Facilities Planning 2MT004 Course Responsibles: Anders Ingwald HT-2013 Layout (cont´d) Evaluating

So far…. Identified ”all” requirements, influential factors (market, production, planning, etc.) Calculated quantity of equipment, concideringe scrap rate, etc. Used group technology (to simplify..) Considered integreated or decoupled cells Material handling … Developing layouts

The impact of change Reasons for updating the layout: Changes in product design. Elimination of some products. Introducing new products. Changes in process sequence. Changes of existing equipment. Changes in production quantities. Changes in organisation structure. Changes in management philosophy, e.G. JIT, TQM Etc.

Flexibility It can be achieved by Utilising modular office equipment, workstations, and material handling equipment. Installing general-purpose production equipment Utilising grid-based utilities and services system. Using modular construction. Etc…

Planning for facility reorganisation (1) Since the MFG environment is dynamic, the layout master plan should be able to adapt to future changes. Placement of shipping and receiving docks. Placement of heavy equipment. Clear building height Floors bearing capacity. Load bearing walls Location of utilities

Planning for facility reorganisation (2) Provides means to react quickly to changes Adding capacity in a short time, (boom). Operate efficiently at scaled down operating levels, (recession). Layout change should not be made before trying other methods (solutions) such as: Efficient machine scheduling Better maintenance of equipment. Smoother material flows. Closer co-operation with customers and suppliers.

Planning for facility reorganisation (2) Provides means to react quickly to changes Adding capacity in a short time, (boom). Operate efficiently at scaled down operating levels, (recession). Layout change should not be made before trying other methods (solutions) such as: Efficient machine scheduling Better maintenance of equipment. Smoother material flows. Closer co-operation with customers and suppliers.

How to develop a flexible layout

Example-1 (Volvo Skövdeverken)

Example-2 (Volvo’s Modular Plant In Kalmar)

Evaluating and selecting the facilities plan Define the problem 2.Analyse the problem 3.Generate alternative solutions 4.Evaluate the alternatives 5.Select the preferred solution 6.Implement the preferred solution

Evaluating Evaluate alternative facility plans. Determine the economic impact of each alternative. Focus on (for budget purposes): Capital investments requirements Operating expenses Perform sensitivity analysis, focusing on: changes in production volume Changes in production mix Technological changes

Evaluating Input: 1.Criteria defined during step 1 of the layout process… 2.Feasible facilities plans (avoid prejudging!)

Evaluating Often both quantitative and qualitative considerations are employed. Different techniques used: 1.List all positive and negative aspects of each alternative 2.Rank performance of each alternative against each of several enumerated criteria 3.Perform weighted factor comparison of alternative by assigning a numerical weight to each criterion (factor), ranking numerically each alternative against each criterion, and summing the weighted rankings over all criteria to obtain a total weighted factor for each alternative. 4.Determine the economical performance of each alternative over a specified planning horizon.

Evaluating – Listing positive and negative assects Simple way Difficult to obtain a accurate, balanced and objective analysis, bias is easily introduced To somewhat overcome the problems with bias groups could be used

Evaluating – Rank performance against several criterias All alternative are ranked against a common set of factors. Forces explicit consideration of factors influencing the decision However: No guarantee that all important factors are considered The ranking process might yield to much information

Evaluating – Weight factor comparison A numerical weight are assigned to each factor based o nits importance A numerical score is assigned toe each alternative based n its performance against a particular factor Scores are multiplied with weight and the summed over all factors. Difficult to set a fair score! Risk for a halo-effect! (a true very high value in one factor is affecting the assessment in other factors!) An attempt to overcome problems regarding objectiveness: Paired comparison

Evaluating – Paired comparison Example. Four alternatives, W, X, Y and Z Result when ranking (pairwise) against a certain factor: W Y, W Z, W < Z, Y < Z Combined gives: Z > X > Y > W Inconsistence in ranking will be revealed!

Evaluating – Factors to consider (examples) Initial investment required Annual operating costs ROI Payback period Flexibility and ease of changing or rearranging the installed system Integration with and ability to serve the process operations Adaptability to changes in products, quantities, delivery times Ease of future expansions Limitations imposed by handling methods on flexibility and ease of expansion Space utilisation

Evaluating – Factors to consider (more examples) Safety Work condition and employees satisfaction Ease of supervision and control Availability of trained personnel … Always have the problem stated in step one of the design procedure in mind. (The problem to be solved!)

Evaluating – Weight factor comparison FactorWeightABCDE Rt.Sc.Rt.Sc.Rt.Sc.Rt.Sc.Rt.Sc …

Evaluating – Weight factor comparison (example) Evaluation factors and weight 1.Annual materials handling cost25 2.Construction cost15 3.Ease of expansion20 4.Employee´s preference30 5.Rail siding access10 Sa: 100

Evaluating – Weight factor comparison (example) Alternatives ranked/rated on the basis of the factors FactorABCD 1.Annual materials handling cost Construction cost Ease of expansion Employee´s preference Rail siding access10657

Evaluating – Weight factor comparison (example) FactorWeightABCDE Rt.Sc.Rt.Sc.Rt.Sc.Rt.Sc.Rt.Sc … Totals

Evaluating – Economic comparison Systematic Economic Analysis Technique (SEAT) 1.Specify the feasible alternatives to be compared 2.Define the planning horizon 3.Estimate the cash flows for each alternative 4.Specify the discount rate to be used 5.Compare the alternatives using a discounted cash flow (DCF) method 6.Perform supplementary analyses 7.Select the preferred alternative

Evaluating – Economic comparison Define planning horizon Use the same horizon for all alternatives Planning horizon should be distinguish from technical working life and depreciable life (may not be related to these) Often to short (US 5 years, Japan 10 – 20 years)

Evaluating – Economic comparison Specifying discount rate Money has a time-value! Used to convert a mix of flows into something that is comparable

Evaluating – Economic comparison Comparing the alternatives R\CAB 1Discount rate = 2TimeCash Flow NPV 10NAV 11NFV 12IRR NPV: Net present value (Discounted to present time) NAV: Net annual value (Equal annual flow of cash flows) NFV: Net future value (all cash flows in the end of the planning horizon) IRR: Internal rate of return (Interest rate that gives an NPV = 0)

Evaluating – Economic comparison