UNIT -5 PROJECT AND FACILITY PLANNING

PROJECT MANAGEMENT

Project
A project is a group of unique interrelated activities that are planned and executed in a certain sequence to create a product/service. With in a specific time frame, budget(cost) and customer specification

 According to BRITISH STANDARD

Project is defined as a unique set of coordinating activities with define starting and finishing points, undertaken by a individual or organization to meet specific objective with in defined schedule, cost and performance parameters

FUNDAMENTAL CRETERIA FOR PROJECT

Project must be completed on time . The project must be accomplished with in the budgeted cost. The project must be prescribed quality requirements.
Time

Cost

Project triangle

quality performance

CHARACTERISTIC OF PROJECT
Unique activities
Erection of boilers/ software industry(service)

Attainment of specific goal Sequence of activities Specified time Interrelated activities

Construction of house

CLASSIFICATION OF PROJECTS
National and international projects Industrial and non industrial projects Project base don level of technology Project based on size Project based on ownership Infrastructure project Need based project

contd
National/international projects
TATA(TAKE OVER ), INFOSYS, UID NUMBER

Industrial /non industrial projects

Industrial ex: (manufacturing) Nonindustrial ex: ( education, health care, agricultural projects)

Project based on technology

High technology( nuclear power, space projects) Conventional technology( steel, power, sugar industries) Low technology( daily usage FMCG products manufacturing)

..contd
Project based on size (investment and plant capacity)
Large ( more than 100 crore) Medium Small ( out lay less than 5 crore) Large and medium scale projects are given financial assistance by IDBI,IFCI,ICICI,SIDC,SFC etc

Based on owner ship

Public sector( state or central government) Private sector(promoters and investors) Joint sector(ppp)

..contd
Need based projects
Balancing project. Modernization project. Expansion projects Replacement project. Diversification project. Rehabilitation/reconstruction project. Plant relocation project.

PROJECT MANAGEMENT
Project management is the discipline of planning, organizing and managing resources to bring about the success full completion of specific project goals and objectives. According to PROJECT MANAGEMENT INSTITUTE Project management is application of knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholder needs and expectations.

FEATURES OF PROJECT MANAGEMENT

Total accountability by a single person.
Appointment of project manager (giving responsibility and authority)

Project dedication.
Committed and goal oriented in their environment

Requirement for coordination. Integrated planning and control.

Use of MIS

ELEMENTS OF PROJECT MANAGEMENT

Identification of project. Technical and financial appraisal Socio economic appraisal
Cost benefit analysis

Formulation of project Implementation of project Monitoring the implementation Feed back Control initiatives Policy restrictions Government regulation Manage staff Manage client/customer Evaluation

PROJECT MANAGEMENT PROCESS

INTIATING PROCESS

PLANNING PROCESS CONTROLLING PROCESS

IMPLEMENTATION PROCESS

CLOSING PROCESS

 Initiation project.
Formally identifying the project.

Planning process
Core process
Process are interdependent Performed in a sequence.

Facilitating process
Intermittent project Performed as when they required.

contd
Implementation process
Core process
Project plan implementation( process of implementing the project plan)

Facilitating process
Scope verification
Getting approval from stakeholders

Quality assurance Team development Information distribution Vendor selection Contract administration

IMPORTANCE OF PROJECT MANAGEMENT

Compression of product life cycle Knowledge explosion Corporate downsizing Global competition Increased customer focus Rapid development.

PROJECT SCHEDULING TECHNIQUE

Project scheduling is the process of identifying and organizing the tasks of a project into a sequence of events. The events are dependent on the results of their preceding activities. Project scheduling enables the project manager to
Identify risk points Under stand proper linkage of events Assist in resource planning

GANTT CHARTS
Gantt charts were developed by Henry L. Gantt. The purpose this chart is to provide an immediate comparison between schedule and reality(planned work and actual process) Two types of Gantt chart
Work load charts Scheduling charts

FACILITY LOCATION
Once a firm has decided to open a new facility (or) relocate an existing facility, It must decide where that facility should be located.

FACILITY /PLANT LOCATION

MEANING
It is understood as the function of determining where the plant should be located for maximum operating economy and effectiveness The location where firm set up their operations is simply called as plant location.

DEFINITION
The function of determining where the plant should be located for maximum operating economy and effectiveness. Plant location stands for that spot where in consideration of business as a whole the total cost of production and delivering goods to all the consumers is the lowest

NEED FOR SELECTION OF LOCATION

STARTING NEW ORGANIZATION IDENTIFICATION OF REGION CHOICE OF THE SITE WITH IN THE REGION DIMENSIONAL ANALYSIS(TANGIBLE COST AND INTANGIBLE COST)

EXISTING ORGANIZATION DISTINCT PRODUCTS MARKET AREA STAGES IN MANUFACTURING FLEXIBILITY EXPANSION RELOCATION

GLOBAL LOCATION VIRTUAL FACTORY BPO VIRTUAL PROXIMITY TELECOMMUNICATION

TYPES OF LOCATION DECISIONS

SINGLE LOCATION DECISION
Define the location objectives and associated constraints Identify the relevant decision criteria Relate the objective to the criteria using appropriate model Evaluate the alternate location Select the location that best satisfies the criteria

contd
MULTI LOCATION DECISION
Separate facilities for different product and services Separate facilities to serve different geographical area. Separate facilities for different processes.

PLANT LOCATION - CRITERIA

Availability of raw materials. Proximity to market. Integration with other parts of the organization. Availability of labor and skills. Availability of amenities. Availability of transport. Suitability of climate. Availability of services. (GAS, WATER,ELECTRICITY,DRAINAGE)

contd
Regional regulation. Room for expansion Safety requirements. Site cost Political, cultural and economic situation. Special grants, regional taxes and import /export barriers.

STEPS IN SELECTION /LOCATION DECISION PROCESS

STEP 1 DEFINE THE LOCATION OBJECTIVES AND ASSOCIATED CONSTRAINTS IDENTIFY THE RELEVENT DECISION CRITERIA RELATE THE OBJECTIVES TO THE CRITERIA USING APPROPRIATE MODELS EVALUATE THE ALTERNATE LOCATIONS

STEP 2

STEP 3

STEP 4

STEP 5

SELECT THE LOCATION THAT BEST SATISFIES THE CRITERIA

IMPORTANCE OF PLANT LOCATION

The location decision is important for a firm to withstand competition. The location of the plant affects the company s ability to serve its customers quickly and conveniently. The location of plant will fix the production technology and cost structure.

TECHNIQUES OF LOCATION SELECTION

Factor rating system Location break even analysis Transportation method of linear programming. Weighted factor rating method. Simple median model. Load distance method. Centre of gravity

Method of Factor Rating

In factor rating method, first we must identify the Most Important Factors in evaluating alternative sites for the new facility. Then we should assign a weight between 0 and 100 to each of these factors.

METHOD OF FACTOR RATING

Each alternative location will then be rated based on these factor weights. The most weighted alternative is selected as the best alternative.

Example
Samson Ltd. is considering three alternative sites for its new facility. After evaluating the firm s Needs, the Managers have Narrowed the list of Important Selection Criteria down into three major Factors. - Availability of skilled labor - Availability of Raw materials, and - Proximity to the firm s markets.

Example
Weights reflecting the relative importance of each factor have been assigned as follows:

Example
Based on these criteria, the three Alternative sites were scored between 0 and 100 points:

Example
Now we will multiply each score by its corresponding factor weight: Weighted scores are calculated as: (Site Score)x(Factor Weight)

Example
From these results, the largest total weight is for Site A. It appears to be the best location.

Example
What happens if we change the factor weights. Lets use the following factor weights:
Skilled labor: 0.45 Raw Materials: 0.40 Market: 0.15

Then the following results are obtained:

Example

Example
In this case, Site C appears to be the best choice with largest weight score. Therefore, factor rating method is very sensitive to the weights assigned to each factor.

Example
Since factor weights, selected factors, and assigned scores are all determined subjectively, the managers should be very careful in selecting these items and numbers.

COST-PROFIT-VOLUME ANALYSIS
When the fixed and variable costs for each site differ, Cost-profit-volume analysis can be used to identify the location with the lowest cost.

Example
Foster Paper Ltd. is considering three alternative sites for its new production facility. The Annual Production Cost associated with each alternative is a linear function of the production volume. That is:

Example
Total Production Cost = (Fixed Cost) + (variable unit cost) x (annual production volume) Assume that The expected annual production volume is 250.000 units.
(x: production volume = 250.000)

Example
For Site A: Prod. Cost = 10.000.000 + 250 x For Site B: Prod. Cost = 25.000.000 + 150 x For Site C: Prod. Cost = 60.000.000 + 50 x Based on these information, Which site has the lowest cost?

Example
At a production volume of 250.000 units, site B has the lowest cost, because For Site A: Prod. Cost = 10.000.000 + 250 (250.000) = 72.500.000 For Site B: Prod. Cost = 25.000.000 + 150 (250.000) = 62.500.000 For Site C: Prod. Cost = 60.000.000 + 50 (250.000) = 72.500.000

Example

Example
This graphic shows that annual production cost changes with different production volumes. If the expected annual production volume is below 150.000 units, then choose site A. If the expected annual production volume is between 150.000 and 350.000 units, then choose site B. If the expected annual production volume is over 350.000 units, then choose site C.

CENTER OF GRAVITY METHOD

The center of gravity method is used to find a location that Minimizes the Sum of Transportation Cost in between new facility and old facilities. Transportation cost is assumed to be a linear function of the Number of Units Shipped AND the Traveling Distance.

CENTER OF GRAVITY METHOD

The location of the firm s existing facilities are converted into x and y coordinates. The following center of gravity equations are used for calculating the x and y coordinates for the new facility:

CENTER OF GRAVITY METHOD

Center of Gravity Method

Here,
Cx : x coordinate for new location Cy : y coordinate for new location i: index for existing locations n: total number of existing locations xi: x coordinate of existing ith location , and yi: y coordinate of existing ith location.

Example
Aldrich Manufacturing Company plans to build a Warehouse to serve its Distribution Centers in Columbus (Ohio), Frankfort (Kentucky), Nashville (Tennessee), and Richmond (Virginia).

Example

Example
The number of units to be shipped monthly from Harrisburg to the Distribution Centers are shown in the following table: (Weighted Coordinates are calculated as: (Annual Shipping Volume) (x or y coordinate))

Example

Example
Using the equations of center of gravity:
Cx = 2,040,000 / 10,000 = 204 (x coordinate for new facility) Cy = 1,185,000 / 10,000 = 118.5 (y coordinate for new facility) The nearest city to (204, 118.5) Charleston at West Virgina.

Example
This method only considers the distances traveled. It does not consider the other factors such as the availability of roads on the selected location. Therefore, applying solely this method may not be applicable in every cases.

Transportation Model
A special form of linear programming, that is Transportation Model, can be used to compare the total transportation cost associated with each alternative site.

Transportation Model
The transportation model technique can be used to determine how many units should be shipped from each plant to each warehouse To Minimize Total Transportation Cost.

Example
Straub Ltd. has three plants running at full capacity in Des Moines, Racine, and Gary. These plants supply four Distribution warehouses in St. Paul, Milwaukee, Chicago, and Detroit.

Example
Straub plans to build a new plant. It has narrowed down the choice of sites to two possibilities: Kalamazoo and Duluth. We will now determine which site results in the lowest transportation Cost by using the unit transportation costs, warehouse demands, and plant capacities shown in the following:

Example

Example

Example
We will approach this problem in the following manner: We will first assume that the selected plant is the Kalamazoo plant, and calculate the total transportation cost.

Example
Later, we will assume the selected plant is Duluth. Then we will compare the transportation costs for both plants. Now, the first step is to find the Optimal number of units to ship between each plantwarehouse combination. This also gives the optimal transportation cost for the problem.

Example
We can use any of the computerized LP tools for finding the optimum values for this problem. Some of these include WINQSB, Lindo, OM Expert, and Excel. We use WINQSB to solve this transportation model. The result is as follows:

Example

Example
The total transportation cost will be $10,225 if the new plant is built in Kalamazoo. (This can be calculated simply by multiplying the shipment in each cell by its unit cost) On the other hand, The optimal number of units to ship between each plant and Duluth Warehouse is found as follows:

Example

Example
The total transportation cost will be $13,825 if the new plant is built in Duluth. Therefore, the Kalamazoo plant will incur the lowest transportation cost.

SIMULATION MODELS

Firms often Consider many variables and Factors when they choose a facility location.

SIMULATION MODELS
These variables are often difficult to estimate and they also change in time. In these kinds of Dynamic Situations, Simulation may be the best modeling technique.

SIMULATION MODELS
Simulation models allow managers to examine a range of Scenarios AND are well suited to open-ended problems. However, the determination of the parameters in a simulation is also a challenging task. Also, developing a simulation model may take considerable time and effort.

FACILITY LAYOUT
Layout planning refers to the arrangement of facilities. A plant layout refers to the arrangement of machinery and equipments, tool room, maintenance room etc. A good layout ensures better flow of work, materials, persons and information.

OBJECTIVE FACILITY LAYOUT

Integrate the production centers. Reduce material handling. Effective utilization of available space. Flexibility Avoid industrial accidents Worker convenience and job satisfaction.

PRINCIPLES OF PLANT LAYOUT

MAXIMUM FLEXIBILITY MINIMUM DISTANCE

FACTORS INFLUENCING PLANT LAYOUT

Management policy Manufacturing process Nature of the product. Volume of production Type of equipment Type of building Availability of total area Possibility of future expansion

FACLITIES LAYOUT-IMPORTANCE
Layout decisions are important for basic reasons:
Economies in handling. Effective use of available area Minimization of production delays Improved quality control Better production control Better supervision Improved utilization of labor

 The basic objective of layout design is to facilitate a smooth flow of work, material, and information through the system. Supporting objectives generally involve the following:
To facilitate attainment of product or service quality. To use workers and space efficiently. To avoid bottlenecks. To minimize material handling costs. To eliminate unnecessary movements of workers or materials. To minimize production time or customer service time. To design for safety.

TYPES OF LAYOUT
The three basic types of layout are
product process fixed-position.

Product layouts are most conducive to repetitive processing Process layouts are used for intermittent processing Fixed-position layouts are used for projects

PRODUCT LAYOUT
Product layouts are used to achieve a smooth and rapid flow of large volumes of goods or customers through a system. Repetitive processing.

REPETITIVE PROCESSING: PRODUCT LAYOUTS

Advantages
A high rate of output Low unit cost due to high volume Labor specialization Low material-handling cost per unit A high utilization of labor and equipment The establishment of routing and scheduling in the initial design of the system Fairly routine accounting, purchasing, and inventory control

http://www.baskent.edu.tr/~kilter 89

Disadvantages
Morale problems and to repetitive stress injuries. Lack of maintaining equipment or quality of output. Inflexible for output or design Highly susceptible to shutdowns Preventive maintenance, the capacity for quick repairs, and spare-parts inventories are necessary expenses Incentive plans tied to individual output are impractical

U-Shaped Layouts

PROCESS LAYOUTS
Process layouts are designed to process items or provide services that involve a variety of processing requirements Nonrepetitive Processing.

 Advantages
Handle a variety of processing requirements Not vulnerable to equipment failures General-purpose equipment is less costly and is easier and less costly to maintain Possible to use individual incentive systems

Disadvantages
In-process inventory costs can be high Routing and scheduling pose continual challenges Equipment utilization rates are low Material handling is slow and inefficient, and more costly per unit Job complexities reduce the span of supervision and result higher supervisory costs Special attention necessary for each product or customer and low volumes result in higher unit costs Accounting, inventory control, and purchasing are much more involved

FIXED-POSITION LAYOUTS
In fixed-position layouts, the item being worked on remains stationary, and workers, materials, and equipment are moved about as needed. Fixed-position layouts are widely used in
farming firefighting road building home building remodeling and repair drilling for oil. In each case, compelling reasons bring workers, materials, and equipment to the product s location instead of the other way around.

COMBINATION LAYOUTS
Supermarket layouts are essentially process layouts we find that most use fixed-path materialhandling devices such as roller-type conveyors in the stockroom and belt-type conveyors at the cash registers. Hospitals also use the basic process arrangement, although frequently patient care involves more of a fixed-position approach In which nurses, doctors, medicines, and special equipment are brought to the patient.

 Faulty parts made in a product layout may require off-line reworking, which involves customized processing. Moreover, conveyors are frequently observed in both farming and construction activities.
Cellular manufacturing - Group technology Flexible manufacturing systems

CELLULAR LAYOUTS
Cellular production is a type of layout in which workstations are grouped into what is referred to as a cell.

 Effective cellular manufacturing must have groups of identified items with similar processing characteristics. This strategy for product and process design is known as group technology It involves identifying items with similarities in either design characteristics or manufacturing characteristics, and grouping them into part families.

FLEXIBLE MANUFACTURING SYSTEMS

A flexible manufacturing system (FMS) is a group of machines that include supervisory computer control, automatic material handling, and robots or other automated processing equipment. Reprogrammable controllers enable these systems to produce a variety of similar products. Systems may range from three or four machines to more than a dozen.

CIM
Computer-integrated manufacturing (CIM) is a system that uses an integrating computer system to link a broad range of manufacturing activities, including engineering design, flexible manufacturing systems, purchasing, order processing, and production planning and control.

SERVICE LAYOUTS
Many service organizations use process layouts because of variability in customer processing requirements. Unlike manufacturing layouts, service layouts must be aesthetically pleasing as well as functional.

WAREHOUSE AND STORAGE LAYOUTS

The design of storage facilities presents a different set of factors than the design of factory layouts.

Frequency of order Correlations between items The height of storage racks Rail and/or truck loading and unloading Need to periodically make a physical count of stored items.

LAYOUT PLANNING -TOOLS

Templates Operation sequence analysis Use of computers
CALP(COMPUTER AIDED LAYOUT PLANNING) ALDEP(AUTOMATED LAYOUT DESIGN PROGRAMME) CRAFT(COMPUTERIZED RELATIVE ALLOCATION OF FACILITIES TECHNIQUE.