according to the sequence of operations for a particular product or service.

Process layouts are flexible; product layouts are efficient.

The advantage of the product layout is its efficiency and ease of use. The disadvantage is its inflexibility. Significant changes in product design may require that a new assembly line be built and new equipment be purchased. This is what happened to U.S. automakers when demand shifted to smaller cars. The factories that could efficiently produce six-cylinder engines could not be adapted to produce four-cylinder engines. A similar inflexibility occurs when demand volume slows. The fixed cost of a product layout (mostly for equipment) allocated over fewer units can send the price of a product soaring.

The major concern in a product layout is balancing the assembly line so that no one workstation becomes a bottleneck and holds up the flow of work through the line. Figure 7.5 shows the product flow in a product layout. Contrast this with the flow of products through the process layout shown in Figure 7.4.

This photo shows a product layout where car bodies are moving down a paced assembly line with workers following along completing their tasks. Notice the workstations alongside the assembly line with tools, materials, signage, instructions, and andon lights (for signaling line slow down or stoppage). Today's factories are clean and orderly; inspectors even wear white gloves!

Figure 7.5. A Product Layout

A product layout needs material moved in one direction along the assembly line and always in the same pattern. Conveyors are the most common material handling equipment for product layouts. Conveyors can be paced (automatically set to control the speed of work) or unpaced (stopped and started by the workers according to their pace). Assembly work can be performed online (i.e., on the conveyor) or offline (at a workstation serviced by the conveyor).

Aisles are narrow because material is moved only one way, it is not moved very far, and the conveyor is an integral part of the assembly process, usually with workstations on either side. Scheduling of the conveyors, once they are installed, is simple—the only variable is how fast they should operate.

Storage space along an assembly line is quite small because in-process inventory is consumed in the assembly of the product as it moves down the assembly line. Finished goods, however, may require a separate warehouse for storage before they are shipped to dealers or stores to be sold.

Product and process layouts look different, use different material handling methods, and have different layout concerns. Table 7.1 summarizes the differences between product and process layouts.

Table 7.1. A Comparison of Product and Process Layouts

	Product Layout	Process Layout
1. Description	Sequential arrangement of activities	Functional grouping of activities
2. Type of process	Continuous, mass production, mainly assembly	Intermittent, job shop, batch production, mainly fabrication
3. Product	Standardized, made to stock	Varied, made to order
4. Demand	Stable	Fluctuating
5. Volume	High	Low
6. Equipment	Special purpose	General purpose
7. Workers	Limited skills	Varied skills
8. Inventory	Low in-process, high finished goods	High in-process, low finished goods
9. Storage space	Small	Large
10. Material handling	Fixed path (conveyor)	Variable path (forklift)
11. Aisles	Narrow	Wide
12. Scheduling	Part of balancing	Dynamic
13. Layout decision	Line balancing	Machine location
14. Goal	Equalize work at each station	Minimize material handling cost
15. Advantage	Efficiency	Flexibility

Aircraft production generally takes place in a fixed position layout due to the size and complexity of assembly. Shown here is a Boeing 787 Dreamliner being outfitted.

FIXED-POSITION LAYOUTS

Fixed-position layouts are typical of projects in which the product produced is too fragile, bulky, or heavy to move. Ships, houses, and aircraft are examples. In this layout, the product remains stationary for the entire manufacturing cycle. Equipment, workers, materials, and other resources are brought to the production site. Equipment utilization is low because it is often less costly to leave equipment idle at a location where it will be needed again in a few days, than to move it back and forth. Frequently, the equipment is leased or subcontracted because it is used for limited periods of time. The workers called to the work site are highly skilled at performing the special tasks they are requested to do. For instance, pipefitters may be needed at one stage of production, and electricians or plumbers at another. The wage rate for these workers is much higher than minimum wage. Thus, if we were to look at the cost breakdown for fixed-position layouts, the fixed cost would be relatively low (equipment may not be owned by the company), whereas the variable costs would be high (due to high labor rates and the cost of leasing and moving equipment).

•Fixed-position layouts: are used for projects in which the product cannot be moved.

Fixed-position layouts are specialized to individual projects and thus are beyond the scope of this book. Projects are covered in more detail in the next chapter. In the sections that follow, we examine some quantitative approaches for designing product and process layouts.

Process layout objective: Minimize material handling costs.

In designing a process layout, we want to minimize movement or material handling cost, which is a function of the amount of material moved times the distance it is moved. This implies that departments that incur the most interdepartment movement should be located closest to each other, and those that do not interact should be located further away. Two techniques used to design process layouts, block diagramming and relationship diagramming, are based on logic and the visual representation of data.

BLOCK DIAGRAMMING

We begin with data on historical or predicted movement of material between departments in the existing or proposed facility. This information is typically provided in the form of a from/to chart, or load summary chart. The chart gives the average number of unit loads transported between the departments over a given period of time. A unit load can be a single unit, a pallet of material, a bin of material, or a crate of material—however material is normally moved from location to location. In automobile manufacturing, a single car represents a unit load. For a ballbearing producer, a unit load might consist of a bin of 100 or 1000 ball bearings, depending on their size.

•Unit load: the quantity in which material is normally moved

ALONG THE SUPPLY CHAIN

The Health Benefits of Good Layout

Steelcase furniture isn't just for offices anymore. Nurture, their line of patient-friendly furnishings, is part of an evidencebased design movement in healthcare where the impact of the physical environment on patient care and health is being investigated. Research shows that hospital design can cut infection rates, lower physician error, improve staff performance, shorten hospital stays, and save lives. The ideal patient room, for example, is a private room with three zones: (1) the patient zone, which includes the bed and overbed table; (2) the staff zone, with a sink, sanitizer, and counter for writing; and (3) the family zone, comfortable enough to encourage longer stays. Access is key to all areas—caregiver access to the patient, patient access to the bathroom, everyone's access to vital information. Rooms are designed as "acuity-adaptable," meaning they can accommodate a variety of medical conditions. New rooms use more natural light, reduce noise, and improve infection control.

A hospital room in which the patient has ownership of his surroundings and feels connected to staff and loved ones is an environment exceptionally conducive to healing. The Center for Health Design estimates that such rooms can add $12 million to the cost of hospital construction, but with reduced falls and transfers, fewer infections, and safer care, those extra costs can be recouped within the first year of operation.

Sources: Andrew Blum, "How Hospital Design Saves Lives," BusinessWeek Online, August 15, 2006; Reena Jana, "Steelcase's Medical Breakthrough," BusinessWeek, March 22, 2007; Chuck Salter, "A Prescription for Innovation," Fast Company, April 2006; Nurture Web site, http://nurture.steelcase.com

The next step in designing the layout is to calculate the composite movements between departments and rank them from most movement to least movement. Composite movement, rep resented by a two-headed arrow, refers to the back-and-forth movement between each pair of departments.

Finally, trial layouts are placed on a grid that graphically represents the relative distances between departments in the form of uniform blocks. The objective is to assign each department to a block on the grid so that nonadjacent loads are minimized. The term nonadjacent is defined as a distance farther than the next block, either horizontally, vertically, or diagonally. The trial layouts are scored on the basis of the number of nonadjacent loads. Ideally, the optimal layout would have zero nonadjacent loads. In practice, this is rarely possible, and the process of trying different lay out configurations to reduce the number of nonadjacent loads continues until an acceptable layout is found.

Block diagramming tries to minimize nonadjacent loads.

Process Layout

Barko, Inc. makes bark scalpers, processing equipment that strips the bark off trees and turns it into nuggets or mulch for gardens. The facility that makes bark scalpers is a small-job shop that employs 50 workers and is arranged into five departments: (1) bar stock cutting, (2) sheet metal, (3) machining, (4) painting, and (5) assembly. The average number of loads transported between the five departments per month is given in the accompanying load summary chart. The current layout of the facility is shown schematically on the 2 × 3 grid. Notice that there is quite a bit of flexibility in the facility, as indicated by the six possible locations (i.e., intersections) available for five departments. In addition, the forklift used in the facility is very flexible, allowing horizontal, vertical, and diagonal movement of material.

Barko management anticipates that a new bark scalper plant will soon be necessary and would like to know if a similar layout should be used or if a better layout can be designed. You are asked to evaluate the current layout in terms of nonadjacent loads, and if needed, propose a new layout on a 2 × 3 grid that will minimize the number of nonadjacent loads.

Solution

In order to evaluate the current layout, we need to calculate the composite, or back-and-forth, movements between departments. For example, the composite movement between department 1 and department 3 is the sum of 50 loads moved from 1 to 3, plus 60 loads moved from 3 to 1, or 110 loads of material. If we continue to calculate composite movements and rank them from highest to lowest, the following list results:

Next, we evaluate the "goodness" of the layout by scoring it in terms of nonadjacent loads. The results are shown visually in Grid 1.

The adjacent moves are marked with a solid line and the nonadjacent moves are shown with a curved dashed line to highlight the fact that material is moved farther than we would like, that is, across more than one square. Following our composite movement list, 2

To improve the layout, we note that departments 3 and 4 should be located adjacent to department 2, and that departments 4 and 5 may be located away from department 1 without adding to the score of nonadjacent loads. Let's put departments 4 and 5 on one end of the grid and department 1 on the other and then fill in departments 2 and 3 in the middle. The revised solution is shown in Grid 2. The only nonadjacent moves are between departments 1 and 4, and 1 and 5. Since no loads of material are moved along those paths, the score for this layout is zero.

The Excel setup for this problem is shown in Exhibit 7.1.

The layout solution in Grid 2 represents the relative position of each department. The next step in the layout design is to add information about the space required for each department. Recommendations for workspace around machines can be requested from equipment vendors or found in safety regulations or operating manuals. In some cases, vendors provide templates of equipment layouts, with work areas included. Workspace allocations for workers can be specified as part of job design, recommended by professional groups, or agreed on through union negotiations. A block diagram can be created by "blocking in" the work areas around the departments on the grid. The final block diagram adjusts the block diagram for the desired or proposed shape of the building. Standard building shapes include rectangles, L shapes, T shapes, and U shapes.

Figure 7.6a shows an initial block diagram for Example 7.1, and Figure 7.6b shows a final block diagram. Notice that the space requirements vary considerably from department to department, but the relative location of departments has been retained from the grid.

• Block diagram: a type of schematic layout diagram that includes space requirements.

RELATIONSHIP DIAGRAMMING

The preceding solution procedure is appropriate for designing process layouts when quantitative data are available. However, in situations for which quantitative data are difficult to obtain or do not adequately address the layout problem, the load summary chart can be replaced with subjective input from analysts or managers. Richard Muther developed a format for displaying manager preferences for departmental locations, known as Muther's grid^[14]. The preference information is coded into six categories associated with the five vowels, A, E, I, O, and U, plus the letter X. As shown in Figure 7.7, the vowels match the first letter of the closeness rating for locating two departments next to each other. The diamond-shaped grid is read similarly to mileage charts on a road map. For example, reading down the highlighted row in Figure 7.7, it is okay if the offices are located next to production, absolutely necessary that the stockroom be located next to production, important that shipping and receiving be located next to production, especially important that the locker room be located next to production, and absolutely necessary that the toolroom be located next to production.

•Muther's grid: a format for displaying manager preferences for department locations.

The information from Muther's grid can be used to construct a relationship diagram that evaluates existing or proposed layouts. Consider the relationship diagram shown in Figure 7.8a.

•Relationship diagram: a schematic diagram that uses weighted lines to denote location preference.

Figure E7.1. Using Excel for Process Layouts

A schematic diagram of the six departments from Figure 7.7 is given in a 2 × 3 grid. Lines of different thicknesses are drawn from department to department. The thickest lines (three, four, or five strands) identify the closeness ratings with the highest priority—that is, for which departments it is important, especially important, or absolutely necessary that they be located next to each other. The priority diminishes with line thickness. Undesirable closeness ratings are marked with a zigzagged line. Visually, the best solution would show short heavy lines and no zigzagged lines (undesirable locations are noted only if they are adjacent). Thin lines (one or two strands, representing unimportant or okay) can be of any length and for that reason are sometimes eliminated from the analysis. An alternative form of relationship diagramming uses colors instead of line thickness to visualize closeness ratings.

From Figure 7.8a, it is obvious that production and shipping and receiving are located too far from the stockroom and that the offices and locker room are located too close to one another. Figure 7.8b shows a revised layout and evaluates the layout with a relationship diagram. The revised layout appears to satisfy the preferences expressed in Muther's grid. The heavy lines are short and within the perimeter of the grid. The lengthy lines are thin, and there are no zigzagged lines (X's are shown only if the departments are adjacent).

Manager preferences for department locations are displayed as A, E, I, O, U, or X.

Figure 7.6. Block Diagrams

Figure 7.7. Muther's Grid

Figure 7.8. Relationship Diagrams

COMPUTERIZED LAYOUT SOLUTIONS

The diagrams just discussed help formulate ideas for the arrangement of departments in a process layout, but they can be cumbersome for large problems. Fortunately, several computer packages are available for designing process layouts. The best known are CRAFT (Computerized Relative Allocation of Facilities Technique) and CORELAP (Computerized Relationship Layout Planning). CRAFT takes a load summary chart and block diagram as input and then makes pairwise exchanges of departments until no improvements in cost or nonadjacency score can be found. The output is a revised block diagram after each iteration for a rectangular-shaped building, which may or may not be optimal. CRAFT is sensitive to the initial block diagram used; that is, different block diagrams as input will result in different layouts as outputs. For this reason, CRAFT is often used to improve on existing layouts or to enhance the best manual attempts at designing a layout.

CORELAP uses nonquantitative input and relationship diagramming to produce a feasible layout for up to 45 departments and different building shapes. It attempts to create an acceptable layout from the beginning by locating department pairs with A ratings first, then those with E ratings, and so on.

Simulation software for layout analysis, such as PROMODEL and EXTEND provide visual feedback and allow the user to quickly test a variety of scenarios. Three-D modeling and CAD-integrated layout analysis are available in VisFactory and similar software.

ALONG THE SUPPLY CHAIN

Urban Outfitters' New Distribution Facility

In recessionary times, most businesses revise their growth strategies or change course. Not Urban Outfitters (UO). To support their goal of adding 500 new stores in North America, Europe, and Asia, UO decided to revamp their supply chain, build their own distribution center, and take control over logistics. Previously, a third party logistics (3PL) provider had handled shipping, warehousing, and distribution. To follow the logic of this decision, we'll start with the effects of the recession.

Lean times sometimes create unanticipated demand. Reducing the stock on shelves, a concept known as lean buying, can create a sense of urgency among customers so that they purchase now instead of waiting for markdowns. Lean buying also means smaller orders for suppliers and a supply chain that needs to be faster and more responsive.

One way to add flexibility to a supply chain is by dual sourcing. UO sources fabric and raw materials in alternate locations, allowing for shorter lead times in the event of a reorder. The smaller initial order (to test the waters) is sourced from one supplier, and the larger re-order is sourced from another suppler. Every two weeks, the UO supply chain team sits down with other key executives to evaluate and discuss sales and operations planning (see Chapter 14) and supply chain performance of its more than 1500 vendors.

A critical supply chain goal is to reduce the concept-tomarket time from 18 weeks down to 9. (That's still a far cry from Zara's nine day design-to hanger time, but it's a start.) To begin the process, UO re-evaluated its Far East operations, the source of its private brand products. The upstream portion of the supply chain flows from designer, to raw materials merchant, to production planner, to production agent, to the factory. A bottleneck in the process has been the production agent, usually someone from the country of origin who facilitates communication and oversees production in the factory. UO has worked to more closely train these agents and, in some cases, to replace them with UO personnel. They are considering establishing a Hong Kong office to coordinate Far East production and consolidate global logistics functions.

In the states, Urban Outfitters has built a 175,500- square-foot distribution center PC) in Reno, Nevada. Although UO is based in Philadelphia, the West Coast DC location makes sense as most of the merchandise is imported from Asia. Taking over the logistics function from a third party provider allowed UO to further shorten the concept-to-market time. The DC uses a high-speed conveyor, sliding shoe sortation system, and pack-to-light technology. The facility handles on average 100,000 packages a day, but has shipped as many as 600,000 in a five-day week. Only 10% of the shipments into the center actually go into reserve storage for order fulfillment. Ninety percent are shipped directly to stores from inbound freight through a process known as cross-docking. Referring to the figure above, shipments arriving in the receiving area are entered into UO's enterprise resource planning (ERP) system (see Chapter 15) where merchandise is matched with store needs. Pallets are staged while cartons for each store are prepared and ticketed. As cases of goods arrive to the pack-to-light area, a packer scans the bar code label on a ticket in the lead case to launch the packing operation for that SKU. Lights on the pick racks identify which cartons, or stores, will get that SKU and how many cases or items should be placed in a carton. Once a shipping carton is full, it's pushed back onto the conveyor system. On its way to the shipping area it is weighed and taped, then routed to the appropriate truck for shipping to a UO store, without ever having entered storage.

In its first year of operation the new distribution center reduced operating costs per unit by 30% and turnaround time by 40%. The facility has room to expand to 429,000 square feet as the expansion strategy takes effect. Urban Outfitters has taken a holistic approach to design, sourcing, production, and distribution. Integrating facility decisions with strategy is an important step toward goal attainment.

1. What difference could in-house logistics versus 3PL make for a customer?

2. Why does cross docking make sense for Urban Outfitters?

3. Do you think UO's strategy of growth is sustainable? What might be the next area for expansion?

Sources: Dan McCue, "Urban Outfitters Sales into the Wind," Inbound Logistics, September 2008; Bob Trebilcock, "Urban Outfitters' Against-the-Grain Distribution is Back In-house," and "Distribution Redesign at Urban Outfitters," Modern Materials Handling, April 1, 2008.

Most service organizations use process layouts. This makes sense because of the variability in customer requests for service. Service layouts are designed in much the same way as process layouts in manufacturing firms, but the objectives may differ. For example, instead of minimizing the flow of materials through the system, services may seek to minimize the flow of paper-work or to maximize customer exposure to as many goods as possible. Grocery stores take this approach when they locate milk on one end of the store and bread on the other, forcing the customer to travel through aisles of merchandise that might prompt additional purchases.

Service layouts may have different objectives than manufacturing layouts.

In addition to the location of departments, service layouts are concerned with the circulation of customer traffic through the facility. There are a variety of ways to prompt the flow of customers through various processes or departments. You may have experienced a free-flow layout in The Disney Store, a grid layout in your grocery store, a spine layout in Barnes and Noble, or a circular layout in Kohl's department store. These layouts are shown in Figure 7.9. Free flow layouts encourage browsing, increase impulse purchasing, and are flexible and visually appealing. Grid layouts encourage customer familiarity, are low cost, easy to clean and secure, and good for repeat customers. Loop layouts and spine layouts fall between the extremes of free flow and grids. They both increase customer sightlines and exposure to products, while encouraging the customer to circulate through the entire store.^[15]

Service layouts must be attractive as well as functional. In this photo, modular office units without permanent walls allow maximum flexibility, save space, and encourage communication.

Figure 7.9. Types of Store Layouts

Service layouts are also concerned with the allocation of space to departments, the location of special displays, the efficiency of checkout procedures, and protection from pilferage. Space allocation is determined by evaluating the sales per square foot of a product or product line versus the willingness of a vendor to pay for product placement. Queuing analysis, discussed in Chapter 5, is a quantitative technique for improving waiting lines that often form at checkouts.

Industry-specific recommendations are available for layout and display decisions. Computerized versions, such as SLIM (Store Labor and Inventory Management) and COSMOS (Computerized Optimization and Simulation Modeling for Operating Supermarkets), consider shelf space, demand rates, profitability, and stockout probabilities in layout design.

Finally, services may have both a back office (invisible to the customer) and a front office (in full view of the customer) component. Back offices can be organized for efficiency and functionality, while front office layouts must be aesthetically pleasing as well as functional. For that reason, service layouts are often considered part of the service design process.

A product layout arranges machines or workers in a line according to the operations that need to be performed to assemble a particular product. From this description, it would seem the layout could be determined simply by following the order of assembly as contained in the bill of material for the product. To some extent, this is true. Precedence requirements, specifying which operations must precede others, which can be done concurrently and which must wait until later, are an important input to the product layout decision. But there are other factors that make the decision more complicated.

Product layout objective: Balance the assembly line.

Product layouts or assembly lines are used for high-volume production. To attain the required output rate as efficiently as possible, jobs are broken down into their smallest indivisible portions, called work elements. Work elements are so small that they cannot be performed by more than one worker or at more than one workstation. But it is common for one worker to perform several work elements as the product passes through his or her workstation. Part of the layout decision is con-cerned with grouping these work elements into workstations so products flow through the assem-bly line smoothly. A workstation is any area along the assembly line that requires at least one worker or one machine. If each workstation on the assembly line takes the same amount of time to perform the work elements that have been assigned, then products will move successively from workstation to workstation with no need for a product to wait or a worker to be idle. The process of equalizing the amount of work at each workstation is called line balancing.

•Line balancing: tries to equalize the amount of work at each workstation.

LINE BALANCING

Assembly-line balancing operates under two constraints: precedence requirements and cycle time restrictions.

•Precedence requirements: physical restrictions on the order in which operations are performed.

Precedence requirements are physical restrictions on the order in which operations are per-formed on the assembly line. For example, we would not ask a worker to package a product before all the components were attached, even if he or she had the time to do so before passing the product to the next worker on the line. To facilitate line balancing, precedence requirements are often expressed in the form of a precedence diagram. The precedence diagram is a network, with work elements represented by circles or nodes and precedence relationships represented by directed line segments connecting the nodes. We will construct a precedence diagram later in Example 7.2.

• Cycle time: the maximum amount of time a product is allowed to spend at each workstation.

Cycle time, the other restriction on line balancing, refers to the maximum amount of time the product is allowed to spend at each workstation if the targeted production rate is to be reached.

Desired cycle time is calculated by dividing the time available for production by the number of units scheduled to be produced:

Suppose a company wanted to produce 120 units in an 8-hour day. The cycle time necessary to achieve the production quota is

Cycle time can also be viewed as the time between completed items rolling off the assembly line. Consider the three-station assembly line shown here.

Cycle time is different from flow time.

It takes 12 minutes (i.e., 4 + 4 + 4) for each item to pass completely through all three stations of the assembly line. The time required to complete an item is referred to as its flow time. How-ever, the assembly line does not work on only one item at a time. When fully operational, the line will be processing three items at a time, one at each workstation, in various stages of assembly. Every 4 minutes a new item enters the line at workstation 1, an item is passed from workstation 1 to workstation 2, another item is passed from workstation 2 to workstation 3, and a completed item leaves the assembly line. Thus, a completed item rolls off the assembly line every 4 minutes. This 4-minute interval is the actual cycle time of the line.

The actual cycle time, C_a, is the maximum workstation time on the line. It differs from the desired cycle time when the production quota does not match the maximum output attainable by the system. Sometimes the production quota cannot be achieved because the time required for one work element is too large. To correct the situation, the quota can be revised downward or parallel stations can be set up for the bottleneck element.

Actual cycle time is the result from the balancing procedure.

Line balancing is basically a trial-and-error process. We group elements into workstations recognizing time and precedence constraints. For simple problems, we can evaluate all feasible groupings of elements. For more complicated problems, we need to know when to stop trying different workstation configurations. The efficiency of the line can provide one type of guideline; the theoretical minimum number of workstations provides another. The formulas for efficiency, E, and minimum number of workstations, N, are

Calculate line efficiency and the theoretical minimum number of workstations.

where

t_i = completion time for element i

j = number of work elements

n = actual number of workstations

C_a = actual cycle time

C_d = desired cycle time

• Balance delay: the total idle time of the line.

The total idle time of the line, called balance delay, is calculated as (1 — efficiency). Efficiency and balance delay are usually expressed as percentages. In practice, it may be difficult to attain the theoretical number of workstations or 100% efficiency.

The line balancing process can be summarized as follows:

Line balancing groups elements into workstations.

1. Draw and label a precedence diagram.

2. Calculate the desired cycle time required for the line.

3. Calculate the theoretical minimum number of workstations.

4. Group elements into workstations, recognizing cycle time and precedence constraints.

5. Calculate the efficiency of the line.

6. Determine if the theoretical minimum number of workstations or an acceptable efficiencylevel has been reached. If not, go back to step 4.

Line Balancing

Real Fruit Snack Strips are made from a mixture of dried fruit, food coloring, preservatives, and glucose. The mixture is pressed out into a thin sheet, imprinted with various shapes, rolled, and packaged. The precedence and time requirements for each step in the assembly process are given below. To meet demand, Real Fruit needs to produce 6000 fruit strips every 40-hour week. Design an assembly line with the fewest number of workstations that will achieve the production quota without violating precedence constraints.

	Work Element	Precedence	Time (min)
A	Press out sheet of fruit	—	0.1
B	Cut into strips	A	0.2
C	Outline fun shapes	A	0.4
D	Roll up and package	B, C	0.3

Solution

First, we draw the precedence diagram as follows.

The precedence diagram is completed by adding the time requirements beside each node. Next, we calculate the desired cycle time and the theoretical minimum number of workstations:

To balance the line, we must group elements into workstations so that the sum of the element times at each workstation is less than or equal to the desired cycle time of 0.4 minute. Examining the precedence diagram, we begin with A since it is the only element that does not have a precedence. We assign A to workstation 1. B and C are now available for assignment. Cycle time is exceeded with A and C in the same workstation, so we assign B to workstation 1 and place C in a second workstation. No other element can be added to workstation 2, due to cycle time constraints. That leaves D for assignment to a third workstation. Elements grouped into workstations are circled on the precedence diagram and placed into workstations shown on the assembly line diagram.

Workstation	Element	Remaining Time	Remaining Elements
1	A	0.3	B, C
	B	0.1	C, D
2	C	0.0	D
3	D	0.1	none

Assembly-line diagram:

Since the theoretical minimum number of workstations was three, we know we have balanced the line as efficiently as possible. The assembly line has an efficiency of

Hybrid layouts modify and/or combine some aspects of product and process layouts. We discuss three hybrid layouts: cellular layouts, flexible manufacturing systems, and mixed-model assembly lines.

CELLULAR LAYOUTS

Cellular layouts attempt to combine the flexibility of a process layout with the efficiency of a product layout. Based on the concept of group technology (GT), dissimilar machines or activities are grouped into work centers, called cells, to process families of parts or customers with similar requirements. (Figure 7.10 shows a family of parts with similar shapes, and a family of related grocery items.) The cells are arranged in relation to each other so that material movement is minimized. Large machines that cannot be split among cells are located near to the cells that use them, that is, at their point of use.

•Cellular layouts: group dissimilar machines into work centers (called cells) that process families of parts with similar shapes or processing requirements.

The layout of machines within each cell resembles a small assembly line. Thus, line-balancing procedures, with some adjustment, can be used to arrange the machines within the cell. The layout between cells is a process layout. Therefore, computer programs such as CRAFT can be used to locate cells and any leftover equipment in the facility.

Consider the process layout in Figure 7.11. Machines are grouped by function into four distinct departments. Component parts manufactured in the process layout section of the factory are later assembled into a finished product on the assembly line. The parts follow different flow paths through the shop. Three representative routings, for parts A, B, and C, are shown in the figure. Notice the distance that each part must travel before completion and the irregularity of the part routings. A considerable amount of "paperwork" is needed to direct the flow of each individual part and to confirm that the right operation has been performed. Workers are skilled at operating the types of machines within a single department and typically can operate more than one machine at a time.

•Production flow analysis: reorders part routing matrices to identify families of parts with similar processing requirements.

Figure 7.10. Group Technology (a) A family of similar parts. (b) A family of related grocery items.: Source: Adapted from Mikell P. Groover, Automation, Production Systems, and Computer Integrated Manufacturing © 1987. Adapted by permission of Pearson Education, Inc., Upper Saddle River, NJ.

Figure 7.11. Original Process Layout with Routing Matrix

Figure 7.11 gives the complete part routing matrix for the eight parts processed through the facility. In its current form, there is no apparent pattern to the routings. Production flow analysis (PFA) is a group technology technique that reorders part routing matrices to identify families of parts with similar processing requirements. The reordering process can be as simple as using the "Data Sort" command in Excel for the most common machines, or as sophisticated as pattern-recognition algorithms from the field of artificial intelligence. Figure 7.12 shows the results of reordering. Now the part families and cell formations are clear. Cell 1, consisting of machines 1, 2, 4, 8, and 10, will process parts A, D, and F; Cell 2, consisting of machines 3, 6, and 9, will process products C and G; and Cell 3, consisting of machines 5, 7, 11, and 12, will process parts B, H, and E. A complete cellular layout showing the three cells feeding a final assembly line is also given in Figure 7.12. The representative part flows for parts A, B, and C are much more direct than those in the process layout. There is no backtracking or crisscrossing of routes, and the parts travel a shorter distance to be processed. Notice that parts G and E cannot be completely processed within cells 2 and 3, to which they have been assigned. However, the two cells are located in such a fashion that the transfer of parts between the cells does not involve much extra movement.

The U shape of cells 1 and 3 is a popular arrangement for manufacturing cells because it facilitates the rotation of workers among several machines. Workers in a cellular layout typically operate more than one machine, as was true of the process layout. However, workers who are assigned to each cell must now be multifunctional—that is, skilled at operating many different kinds of machines, not just one type, as in the process layout. In addition, workers are assigned a path to follow among the machines that they operate, which may or may not coincide with the path the product follows through the cell. Figure 7.13 shows a U-shaped manufacturing cell including worker paths.

Figure 7.12. Revised Cellular Layout with Reordered Routing Matrix

Figure 7.13. A Manufacturing Cell with Worker Paths: Source: J.T. Black, "Cellular Manufacturing Systems Reduce Setup Time, Make Small Lot Production Economical." Industrial Engineering (November 1983). Reprinted with the permission of the Institute of Industrial Engineers, 3577 Parkway Lane, Suite 200, Norcross, GA 30092, 770-449-0461 © 1983.

Advantages of Cellular Layouts

Cellular layouts have become popular in the past decade as the backbone of modern factories. Cells can differ considerably in size, in automation, and in the variety of parts processed. As small interconnected layout units, cells are common in services, as well as manufacturing.

The advantages of cellular layouts are as follows:

• Reduced material handling and transit time. Material movement is more direct. Less distance is traveled between operations. Material does not accumulate or wait long periods of time to be moved. Within a cell, the worker is more likely to carry a partially finished item from machine to machine than wait for material-handling equipment, as is characteristic of process layouts where larger loads must be moved farther distances.

  Cellular layouts reduce transit time, setup time, and in-process inventory.

• Reduced setup time. Since similar parts are processed together, the adjustments required to set up a machine should not be that different from item to item. If it does not take that long to change over from one item to another, then the changeover can occur more frequently, and items can be produced and transferred in very small batches or lot sizes.

• Reduced work-in-process inventory. In a work cell, as with assembly lines, the flow of work is balanced so that no bottleneck or significant buildup of material occurs between stations or machines. Less space is required for storage of in-process inventory between machines, and machines can be moved closer together, thereby saving transit time and increasing communication.

• Better use of human resources. Typically, a cell contains a small number of workers responsible for producing a completed part or product. The workers act as a self-managed team, in most cases more satisfied with the work that they do and more particular about the quality of their work. Labor in cellular manufacturing is a flexible resource. Workers in each cell are multifunctional and can be assigned to different routes within a cell or between cells as demand volume changes.

• Easier to control. Items in the same part family are processed in a similar manner through the work cell. There is a significant reduction in the paperwork necessary to document material travel, such as where an item should be routed next, if the right operation has been performed, and the current status of a job. With fewer jobs processed through a cell, smaller batch sizes, and less distance to travel between operations, the progress of a job can be verified visually rather than by mounds of paperwork.

• Easier to automate. Automation is expensive. Rarely can a company afford to automate an entire factory all at once. Cellular layouts can be automated one cell at a time. Figure 7.14 shows an automated cell with one robot in the center to load and unload material from several CNC machines and an incoming and outgoing conveyor. Automating a few workstations on an assembly line will make it difficult to balance the line and achieve the increases in productivity expected. Introducing automated equipment in a job shop has similar results, because the "islands of automation" speed up only certain processes and are not integrated into the complete processing of a part or product.

Disadvantages of Cellular Layouts

In spite of their many advantages, cellular layouts are not appropriate for all types of businesses. The following disadvantages of cellular layouts must be considered:

• Inadequate part families. There must be enough similarity in the types of items processed to form distinct part families. Cellular manufacturing is appropriate for medium levels of product variety and volume. The formation of part families and the allocation of machines to cells is not always an easy task. Part families identified for design purposes may not be appropriate for manufacturing purposes.

  Cellular layouts require distinct part families, careful balancing, expanded worker training, and increased capital investment.

  

  Figure 7.14. An Automated Manufacturing Cell: Source: J. T. Black, "Cellular Manufacturing Systems Reduce Setup Time, Make Small Lot Production Economical." Industrial Engineering (November 1983). Reprinted with the permission of the Institute of Industrial Engineers, 3577 Parkway Lane, Suite 200, Norcross, GA 30092, 770-449-0461, © 1983.

• Poorly balanced cells. Balancing the flow of work through a cell is more difficult than assemblyline balancing because items may follow different sequences through the cell that require different machines or processing times. The sequence in which parts are processed can thus affect the length of time a worker spends at a certain stage of processing and thus delay his arrival to a subsequent stage in his worker path. Poorly balanced cells can be very inefficient. It is also important to balance the workload among cells in the system, so that one cell is not overloaded while others are idle. This may be taken care of in the initial cellular layout, only to become a problem as changes occur in product designs or product mix. Severe imbalances may require the reformation of cells around different part families, and the cost and disruption that implies.

• Expanded training and scheduling of workers. Training workers to do different tasks is expensive and time-consuming and requires the workers' cooperation. Some tasks are too different for certain workers to master. Although flexibility in worker assignment is one of the advantages of cellular layouts, the task of determining and adjusting worker paths within or between cells can be quite complex.

• Increased capital investment. In cellular manufacturing, multiple smaller machines are preferable to single large machines. Implementing a cellular layout can be economical if new machines are being purchased for a new facility, but it can be quite expensive and disruptive in existing production facilities where new layouts are required. Existing equipment may be too large to fit into cells or may be underutilized when placed in a single cell. Additional machines of the same type may have to be purchased for different cells. The cost and downtime required to move machines can also be high.

MIXED-MODEL ASSEMBLY LINES

Traditional assembly lines, designed to process a single model or type of product, can be used to process more than one type of product but not efficiently. Models of the same type are produced in long production runs, sometimes lasting for months, and then the line is shut down and changed over for the next model. The next model is also run for an extended time, producing perhaps half a year to a year's supply; then the line is shut down again and changed over for yet another model; and so on. The problem with this arrangement is the difficulty in responding to changes in customer demand. If a certain model is selling well and customers want more of it, they have to wait until the next batch of that model is scheduled to be produced. On the other hand, if demand is disappointing for models that have already been produced, the manufacturer is stuck with un-wanted inventory.

Figure 7.15. A Flexible Manufacturing System

Recognizing that this mismatch of production and demand is a problem, some manufacturers concentrated on devising more sophisticated forecasting techniques. Others changed the manner in which the assembly line was laid out and operated so that it really became a mixed-model assembly line. First, they reduced the time needed to change over the line to produce different models. Then they trained their workers to perform a variety of tasks and allowed them to work at more than one workstation on the line, as needed. Finally, they changed the way in which the line was arranged and scheduled. The following factors are important in the design and operation of mixed-model assembly lines.

•Mixed-model assembly line: processes more than one product model.

• Line balancing. In a mixed-model line, the time to complete a task can vary from model to model. Instead of using the completion times from one model to balance the line, a distribution of possible completion times from the array of models must be considered. In most cases, the expected value, or average, times are used in the balancing procedure. Otherwise, mixed-model lines are balanced in much the same way as single-model lines.

• U-shaped lines. To compensate for the different work requirements of assembling different models, it is necessary to have a flexible workforce and to arrange the line so that workers can assist one another as needed. Figure 7.16 shows how the efficiency of an assembly line can be improved when a U-shaped line is used.

  Single-model and mixedmodel assembly lines differ in layout and operation.

• Flexible workforce. Although worker paths are predetermined to fit within a set cycle time, the use of average time values in mixed-model lines will produce variations in worker performance. Hence, the flexibility of workers helping other workers makes a tremendous difference in the ability of the line to adapt to the varied length of tasks inherent in a mixed-model line.

• Model sequencing. Since different models are produced on the same line, mixed-model scheduling involves an additional decision—the order, or sequence, of models to be run through the line. From a logical standpoint, it would be unwise to sequence two models back to back that require extra long processing times. It would make more sense to mix the assembling of models so that a short model (requiring less than the average time) followed a long one (requiring more than the average time). With this pattern, workers could "catch up" from one model to the next.

Figure 7.16. Balancing U-Shaped Lines

Another objective in model sequencing is to spread out the production of different models as evenly as possible throughout the time period scheduled. This concept of uniform production will be discussed in Chapter 16, "Lean Production."

Capacity planning is the process of establishing the overall level of productive resources for a firm. It involves long-term strategic activities, such as the acquisition of new facilities, technologies, or businesses, that take a year or more to complete.

Capacity expansion can lead demand, lag behind demand, or meet average demand. The best operating level for a facility often includes a capacity cushion for unexpected occurrences. The tendency of high levels of output to cost less per unit is known as economies of scale. This normally holds true up to a certain level of output, at which point diseconomies of scale can take over.

Facility decisions are an important part of operations strategy. An effective layout reflects a firm's competitive priorities and enables the firm to reach its strategic objectives. Batch production, which emphasizes flexibility, is most often organized into a process layout, whereas mass production uses a product layout for maximum efficiency. Because of their size and scope, projects tend to use fixed-position layouts. Service layouts may try to process customers through the system as quickly as possible or maximize customer exposure to products and services.

In the current manufacturing environment of new product introductions, rapidly changing technologies, and intense competition, the ability of a manufacturing system to adapt is essential. Thus, several hybrid layouts have emerged that combine flexibility and efficiency. Reductions in setup times have made mixed-model assembly lines feasible. The newest flexible manu-facturing systems (FMSs) can process any item that fits the dimensions of the pallet on which it is transported. Manufacturing cells that resemble small assembly lines are designed to process families of items. Some companies are placing wheels and casters on their machines so that the cells can be adjusted as needed. Others are experimenting with modular conveyor systems that allow assembly lines to be rearranged while workers are on their lunch break.

As important as flexibility is, the cost of moving material is still a primary consideration in layout design. Today, as in the past, layout decisions are concerned with minimizing material flow. However, with reduced inventory levels, the emphasis has shifted from minimizing the number of loads moved to minimizing the distance they are moved. Instead of accumulating larger loads of material and moving them less often, machines are located closer together to allow the frequent movement of smaller loads. Planners who used to devote a considerable amount of time to designing the location of storage areas and the movement of material into and out of storage areas are now concerned with the rapid movement of material to and from the facility itself. The logistics of material transportation is discussed in Chapter 10, "Supply Chain Management."

Desired Cycle Time

Actual Cycle Time

Theoretical Minimum Number of Workstations

Efficiency

Balance Delay

1 – efficiency

balance delay the total idle time of an assembly line.

best operating level the percent of capacity utilization at which unit costs are lowest.

block diagram a schematic layout diagram that includes the size of each work area.

capacity the maximum capability to produce.

capacity cushion a percent of capacity held in reserve for unexpected occurrences.

capacity planning a long-term strategic decision that establishes the overall level of productive resources for a firm.

cellular layout a layout that creates individual cells to process parts or customers with similar requirements.

cycle time the maximum amount of time an item is allowed to spend at each workstation if the targeted production rate is to be achieved; also, the time between successive product completions.

diseconomies of scale when higher levels of output cost more per unit to produce.

economies of scale when it costs less per unit to produce higher levels of output.

facility layout the arrangement of machines, departments, workstations, and other areas within a facility.

fixed-position layout a layout in which the product remains at a stationary site for the entire manufacturing cycle.

flexible manufacturing system (FMS) programmable equipment connected by an automated material-handling system and controlled by a central computer.

line balancing a layout technique that attempts to equalize the amount of work assigned to each workstation on an assembly line.

mixed-model assembly line an assembly line that processes more than one product model.

Muther's grid a format for displaying manager preferences for department locations.

precedence requirements physical restrictions on the order in which operations are performed.

process layout a layout that groups similar activities together into work centers according to the process or function they perform.

product layout a layout that arranges activities in a line according to the sequence of operations that are needed to assemble a particular product.

production flow analysis (PFA) a group technology technique that reorders part routing matrices to identify families of parts with similar processing requirements.

relationship diagram a schematic diagram that denotes location preference with different line thicknesses.

unit load the quantity in which material is normally moved, such as a unit at a time, a pallet, or a bin of material.

1. PROCESS LAYOUT

Mohawk Valley Furniture Warehouse has purchased a retail outlet with six departments, as shown below. The anticipated number of customers that move between the departments each week is given in the load summary chart.

SOLUTION

Composite movements ranked from highest to lowest are as follows:

PRODUCT LAYOUT

The Basic Block Company needs to produce 4000 boxes of blocks per 40-hour week to meet upcoming holiday demand. The process of making blocks can be broken down into six work elements. The precedence and time requirements for each element are as follows. Draw and label a precedence diagram for the production process. Set up a balanced assembly line and calculate the efficiency of the line.

SOLUTION

7-1. Why is capacity planning strategically important?

7-2. Describe three strategies for expanding capacity. What are the advantages and disadvantages of incremental versus one-step expansion?

7-3. Explain economies and diseconomies of scale. Give an example of each.

7-4. Explore capacity planning at your university or place of business. How is capacity measured? What factors influence the acquisition and allocation of resources?

7-5. Look around your classroom. Which layout characteristics help the learning process, and which ones hinder it? How does layout affect the manner in which the class is taught?

7-6. Visit a local McDonald's, Burger King, and Taco Bell (or similar establishments). How do their layouts differ? Which appears to be most efficient? Why?

7-7. Does layout make a difference? Think of a time when the layout of a facility impeded a process with which you were involved. Think of a time when a layout made it easier for a process to be completed.

7-8. List five goals of facility layout. Give an example of a facility you know that emphasizes each goal.

7-9. Distinguish between a process and product layout. Give an example of each.

7-10. Give an example of a fixed-position layout for producing a product and providing a service.

7-11. What type of layout(s) would be appropriate for:

7-12. What are the fixed and variable cost tradeoffs among product, process, and fixed-position layouts? Draw a cost/ volume graph to illustrate your answer.

7-13. What is the difference between block diagramming and relationship diagramming? When might each be used?

7-14. How do service layouts differ from manufacturing layouts? Give an example of a well-designed service layout and an example of a poorly designed layout.

7-15. What are the objectives of line balancing? Describe several heuristic approaches to line balancing.

7-16. How are manufacturing cells formed? How does the role of the worker differ in cellular manufacturing?

7-17. Discuss the advantages and disadvantages of cellular layouts. How does a cellular layout combine a product and process layout?

7-18. Describe a flexible manufacturing system. How does it differ from a cellular layout?

7-19. How do mixed-model assembly lines differ from traditional assembly lines? What additional decisions are required?

7-20. Look for layout software packages on the Internet. What do systems like VisFactory do? Can you find any of the layout approaches discussed in the text?

7-21. Find a virtual plant tour on the Internet and describe the production system according to the criteria in Table 7.1.

7-22. Even better than virtual tours are actual tours. Take a tour of two production or distribution facilities in your area. Look for the basic and hybrid layouts discussed in this chapter. Also, look for bottlenecks and smooth flow. Write a paper comparing the two layouts.

7-1. Maureen Marcy is designing the layout for a new business in town, The Collegiate Spa. From visiting spas in neighboring towns, she has compiled the following data on movement between spa activities. Help Maureen determine where to locate each activity on a 2 × 3 grid so that nonadjacent moves are minimized.

7-2. Spiffy Dry Cleaners has recently changed management, and the new owners want to revise the current layout. The store performs six main services: (1) laundry, (2) dry cleaning, (3) pressing, (4) alterations, (5) delivery, and (6) tuxedo rental. Each is located in a separate department, as shown here. The load summary chart gives the current level of interaction between the departments. Calculate the number of nonadjacent loads for the current layout. Design an alternative layout to minimize the number of nonadjacent loads.

7-3. Given the following load summary chart, design a layout on a 2 × 3 grid that will minimize nonadjacent loads.

7-4. Pratt's Department Store is opening a new store in The Center's Mall. Customer movement tracked in its existing stores is shown below. Design a layout for Pratt's new store on a 2 × 3 grid that will minimize nonadjacent customer movement.

7-5. Rent With Us Management Inc. has purchased a large housing complex and must decide where to locate its offices and service facilities. The company has learned that locating each service in a different apartment building helps control the behavior of tenants, but it would also like to keep unnecessary transit time to a minimum. Data collected on movements between facilities during a six month period from a similar apartment complex are shown below. Construct a layout diagram on a 2 × 3 grid that minimizes nonadjacent movement.

7-6. Avalanche, Inc. is a manufacturer of premium snow skis. The work is a combination of precision machining and skilled craftsmanship. Before completion, skis are processed back and forth between six different departments: (1) molding, (2) cutting, (3) fiberglass weaving, (4) gluing, (5) finishing, and (6) waxing. Avalanche is opening a new production facility and wants to lay it out as efficiently as possible. The number of loads of material moved from department to department at existing operations in other plants is shown below. Arrange the department for Avalanche's new plant in a 2 × 3 grid so that nonadjacent loads are minimized.

7-7. Marillion Hospital is building a satellite clinic in the Cold Harbor area of Richmond. The design committee has collected data on patient movement from similar facilities in hopes of making the new facility more efficient and customer-friendly.

7-8. Social Services is moving into a new facility. Historical data on client visitation per month among its six departments is shown below. Design a layout for the new facility on a 2 × 3 grid that minimizes the distance clients must travel to receive services.

7-9. Tech Express provides technical assistance to customers through six separate departments. While much of the communication is electronic, it is helpful for departments working together on a customer's request to be physically located near to each other. Given the following data on customer "flow" between departments, design a layout on a 2 × 3 grid that will facilitate the maximum collaboration among departments. How much customer flow is nonadjacent?

7-10. Flying Flags is opening a new theme park in southern Indiana. The park will have six main attractions: (a) animal kingdom, (b) Broadway shows, (c) carousel and other kiddie rides, (d) daredevil roller coasters, (e) eating places, (f) flying machines, and (g) games. Data on customer flow patterns from similar parks is shown here, along with the layout for a similar park in Virginia. Calculate the nonadjacent loads for the Virginia park; then improve the design for the new Indiana location.

7-11. Design a layout on a 2 × 3 grid that satisfies the preferences listed here.

7-12. Design a layout on a 2 × 3 grid that satisfies these preferences.

7-13. Amber Ale use a simple five-step process to prepare its products for shipment. Because of recent increases in demand, the company is setting up an assembly line to do the work. How should the line be constructed if Amber needs a new product off the line every 10 minutes? Draw a precedence diagram, group the tasks into workstations, determine the efficiency of the line, and calculate the expected output for an eight-hour day. (There are multiple solutions to this problem.)

7-14. The Henry Street Mission uses volunteers to assemble care packages for needy families during the holiday season. The mission would like to organize the work as efficiently as possible. A list of tasks, task times, and precedence requirements follows:

7-15. Best Vision is revamping its assembly lines to improve efficiency. As shown below, there are 10 steps to assembling a television set.

7-16. Professional Image Briefcases is an exclusive producer of handcrafted, stylish cases. The company assembles each case with care and attention to detail. This laborious process requires the completion of the six primary work elements listed here.

7-17. The TLB Yogurt Company must be able to make 600 party cakes in a 40-hour week. Use the following information to draw and label a precedence diagram, compute cycle time, compute the theoretical minimum number of workstations, balance the assembly line, and calculate its efficiency.

7-18. The Speedy Pizza Palace is revamping its order-processing and pizza-making procedures. In order to deliver fresh pizza fast, six elements must be completed.

7-19. Professor Garcia has assigned 15 cases in his OM Seminar class to be completed in a 15-week semester. The students, of course, are moaning and groaning that the caseload cannot possibly be completed in the time allotted. Professor Garcia sympathetically suggests that the students work in groups and learn to organize their work efficiently. Knowing when a situation is hopeless, the students make a list of the tasks that have to be completed in preparing a case. These tasks are listed here, along with precedence requirements and estimated time in days. Assuming students will work five days a week on this assignment, how many students should be assigned to each group, and what is the most efficient allocation of tasks? Can 15 cases be completed in a semester? Explain your answer.

7-20. The precedence diagram and task times (in minutes) for assembling McCauley's Mystifier are shown here. Set up an assembly line to produce 125 mystifiers in a 40-hour week. Balance the line and calculate its efficiency.

7-21. The precedence diagram and task times (in minutes) for assembling modular furniture are shown below. Set up an assembly line to assemble 1000 sets of modular furniture in a 40-hour week. Balance the line and calculate its efficiency.

7-22. The Costplus Corporation has set a processing quota of 80 insurance claims per 8-hour day. The claims process consists of five elements, which are detailed in the following table. Costplus has decided to use an assembly-line arrangement to process the forms and would like to make sure they have set up the line in the most efficient fashion. Construct a precedence diagram for the claims process and calculate the cycle time required to meet the processing quota. Balance the assembly line and show your arrangement of workstations. Calculate the line's efficiency. How many claims can actually be processed on your line?

7-23. Given in the following table are the tasks necessary for final assembly of a hospital bed, the length of time needed to perform each task, and the operations that must be completed prior to subsequent operations. Construct a precedence diagram and balance the assembly line for a desired cycle time of 14 minutes. Draw a schematic diagram of the balanced line. How many beds can actually be assembled in an eight-hour period?

7-24. Given in the following table are the tasks necessary for the assembly of Fine Cedar Chests, the length of time needed to perform each task, and the operations that must be completed prior to subsequent operations.

7-25. Quick Start Technologies (QST) helps companies design facility layouts. One of its clients is building five new assembly plants across the continental United States. QST will design the assembly-line layout and ship the layout instructions, along with the appropriate machinery to each new locale. Use the precedence and time requirements given below to design an assembly line that will produce a new product every 12 minutes. Construct a precedence diagram, group the tasks into workstations, determine the efficiency of the line, and calculate the expected output for an eight-hour day.

7-26. Print-for-All is a family-owned print shop that has grown from a three-press two-color operation to a full-service facility capable of performing a range of jobs from simple copying to four-color printing, scanning, binding, and more. The company is moving into a new facility and would like some help arranging its 16 processes into an efficient, yet flexible, layout. A list of the most popular jobs is shown with processing information. How would you arrange the processes to ensure an efficient and flexi-ble operation?

7-27. Jetaway, a small manufacturer of replacement parts for the aircraft industry, had always maintained a simple layout—all like machines were located together. That way the firm could be as flexible as possible in producing small amounts of the variety of parts its customers required. No one questioned the production arrangement until Chris Munnelly started to work for the company. Chris was actually hired to upgrade Jetaway's computer system. In the process of creating a database of part routings, Chris began to see similarities in the parts produced. A part routing matrix for nine of the most popular parts is shown below, along with a schematic of the factory layout.

Chris, who was already tired of being a programmer, decided to reorder the matrix and see what he could find. If he could identify distinct part families, he could reorganize the placement of machines into the cells he had been reading about in his business magazines. Maybe then someone would notice his management potential.

Help Chris gain status in Jetaway by creating a cellular layout for the company. Show your results in a schematic diagram. Be sure to include the reordered routing matrix.

Workout Plus

Workout Plus is a health club that offers a full range of services to its clients. Recently, two other fitness clubs have opened up in town, threatening Workout's solvency. While Workout is tops among serious fitness buffs, it has not attracted a wide spectrum of members. Shannon Hiller, owner and manager, has decided it's time for a face lift. She started the process by sponsoring a week-long "ideathon" among club members. Nonmembers who frequented an adjacent grocery store were also canvassed for suggestions. Their comments are provided below, along with the current facility layout.

Current layout:

Member comments:

Photo Op—Please Line Up

Tech is modernizing its college ID system. Beginning this term, all faculty, staff, and students will be required to carry a "smart" identification card, called a student passport. What makes it smart is a magnetic strip with information on club memberships, library usage, class schedules (for taking exams), restrictions (such as no alcohol), medical insurance, emergency contacts, and medical conditions. If desired, it can also be set up as a debit card to pay fines or purchase items from the bookstore, vending machines, cash machines, copy machines, and several local retailers.

University administrators are excited about the revenue potential and increased control of the passport, but they are not looking forward to the process of issuing approximately 60,000 new cards. If applicants could be processed at the rate of 60 an hour, the entire university could be issued passports in a month's time (with a little overtime).

The steps in the process and approximate times follow. Steps 1 and 2 must be completed before step 3 can begin. Steps 3 and 4 must precede step 5, and step 5 must be completed before step 6.

The Grab'n Go Café

The GNG Café, a new concept in on-campus dining features homemade bakery items, upscale sandwiches and wraps, fresh salads, and signature soups. The modern café-style design allows customers the freedom to select their menu choices from individual stations throughout the café. While the restaurant has caught the imagination of the university community with its nifty interiors and quality food (which is a welcome change from "the bun"), space and layout restrictions have ensured that the customer when buying anything at GNG can neither "grab" nor "go" with his food.

It is undeniable that the quality of food offered at GNG is good, but GNG management should not forget that their target customers are students who possess a modest income. It is not unusual for students to reach the checkout and find themselves without sufficient funds to complete their transaction.

The first thing customers do when they enter the restaurant is stand and look for the various items they want to buy. While the food and drinks are displayed quite neatly and colorfully, customers still have a hard time figuring out where to go first and what price they should expect to pay for a particular product. Neither the product options nor their prices are prominently displayed. This is especially true of made-to-order sandwiches. Since customers don't have information about the sandwiches beforehand and the options are many, they can take quite some time deciding what kind of sandwich they want to buy. This causes a traffic problem especially at mealtimes when a lot of people come in at the same time to order, and then must wait for their food in a small space. The overcrowding and open layout also present problems with pilfering of food, as students conveniently "forget" to pay upon exiting the facility.

GNG management has agreed to take on a student project to chart the flow of customers through the café and to make recommendations on facility changes. A schematic diagram of the existing layout follows, along with data on the flow of 25 customers. What changes in layout and operating procedures would you recommend for GNG?

Figure 7.17. GNG Facility Layout

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