Plant Location

Views:
 
Category: Entertainment
     
 

Presentation Description

No description available.

Comments

Presentation Transcript

PRODUCTION AND OPERATIONS MANAGEMENT:

PRODUCTION AND OPERATIONS MANAGEMENT Prepared by Prof. Jitendra Patel Assistant Professor Prestige Institute of Management and Research Indore

Module 2:

2Plant Location and Facilities Layout 2.1 Definition 2.2 Steps in Location Selection 2.2.1 Deciding on Domestic or International Location 2.2.2 Selection Of Region 2.2.3 Selection of Community 2.2.4 Selection of Site 2.3 Locations Models 2.3.1 Factor Rating Model 2.3.2 Point Rating Model 2.3.3 Break Even Analysis 2.3.4 Centre of Gravity 2.3.5 Dimensional Analysis 2.3.6Brown and Gibson Method Module 2 8/22/2014 2 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

Plant location is the function of determining location for a plant for maximum operating economy and effectiveness. Plant Location 8/22/2014 3 Jitendra Patel, Assistant Professor, PIMR , Indore

Steps in Location Selection:

Steps in Location Selection To be systematic, in choosing a plant location, the entrepreneur would do well to proceed step by step, the steps being; 1. Within the country or outside; 2. Selection of the region; 3. Selection of the locality or community; 4. Selection of the exact site. 8/22/2014 4 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

Deciding on Domestic or International Location Political Stability Currency and Exchange Rate Cultural and Economic Peculiarities Natural Environment 2. Selection of Region Availability of Raw Materials Nearness to the Market Availability of Power Transport Facilities Suitability of Climate Government Policy Competition Between States 8/22/2014 5 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

3. Selection of Community Availability of Labour Civic Amenities for Workers Existence of Complementary and Competing Industries Finance and Research Facilities Availability of Water and Fire-fighting Facilities Local Taxes and Restrictions Momentum of an Early Start Personal Factors Selection of the Site Soil, Size and Topography Disposal of Waste 8/22/2014 6 Jitendra Patel, Assistant Professor, PIMR , Indore

Location Models:

Location Models Various models are available which help identify a near ideal location. The most popular models are: 1. Factor Rating Method 2. Point Rating Method 3. Break-even Analysis Centre Of Gravity Dimensional Analysis Brown and Gibson Method 8/22/2014 7 Jitendra Patel, Assistant Professor, PIMR , Indore

Factor-Rating Method:

Factor-Rating Method Factor rating is used to evaluate alternative Locations Six steps in the method Develop a list of relevant factors called critical success factors Assign a weight to each factor Develop a scale for each factor Score each location for each factor Multiply score by weights for each factor for each location Recommend the location with the highest point score 8/22/2014 8 Jitendra Patel, Assistant Professor, PIMR , Indore

Advantage of Factor Rating:

Advantage of Factor Rating Simplicity which facilitates communication about why one location/site is better than another Enables bringing diverse location considerations into evaluation alternatives Foster consistency of Judgment about location alternatives

Factor Rating Example:

Factor Rating Example S.No Factor Factor Rating Location Rating Product of Rating Location A Location B Location A Location B 1 Tax Advantage 4 8 6 32 24 2 Suitability of Labour Skill 3 2 3 6 9 3 Proximity to Customers 3 6 5 18 15 4 Proximity to Suppliers 5 2 4 10 20 5 Adequacy of water 1 3 3 3 3 6 Receptivity of Community 5 4 3 20 15 7 Quality of Education 4 1 2 4 8 8 Access to rail and Air Transportation 3 10 8 30 24 9 Suitability of Climate 2 7 9 14 18 10 Availability of Power 2 6 4 12 8 Total Score 149 144 8/22/2014 10 Jitendra Patel, Assistant Professor, PIMR , Indore

Point Rating Method:

Point Rating Method In point rating Method company assign relative weight to different objectives Each potential site is then evaluated with respect to every factor a company is looking for and point is assigned to each factor The site with highest total number of points is considered superior to other site. 8/22/2014 11 Jitendra Patel, Assistant Professor, PIMR , Indore

Advantages of Point Rating Method:

Advantages of Point Rating Method Point rating system is relative importance of tangible cost factors compared to intangible factors. Points are usually assigned only to intangible factors and evaluation is made to determine whether the difference between the intangible scores is worth the difference if any between the tangibles costs of the competing factors

Drawback of Point Rating Method :

Drawback of Point Rating Method The drawback of Point Rating Method is that high score in any factor can overcome a low score in any other factor.

Point Rating Method:

Point Rating Method Factors Rated Maximum Possible Points Points Assigned to Locations Location A Location B Future availability of fuel 300 200 250 Transportation flexibility and growth 200 150 150 Adequacy of water supply 100 100 100 Labor availability 250 220 200 Pollution regulations 30 20 20 Site Topography 50 40 30 Living Conditions 150 100 125 Total 1080 830 875 8/22/2014 14 Jitendra Patel, Assistant Professor, PIMR , Indore

Location Break-Even Analysis:

Location Break-Even Analysis Method of cost-volume analysis used for industrial locations Three steps in the method Determine fixed and variable costs for each location Plot the cost for each location Select location with lowest total cost for expected production volume 8/22/2014 15 Jitendra Patel, Assistant Professor, PIMR , Indore

Location Break-Even Analysis Example:

Location Break-Even Analysis Example Three Locations : Expected Volume : 18000 units Expected Sales Price: Rs700 City Fixed Cost Variable Cost Total Cost Delhi Rs 30 Lacs Rs300 Rs 84 Lacs Bangalore Rs 50 Lacs Rs 200 Rs 86 Lacs Kolkata Rs 25 Lacs Rs 350 Rs 88 Lacs 8/22/2014 16 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

10 20 30 40 50 60 70 80 90 100 Annual Cost In Lacs 0 2 4 6 8 10 12 14 16 18 20 22 24 Bangalore Delhi Kolkata Volume in thousand Kolkata Lowest Cost Delhi Lowest Cost Bangalore Lowest Cost Location Break Even Example 8/22/2014 17 Jitendra Patel, Assistant Professor, PIMR , Indore

Center-of-Gravity Method:

Center-of-Gravity Method Finds location of distribution center that minimizes distribution costs Consideration for Center of Gravity Method Location of markets Volume of goods shipped to those markets Shipping cost (or distance) 8/22/2014 18 Jitendra Patel, Assistant Professor, PIMR , Indore

Center-of-Gravity Method:

Center-of-Gravity Method Place existing locations on a coordinate grid Grid origin and scale is arbitrary Maintain relative distances Calculate X and Y coordinates for ‘center of gravity’ Assumes cost is directly proportional to distance and volume shipped 8/22/2014 19 Jitendra Patel, Assistant Professor, PIMR , Indore

Center-of-Gravity Method:

Center-of-Gravity Method x - coordinate = ∑ d ix Q i ∑ Q i i i ∑ d iy Q i ∑ Q i i i y - coordinate = where d ix = x-coordinate of location i d iy = y-coordinate of location i Q i = Quantity of goods moved to or from location i 8/22/2014 20 Jitendra Patel, Assistant Professor, PIMR , Indore

Center Of Gravity Example:

Center Of Gravity Example 100 200 300 400 500 600 400 300 500 200 100 600 A(75) C(135) D(60) B(105) 8/22/2014 21 Jitendra Patel, Assistant Professor, PIMR , Indore

Centre Of Gravity Example:

Centre Of Gravity Example X Coordinate: 200(75)+100(105)+250(135)+500(60) 75+105+135+60 = 238 Y Coordinate: 200(75)+500(105)+600(135)+300(60) 75+105+135+60 =444 Distribution Centre Location No of Tailor Load Transported from every Location A(200,200) 75 B(100,500) 105 C( 250, 600) 135 D (500,300) 60 8/22/2014 22 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

100 200 300 400 500 600 400 300 500 200 100 600 A(75) C(135) D(60) B(105) Centre of Gravity(238,444) 8/22/2014 23 Jitendra Patel, Assistant Professor, PIMR , Indore

Dimension Analysis:

Dimension Analysis One of the methods of making an integrated comparison of alternatives sites on the basis of tangible and intangible costs is Dimensions Analysis. This involves computing the relative merits or cost ratios for each factors An appropriate weight age is given to each cost factors and cost ratio is raised and multiplying these weighted ratio in order to arrive at the comprehensive figure on the relative merits of the two sites 8/22/2014 24 Jitendra Patel, Assistant Professor, PIMR , Indore

Dimension Analysis:

Dimension Analysis ( i )C 1 M , C 2 M , C 3 M ,……….,C Z M are the different costs associated with site M (ii)C 1 N , C 2 N , C 3 N ,………., C Z N are the different costs associated with site N (iii)W 1 , W 2 , W 3 ,……….,W Z are the weight ages given to these cost items W 1 W 2 W Z C 1 M X C 2 M X………………X C Z M C 1 N C 2 N C Z N the relative merit of sites , M and N Site having relative merit ratio more than unity is preferred 8/22/2014 25 Jitendra Patel, Assistant Professor, PIMR , Indore

Merit of Dimension Analysis:

Merit of Dimension Analysis It compares both tangible and intangibles costs i.e. the objective and subjective factors(i.e. Educational Facilities, Recreational facilities and Health Facilities) helping decision maker to reach integrated quantitative figure. By taking dimensionless ratios for each factor, it can incorporates the actual costs for objectives factors and at the same time use subjective ‘scores’ of costs for the factors for which costs cannot be determined in rupee terms 8/22/2014 26 Jitendra Patel, Assistant Professor, PIMR , Indore

Example of Dimension Analysis:

Example of Dimension Analysis S.No Factors Cost at Location A Cost at Location B Weightages 1 Transportation 5,30,000 8,10,000 1 2 Power 65 paise = 0.65 1.05 1 3 Tax 10,50,000 8,80,000 1 4 labor 115 101 1 5 Proximity to Market 8 10 2 6 Industrial Relation 10 8 1.5 8/22/2014 27 Jitendra Patel, Assistant Professor, PIMR , Indore

Solution:

Solution Location A 530000 1.05 10,50,000 115 8 2 10 1.5 Location B 810000 X 0.65 8,80,000 101 10 8 Transport Power Tax Labor Proximity IR =1.284 the location B is preferable to location A as the costs ratio of location A VS Location B is significantly more than unity. 8/22/2014 28 Jitendra Patel, Assistant Professor, PIMR , Indore

BROWN AND GIBSON’S METHOD:

BROWN AND GIBSON’S METHOD This Method also measure relative merit of the sites in dimensionless format It start with identification of critical factors and their availability If the critical factor is available at site the score is one(1) otherwise zero(0) This method considers the total tangible costs which are known as Objective Factors The total cost are converted into measures by taking there reciprocal and comparing them with the summation of these reciprocal for all eligible site. 8/22/2014 29 Jitendra Patel, Assistant Professor, PIMR , Indore

Objective Factor Cost Formula:

Objective Factor Cost Formula The objective measure (OFM) is OFM i = 1/ OFC i ∑ 1/ OFC i OFC i = Objective Factor cost for site ‘ i ’ OFM i = Objective Factor measure for site ‘ i ’ 8/22/2014 30 Jitendra Patel, Assistant Professor, PIMR , Indore

Subjective Factor Measure Formula:

Subjective Factor Measure Formula This method also consider subjective factors such as industrial relation, climate , recreational facilities and educational facilities , proximity to the large city SFM i = ∑( SFW k X SW ik ) where SFW k = weight of subjective factor k relative to all subjective factors(property weight) SW ik = weight of site i relative to all potential sites for subjective factor k (site weight) the value of ‘Property Weight’ and ‘site weight’ are determined through the Preference theory by paired comparison 8/22/2014 31 Jitendra Patel, Assistant Professor, PIMR , Indore

Location Measure Formula:

Location Measure Formula LM i = CFM i X D X OFM i +(1-D) SFM i CFM i = Critical factor measure for site I D= relative weight of objective factor LM= Location Measure Sites with higher locations measures are preferred over the site with lower location measure. 8/22/2014 32 Jitendra Patel, Assistant Professor, PIMR , Indore

BROWN AND GIBSON’S METHOD EXAMPLE:

BROWN AND GIBSON’S METHOD EXAMPLE Site 1 2 3 Transport Costs(Rs) 165 Lakh 346.5Lakh 231Lakh Labor Costs(Rs) 354.5Lakh 288.4Lakh 255.5Lakh Energy Costs(Rs) 231 Lakh 182.5Lakh 197.1Lakh Materials Costs (Rs) 495Lakh 629.6Lakh 766.5Lakh 8/22/2014 33 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

Property (Qualitative Factor) Comparison (on Paired Basis Comparison I II III IV V VI Total Relative Weight, SFW k City Proximity 0 0 1 1 1/6 Industrial Relations 0 0 0 0 0/6 Environmental Problems 1 1 0 2 2/6 Government Support 1 1 1 3 3/6 Total 6 1.00 8/22/2014 34 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

City Proximity Site Comparison Total Relative Weight SW i1 1 1 1 2 2/4 2 0 1 1 1/4 3 0 1 1 1/4 total 4 1.00 8/22/2014 35 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

2. Industrial Relation Site Comparison Total Relative Weight SW i2 1 0 0 0 0/3 2 1 1 2 2/3 3 1 0 1 1/3 Total 3 1.00 8/22/2014 36 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

3. Environmental Problems Site Comparison Total Relative Weight SW i3 1 1 0 1 1/3 2 1 1 2 2/3 3 0 0 0 0/3 Total 3 1.00 8/22/2014 37 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

4. State Government Support Site Comparison Total Relative Weight SW i4 1 0 0 0 0/3 2 1 0 1 1/3 3 1 1 2 2/3 Total 3 1.00 8/22/2014 38 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

Location Measure LM= CFM x [D x OFM+ (1-D)x SFM] D(objective Factor Decision weight) =1- 0.40=0.60 8/22/2014 39 Jitendra Patel, Assistant Professor, PIMR , Indore

BROWN AND GIBSON’S METHOD EXAMPLE:

BROWN AND GIBSON’S METHOD EXAMPLE Site 1 2 3 Transport Costs(Rs) 165 Lakh 346.5Lakh 231Lakh Labor Costs(Rs) 354.5Lakh 288.4Lakh 255.5Lakh Energy Costs(Rs) 231 Lakh 182.5Lakh 197.1Lakh Materials Costs (Rs) 495Lakh 629.6Lakh 766.5Lakh Total OFC 1245.5Lakh 1447.0Lakh 1450.1Lakh 1/OFC 0.0008028 0.0006910 0.0006896 ∑(1/OFC) 0.0021834 OFC x ∑(1/OFC) 2.7194247 3.1593798 3.1661483 OFM={OFC x ∑(1/OFC)}-1 0.3677248 =0.368 0.3165178 =0.316 0.3158412 =0.316 8/22/2014 40 Jitendra Patel, Assistant Professor, PIMR , Indore

SFWk Calculation:

SFW k Calculation City Proximity 1/6 Industrial Relation 0 Environmental Problems 2/6 State Government support: 3/6 8/22/2014 41 Jitendra Patel, Assistant Professor, PIMR , Indore

SFM for three Site:

SFM for three Site Site 1: (1/6).(2/4)+(0).(0)+(2/6).(1/3)+(3/6).(0)=0.194 Site2: (1/6).(1/4)+(0).(2/3)+(2/6).(2/3)+(3/6).(1/3) =0.0417+0+0.2222+0.1667=0.431 Site 3 (1/6).(1/4)+(0).(1/3)+(2/6).(0)+(3/6).(2/3) =0.00417+0+0+0.3333=0.375 8/22/2014 42 Jitendra Patel, Assistant Professor, PIMR , Indore

LM Calculation for three Site:

LM Calculation for three Site Site 1 LM= CFM x [D x OFM+ (1-D)x SFM] = 1x[.60x 0.368+0.40 x0.194] =0.2984 Site 2 = 1x[.60x 0.316+0.40 x0.431] =0.3620 Site 3 =1x[.60x 0.316+0.40 x0.375] =0.3396 Site 2 having highest Location Measure is preferred over other two site. 8/22/2014 43 Jitendra Patel, Assistant Professor, PIMR , Indore

References:

References Aswathappa.K., & Bhat.K.S. (2011). Production and Operations Management . Mumbai, India: Himalaya Publishing House. Chary.S.N .(2008). Theory and Problems in Production and Operations Management. New Delhi, India: Tata McGraw- Hill Publishing Company Limited Prenhall (2011); “Location Analysis Techniques” Retrieved from http://www.prenhall.com/divisions/bp/app/russellcd/PROTECT/CHAPTERS/CHAP09/HEAD06.HTM, last visited on 31 July 2014. 8/22/2014 44 Jitendra Patel, Assistant Professor, PIMR , Indore

PowerPoint Presentation:

Thanks 8/22/2014 45 Jitendra Patel, Assistant Professor, PIMR , Indore

authorStream Live Help