16. Facility Layout Decision
After selecting a facility’s location, the next major decision is to design the best physical layout for the facility. The available space needs to be assessed with workstations, equipment, and storage; and other amenities need to be arranged. The goal is to create the most efficient workflow necessary to produce its goods or services at the highest level of quality with the lowest possible cost.
Layout planning is organizationally important not only for efficient operations but also for other functions that are impacted as well, such as marketing, which is affected by layout when clients come to the site, human resources because layout impacts people, and finance because layout changes can be costly endeavors.
The layout decision can determine how efficient a facility is. In the case of the supply chain, this is primarily focused in the warehousing function, in both the warehouse itself and various other areas, including office and maintenance areas.
Layout should be considered in a variety of situations, including when a new facility is being constructed, when there is a significant change in demand or throughput volume, when a new good or service is introduced to the customer benefit package, or then different processes, equipment, or technology are installed.
The focus of layout improvements is to minimize delays in materials handling and customer movement, maintain flexibility, use labor and space effectively, promote high employee morale and customer satisfaction, provide for good housekeeping and maintenance, and enhance sales as appropriate in manufacturing and service facilities.
Types of Layouts
Managers can choose from five primary types of workflow layouts:
Product layout: Production line (for example, an automobile assembly plant)
Process layout: Arranged in departments (for example, hospitals, printer)
Hybrid layout: A combination of both product and process layouts
Fixed-position layout: Building a large item (for example, airplane, cruise ship)
Cellular layout: Reorganizes people and machines into groups to focus on single products or product groups
We will now discuss each in some detail.
Product Layouts
Product arrangements are based on the sequence of operations that are performed during the manufacturing of a fairly standardized good or delivery of a service. Typically, workstations and equipment are located along the line of production, as with an assembly line, for example. Batches of semi-finished (that is, work in process) goods are passed to the next station in a production line.
Some examples of this type of layout include the following: winemaking industry, credit card processing, submarine sandwich shops, paper manufacturers, insurance policy processing, and automobile assembly lines.
Advantages of product layouts include lower work-in-process inventories, shorter processing times, less material handling, lower labor skills, and relatively simple planning and control systems.
Disadvantages include that a breakdown at one workstation can cause the entire process to shut down or a change in product design and the introduction of new products may require major changes in the layout, resulting in limited flexibility.
Process Layouts
Process layouts usually have a functional grouping of equipment or activities that perform similar work.
Examples of process layout including the following: legal offices, print shops, footwear manufacturing, and hospitals.
Advantages of process layouts may include a lower investment in equipment and that the diversity of jobs can lead to increased worker satisfaction.
Disadvantages may include high movement and transportation costs, more complex scheduling and control systems, longer total processing time, higher in-process inventory or waiting time, and higher worker skill requirements.
Warehouse (Process) Layout Considerations
The objective in warehouse (and really all process type) layout is to optimize the tradeoffs between handling costs and costs that are associated with warehouse space while at the same time minimizing damage and spoilage to the product.
When considering warehouse layouts, it is most effective to arrange work centers or functional process areas so as to minimize the total costs of material handling between departments or work centers.
The basic cost elements involved in this load distance (LD) minimization calculation are as follows:
The number of loads (or people) moving between centers
The distance loads (or people) moved between centers
Once estimating these elements for all possible combinations, a total load x distance is calculated for the current state. You can then look for improved layout arrangements that reduce the total load x distance by evaluating various number and distance (can use cost, which will vary by distance traveled) of load combinations between the elements. This can be estimated manually in a simple spreadsheet, or for more optimal results, you can use packaged software such as Factory Flow, Proplanner, and CRAFT.
Maximizing Density
By maximizing the total cube or space of a warehouse, you are able to better utilize its full volume while maintaining low material handling costs.
Material handling costs include all costs associated with a transaction, such as incoming transport, storage, finding and moving material, outgoing transport, equipment, people, material, supervision, insurance, and depreciation.
Warehouse density also tends to vary inversely with the number of different items stored. Although this might sound counterintuitive, you must realize that each item or stock keeping unit (SKU) will have its own set of dimensions. So, if you carried one single item in a warehouse, you would be able to use almost every inch of storage space. However, most warehouses have hundreds if not thousands of items, all with different dimensions, making it more difficult to maximize the use of storage space.
That’s where the concept of random stocking can be used, allowing for the more efficient use of warehouse space. Random stocking can be greatly aided by the use of a warehouse management system (WMS; described in Chapter 8, “Warehouse Management and Operations”).
Key tasks in random stocking include maintaining a list of open locations, keeping accurate inventory records, the sequencing of items to minimize travel and picking time, combining of picking orders, and assigning classes of items to particular areas.
Minimizing Travel Time to Maximize Warehouse Efficiency
The concept of velocity slotting helps to minimize travel time, which is critical to productivity in a warehouse, as it tries to locate at least some of the faster moving A type items closer to the shipping area and slower moving items further away and higher up.
The use of automated storage and retrieval systems (ASRS) can significantly improve warehouse productivity.
Dock location is also a key design element. The primary decision is where to locate each department relative to the dock. It is important to organize departments so as to minimize travel time (can be thought of as a load x distance total for measurement purposes).
The usage of cross-docking, discussed in Chapter 8, modifies the traditional warehouse layouts. Cross-dock facilities tend to have more docks, less storage space, and less order picking because materials are moved directly from receiving to shipping and are not placed in storage in the warehouse.
Cross-docking requires tight scheduling and accurate shipments; barcode or radio-frequency identification (RFID) is used for advanced shipment notification as materials are unloaded. They also typically require automatic identification systems (AISs) and information systems such as a warehouse management system (WMS).
The location of value-added activities performed at the warehouse, which can enable low-cost and rapid-response strategies, must be factored into the layout decision. These can include the assembly of components, repairs, and customized labeling and packaging, among other activities.
Office (Process) Layout Considerations
When we look at an office (process) layout, we consider the grouping of workers, their equipment, and the space required to provide comfort, safety, and flow of information.
One way to evaluate office layout is by using a relationship matrix (see Figure 16.1) in which you can look at the relative importance to various people and functions and, based on the results, revise the layout.
The movement of information is a large factor, but it is constantly changing because of frequent technological advances. In fact, certain advances, like the use of electronic documents, may make the movement of information a nonfactor.
Much of the American workforce works in an office environment, including those carrying out many supply chain and logistics administrative functions. In this environment, human interaction and communication are the primary factors in designing office layouts.
When considering layout in an office, you need to account for both the physical environment and psychological needs of the organization.
One key layout tradeoff is between proximity and privacy. Some companies have gone to a more open-office concept, with no walls and with sound-absorbing ceiling panels. Open-concept offices promote understanding and trust, but may not be appropriate depending on job functions and privacy issues.
Flexible layouts can incorporate what is known as office landscaping to help solve the privacy issue in open-office environments. Office landscape involves furniture and desk placement, usually in open-plan office settings. It often also involves the selection and placement of plants, the creative use of natural light, and the use of artwork to create ambiance.
Hybrid Layouts
Hybrid or combination layouts combine elements of both product and process layouts. They tend to keep some of the efficiencies of product layouts while maintaining some of the flexibility of process layouts.
For example, a business may have a process layout for the majority of its process but also have an assembly line in one particular area. Alternatively, a firm may utilize a fixed-position layout (described later) for the assembly of its final product, but use assembly lines to produce the components and subassemblies that make up the final product (for example, a cruise ship).
Cellular (or Work Cell) Layouts
This type of layout design is not usually established according to functional characteristics of equipment, but instead by creating self-contained groups of equipment (called work cells; see Figure 16.2) and dedicated operators needed for producing a particular family of goods or services (by family, we mean one or more items or services that have mostly the same steps or processes).
The concept of cellular manufacturing or group technology classifies parts into families so that efficient mass-production types of layouts can be designed for the families of goods or services.
Cellular layouts are used to centralize people expertise and equipment capability and are usually laid out in a horseshoe shape rather than as a long assembly line. This is to gain better flow, improve use of equipment, maintain smaller batch size (that is, make one, pass one), and require fewer more cross-trained operators.
Work cells, although common in manufacturing, can be applied strategically in offices (for example, processing orders) and warehouses (for example, kitting). Additional examples might include group legal or medical specialties.
Benefits and advantages of work cells include the following:
Reduced work in process, raw material, and finished goods inventory.
Less use of floor space.
Reduced direct labor cost.
Heightened sense of employee participation as a result of the high level of training, flexibility, and empowerment of employees, which results in improved morale and increased productivity.
Increased equipment and machinery utilization.
Because they are essentially self-contained, they have their own equipment and resources.
Tests such as a poka-yoke, which is a foolproof testing device, are commonly used at stations in work cell to improve quality.
Fixed-Position Layout
A fixed-position layout consolidates resources necessary to manufacture a good or deliver a service, such as people, materials, and equipment, at one physical location. Because the fixed-position layout is typically used with project types of processes, where the product that is too large or too heavy to move, required resources must be portable so that they can be taken to the job for on-the-spot performance.
Production of large items such as heavy machine tools, airplanes, buildings, locomotives, and ships is usually accomplished in a fixed-position layout.
Service-providing firms often use fixed-position layouts, such as major hardware and software installations, sporting events, and concerts.
Due to the nature of the product, the user has little choice in the use of a fixed-position layout.
Disadvantages can include those related to limited space on the site resulting in a work area being crowded, which can also cause material handling problems and administration difficulties, because the span of control can be narrow, making coordination unwieldy.
Facility Design in Service Organizations
Service organizations can use product, process, cellular, or fixed-position layouts to organize different types of work.
Process Layout Examples
There are many examples of process layout in service organization. They can be seen in libraries, which place reference materials, serials, and microfilms into separate areas; hospitals, which group services by function such as maternity, emergency room, surgery, and x-ray; and insurance companies, which have office layouts in which claims, underwriting, and filing are individual departments.
Product Layout Examples
Service organizations that deliver very standardized services tend to use product layouts. For example, the kitchen at a fast-food restaurant that has both dine-in and delivery will tend to be arranged in an assembly line type of layout, with some pre-prepared items such as cooked hamburgers, sliced tomatoes, and so on for easier assembly.
Some eyeglass chains use both process and product layouts; the customer contact area may be arranged in a process layout, but the lab area, where lenses are manufactured, may be in a product layout.
Designing and Improving Product Layouts
There are some fairly common techniques used for the design and improvement of product layouts, which we will now describe in some detail.
Assembly Line Design and Balancing
An assembly line is a product layout dedicated to combining the components of a good or service. Typically, parts are added as the semi-finished item to be assembled moves from workstation to workstation. Parts are added in sequence until the final assembly is produced.
Assembly line balancing is a procedure where tasks along the assembly line are assigned to an individual workstation so that each has roughly the same amount of work.
When designing product layouts in this type of situation, you need to consider the sequence of tasks to be performed by each workstation, a logical order to assemble the finished item, and the speed of each process.
Examples of processes that use assembly line layout include the automobile industry, winemaking industry, credit card processing, sandwich shops, paper manufacturers, and insurance policy processing.
There are a number of steps required in the line balancing process, as follows:
1. Identify tasks and immediate predecessors in the assembly line process.
2. Determine output rate required of the final item.
3. Determine cycle time, which is the longest time that an item can be at any one workstation. (Note that a workstation can be made up of one or more individual tasks or processes.)
4. Compute the theoretical minimum number of workstations.
5. Assign individual tasks to workstations. (That is, balance the line to make sure that the process is flowing smoothly and that no bottlenecks slow up the process.)
6. Compute efficiency and idle time and balance or eliminate any delays or bottlenecks identified.
Assembly Line Balancing Example
Step 1: Identify tasks and immediate predecessors (perfume spray filling and packaging line example in Table 16.1).
Step 2: Determine output rate of final item (for example, 600 bottles per hour with 8 hours per shift).
Step 3: Determine cycle time (the amount of time each workstation is allowed to complete its tasks).
The throughput or capacity of this process is limited by the bottleneck task (the longest task in a process), which can be calculated as follows:
Step 4: Compute the theoretical minimum number of stations (that is, the number of stations needed to achieve 100% efficiency where every available second is used).
Note that you should always round up when calculating the number of workstations.
Step 5: Assign tasks to workstations.
Start at the first station and choose the longest eligible task following precedence relationships (that is, A must precede B, G must follow both E and F, and so on; see Table 16.2). Continue adding the longest eligible task that fits without going over the desired cycle time. Once no additional tasks can be added within the desired cycle time, assign the next task to the following workstation until finished.
Step 6: Compute efficiency and balance delay.
The percent efficiency is the ratio of total task times divided by the number of workstations times the largest assigned cycle time (6 seconds for workstation 4).
Balance delay is the percentage by which the assembly line falls short of 100%.
Balance delay = 100% – 86.1% = 13.9%
Work Cell Staffing and Balancing
As discussed earlier, a work cell reorganizes people and machines into groups to focus on single products or product groups that have similar characteristics and process steps or tasks. To justify a cell, there must be sufficient volume, but the cells can be reconfigured as design or volume changes.
When staffing and balancing a work cell, you must first determine the Takt time, which the rate at which a finished product needs to be completed to meet customer demand. It is computed as (Total work time available / Units required).
It is also important when setting up a work cell to determine staffing needs. That calculation is (Total operation time required / Takt time), which will determine the number of operators required for the cell.
Work Cell Staffing and Balancing Example
If a picture frame manufacturer requires 650 frames of a specific size per day to be produced and is running an 8-hour shift, and if the manufacturing process requires the operations (and time required) shown in Figure 16.3, we can then calculate the cell Takt time, number of workers required, as well as identify any bottlenecks in the process.
The Takt time in this case is as follows:
(8 hrs × 60 mins) / 650 units = .74 min = Produce 1 unit every 44 seconds
The workers required for the cell are as follows:
155 seconds / 44 = 3.5 or 4 (round up)
By calculating the Takt time and staffing requirements of the work cell, we can now also see whether there is any imbalance in the operations caused by a bottleneck.
In this example, the assembly operation, which takes 55 seconds per picture frame (see Figure 16.3), is the bottleneck, as our Takt time is 44 seconds. The result of this is that the operations downstream will either be waiting on the assembly operation or we will have to run overtime in assembly to keep the other processes running. This will incur both higher costs and increased inventory carrying costs.
There are a variety of options to relieve this bottleneck besides running overtime, such as cross-training of operators to shift them to assembly, buying faster or additional assembly equipment, and so on.
Warehouse Design and Layout Principles
Some basic guidelines specifically apply to warehouse layout and design. In general, they include the following: use one-story facilities where possible, always try to move goods in a straight line, use the most efficient materials handling equipment, minimize aisle space, and use the full building height. (That is, land is expensive; many buildings can go as high as 65 feet.)
When designing a warehouse, other things you need to consider include the following:
Cubic capacity utilization
Protection
Efficiency
Mechanization
Productivity
Design and Layout Process
The first major decision in this process is to determine the size of the individual warehouse facility. In addition to specifying the space needed for storage and handling, a location may be needed for processing rework and returns. All warehouses require office space for administrative and clerical activities, so space must be planned for these and other miscellaneous requirements.
The calculation to determine storage space requirements starts with a demand forecast for the facility in question.
After you have arrived at that, you then need to determine each item’s order quantity (inbound and outbound), which is converted from units into cubic footage requirements to determine not only storage requirements but also other functional area requirements such as for order picking, shipping, receiving, office space, and so on, as mentioned previously (see Figure 16.4).
Some of the most important functions of a warehouse actually occur at the receiving and shipping docks, so it is critical not to neglect these areas during this process.
You should consider the materials received and shipped to help determine dock bay requirements and configuration as well as staging area requirements. There are other miscellaneous requirements for the dock areas that need to be considered, such as office space, receiving hold area, trash disposal, empty pallet storage, a trucker’s lounge area, and even yard space for vehicles outside.
Of course, a lot of thought needs to go into storage space planning, which requires you to do the following:
Define the materials to be stored: Define what and how much material will be stored and how the materials are to be stored.
Select a storage philosophy: Consider whether selecting a fixed location is necessary. If so, determine what specific location each individual SKU is stored in (even if that means that location may be empty sometimes). If a random location storage philosophy will be used instead, determine where any SKU may be assigned to any available storage location.
Consider space requirements for aisle space and honeycombing storage: It is necessary within a storage area to allow accessibility to the material being stored, so an aisle space allowance (that is, a percentage) must be calculated. The amount of aisle allowance depends on the storage method, which determines the number of aisles required and the material handling method, which in turn helps to determine the size of aisles.
Thought must also be given to an effect known as honeycombing storage, which is a percentage allowance of storage space lost whenever a storage location is only partially filled with material and may occur both horizontally and vertically. The unoccupied area within the storage location is honeycombing space.
In addition, there must be an allowance for growth and adequate aisle space for materials handling equipment.
Technology
As mentioned earlier in this chapter, the design and layout of an office or warehouse can be determined manually by hand, with a spreadsheet, or for more optimal results, by using packaged software such as Factory Flow, Proplanner, and CRAFT.
Careers
Whereas other functions like industrial engineering may have more say in terms of the details of warehouse design and layout, supply chain management has great input, if not the final say, for most, if not all, of the layout decisions mentioned in this chapter.
At this point, we have covered the major functional areas of supply chain and logistics management in terms of planning and managing them. Next, we look at how to control these processes.