Unit 05 — Layout and Capacity Planning

1. Facility Layout and Its Objectives Core syllabus concept

1Understand the Concept

Facility layout refers to the arrangement of activities, processes, departments, workstations, storage areas, aisles, and common areas within an existing or proposed facility p. 261. The basic objective of the layout decision is to ensure a smooth flow of work, material, people, and information through the system — everything else follows from that.

Beyond that basic objective, the textbook lists what an effective layout also achieves: minimise movement and material-handling costs; utilise space and labour efficiently; eliminate bottlenecks; facilitate communication and interaction between workers, supervisors 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 visual control of activities; provide flexibility to adapt to changing conditions; and increase capacity.

Two of those deserve emphasis because they connect to other units: eliminating bottlenecks ties directly to Unit 3, and increasing capacity shows that layout is not merely cosmetic — a better arrangement can raise output without buying new equipment.

2Simple Explanation

3Important Points

• Layout = arrangement of activities, processes, departments, workstations, storage, aisles and common areas.
• Basic objective: smooth flow of work, material, people, and information.
• Also: minimise material handling cost, use space/labour efficiently, eliminate bottlenecks, reduce cycle and service time, improve safety/quality/maintenance/visual control, provide flexibility, increase capacity.
• Layout decisions affect quality and competitiveness, not just cost.

4Exam-Ready Answer

5Possible Exam Questions

• Define facility layout. State the objectives of a good facility layout.
• How can a layout decision increase the capacity of a facility?
• Explain the relationship between facility layout and bottleneck elimination.

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2. Types of Layouts: Process, Product, and Fixed-Position Core syllabus concept

1Understand the Concept

A process layout, also known as a functional layout, groups similar activities together in departments or work centres according to the process or function they perform p. 262 — all drills in one work centre, all lathes in another; in a department store, women's clothing, men's clothing and cosmetics 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 varies. Equipment is general-purpose and workers are skilled at operating it. Its advantage is flexibility; its disadvantage is inefficiency — jobs do not flow through the system in an orderly manner, backtracking is common, and queues develop.

A product layout, better known as an assembly line, arranges activities in a line according to the sequence of operations needed to assemble a particular product p. 264. Work flows from one workstation to the next until the finished product comes off the end of the line. Product layouts suit mass production or repetitive operations where demand is stable and volume is high. The advantage is efficiency and ease of use; the disadvantage is inflexibility — a significant design change may require a new line and new equipment.

A fixed-position layout is typical of projects in which the product produced is too fragile, bulky, or heavy to move — ships, houses, and aircraft p. 266. The product remains stationary for the entire manufacturing cycle, and equipment, workers, materials, and other resources are brought to the production site. Equipment utilisation 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; equipment is frequently leased or subcontracted, and the workers called to the site are highly skilled at their specific tasks, so fixed cost tends to be relatively low while variable costs are high.

2Simple Explanation

3Example

Your lecture applies the process layout to an automobile service station: separate areas with general-purpose equipment for dent correction, painting, wheel alignment, oil replacement, engine work, electrical check-up and interior cleaning. Different cars have different service requirements and are routed to different departments according to a schedule set by the service supervisor — the defining pattern of intermittent manufacturing Slides 6–7.

4Important Points — Comparison Table

	Product Layout	Process Layout
Description	Sequential arrangement of activities	Functional grouping of activities
Type of process	Continuous, mass production, mainly assembly	Intermittent, job shop, batch, mainly fabrication
Product	Standardised, made to stock	Varied, made to order
Demand / Volume	Stable / High	Fluctuating / Low
Equipment	Special purpose	General purpose
Workers	Limited skills	Varied skills
Inventory	Low in-process, high finished goods	High in-process, low finished goods
Storage space	Small	Large
Material handling	Fixed path (conveyor)	Variable path (forklift)
Aisles	Narrow	Wide
Scheduling	Part of balancing	Dynamic
Layout decision	Line balancing	Machine location
Goal	Equalise work at each station	Minimise material handling cost
Advantage	Efficiency	Flexibility

Table 7.1 — A Comparison of Product and Process Layouts p. 265

5Exam-Ready Answer

6Possible Exam Questions

• Explain process, product, and fixed-position layouts with examples.
• Differentiate between product and process layouts on any five parameters.
• Why is equipment utilisation low in a fixed-position layout?
• A furniture company makes both mass-market standard tables and highly customised one-off pieces. What layout(s) would you recommend, and why?

7Common Mistakes

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3. Designing Process Layouts: Block Diagramming Core syllabus concept

1Concept — What Is It Solving?

Knowing you need a process layout is not the same as knowing where to put each department. In designing a process layout the objective is to minimise movement or material-handling cost, which is a function of the amount of material moved times the distance it is moved p. 266. This implies that departments incurring the most interdepartmental movement should be located closest to each other, and those that do not interact should be located further apart. Two techniques do this: block diagramming (when quantitative data is available) and relationship diagramming (when it is not).

2Key Terms

• Load summary chart (from/to chart) — gives the average number of unit loads transported between departments over a period.
• Unit load — the quantity in which material is normally moved: a single unit, a pallet, a bin, or a crate. In automobile manufacturing a single car is a unit load; for a ball-bearing producer it might be a bin of 100 or 1000 bearings.
• Composite movement — the back-and-forth movement between each pair of departments, represented by a two-headed arrow.
• Nonadjacent load — a load that must travel a distance farther than the next block, whether horizontally, vertically, or diagonally.

3Step-by-Step Method

1. Start from data on historical or predicted movement of material between departments — the load summary chart.
2. Calculate the composite movements between departments and rank them from most movement to least.
3. Place trial layouts on a grid that graphically represents relative distances between departments as uniform blocks.
4. Assign each department to a block so that nonadjacent loads are minimised; score each trial layout by its number of nonadjacent loads.
5. Repeat with different configurations until an acceptable layout is found. Ideally the optimal layout would have zero nonadjacent loads, but in practice this is rarely possible.

4Textbook Example — Example 7.1 (Barko, Inc.)

5Exam-Ready Answer

6Common Mistakes

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4. Relationship Diagramming & Muther's Grid Core syllabus concept

1Concept — What Is It Solving?

Block diagramming needs numbers. But in many situations quantitative data is difficult to obtain, or does not adequately address the layout problem — how do you put a number on "the locker room shouldn't be next to the offices"? In those cases the load summary chart is replaced with subjective input from analysts or managers p. 269.

Richard Muther developed a format for displaying manager preferences for departmental locations, known as Muther's grid. Preference information is coded into six categories associated with the five vowels A, E, I, O, U plus the letter X, where the vowels match the first letter of the closeness rating:

Code	Closeness rating
A	Absolutely necessary
E	Especially important
I	Important
O	Okay
U	Unimportant
X	Undesirable

The diamond-shaped grid is read like the mileage chart on a road map. The information in it is then used to construct a relationship diagram — a schematic diagram that uses weighted lines to denote location preference. Thicker lines (three, four or five strands) identify the highest-priority closeness ratings (important, especially important, absolutely necessary); thin lines represent unimportant or okay ratings and can be any length; and an undesirable rating is marked with a zigzagged line. Visually, the best solution shows short heavy lines and no zigzagged lines.

2Simple Explanation

3Example

Reading down the highlighted row of that grid: it is okay if the offices are next to production, absolutely necessary that the stockroom be next to production, important that shipping and receiving be next to production, especially important that the locker room be next to production, and absolutely necessary that the toolroom be next to production.

From diagram (a) it is obvious that production and shipping/receiving are located too far from the stockroom, and that the offices and locker room are located too close to one another. The revised layout in (b) satisfies 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.

4Important Points

• Use relationship diagramming when quantitative movement data is unavailable or inadequate.
• Muther's grid codes manager preferences as A (absolutely necessary), E (especially important), I (important), O (okay), U (unimportant), X (undesirable).
• Relationship diagram = weighted lines; thicker = higher closeness priority; zigzag = undesirable adjacency.
• A good solution = short heavy lines, no zigzagged lines.
• Computerised alternatives exist: CRAFT (uses load summary chart + block diagram, makes pairwise exchanges) and CORELAP (uses relationship diagramming, places A-rated pairs first).

5Exam-Ready Answer

6Possible Exam Questions

• What is Muther's grid? Explain the six closeness ratings.
• Explain relationship diagramming. When would you use it instead of block diagramming?
• How do you visually recognise a good layout from a relationship diagram?
• Differentiate between block diagramming and relationship diagramming.

7Common Mistakes

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5. Hybrid Layouts: Cellular, FMS, and Mixed-Model Lines Core syllabus concept

1Understand the Concept

Process layouts are flexible but inefficient; product layouts are efficient but inflexible. Hybrid layouts attempt to capture both. A cellular layout groups dissimilar machines into work centres, called cells, that process families of parts with similar shapes or processing requirements p. 278 — instead of routing a part across the whole factory or dedicating an entire line to one product, a cell handles a whole family of similar parts efficiently in one place.

A flexible manufacturing system (FMS) consists of numerous programmable machine tools connected by an automated material-handling system and controlled by a common computer network, with automated tool changing — combining flexibility with efficiency. A mixed-model assembly line processes more than one product model on the same line, avoiding the cost of a separate dedicated line per variant.

2Simple Explanation

3Important Points

• Cellular layout groups machines by part family, not by function. Steps: identify part families with similar flow paths → group machines into cells → arrange cells to minimise material movement → locate large shared machines at point of use.
• Advantages: reduced material handling and transit time, reduced setup time, reduced work-in-process inventory, better use of human resources, easier to control, easier to automate.
• Disadvantages: inadequate part families, poorly balanced cells, expanded training and scheduling of workers, increased capital investment.
• FMS: programmable machine tools + automated material handling + common computer control; layouts differ by variety of parts, size of parts, and average processing time.
• Mixed-model assembly line: more than one product model processed on one line.

4Exam-Ready Answer

5Possible Exam Questions

• What is a cellular layout? Explain its advantages and disadvantages.
• Differentiate between a flexible manufacturing system and a mixed-model assembly line.
• Why are hybrid layouts said to combine the strengths of process and product layouts?

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6. Designing Service Layouts Core syllabus concept

1Understand the Concept

Your syllabus names "layout for service functions" as a distinct topic. A service layout — a retail store above all — must be both attractive and functional p. 273: it is simultaneously a workspace and a piece of marketing. Four arrangements are used:

• Free-flow layouts encourage browsing, increase impulse purchasing, are flexible and visually appealing.
• Grid layouts encourage customer familiarity, are low cost, easy to clean and secure, and good for repeat customers.
• Loop and spine layouts both increase customer sightlines and exposure to products, while encouraging the customer to circulate through the entire store.

2Example

A supermarket uses a grid layout so regular shoppers navigate quickly and predictably to the same items each week, keeping the store easy to restock, clean and secure. A fashion boutique instead uses a free-flow layout with irregularly placed fixtures, encouraging customers to wander, browse and make unplanned purchases.

3Exam-Ready Answer

4Possible Exam Questions

• Explain the different types of service/retail layouts with examples.
• Why would a supermarket prefer a grid layout while a fashion boutique prefers a free-flow layout?

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7. Designing Product Layouts: Line Balancing Core syllabus concept

1Concept — What Is It Solving?

The design problem for a product layout is line balancing: assigning tasks to workstations so the amount of work at each station is roughly equal and no station becomes a bottleneck holding up the whole line. Line balancing operates under two constraints p. 274: precedence requirements — physical restrictions on the order in which operations are performed — and cycle time, the maximum amount of time a product is allowed to spend at each workstation.

A useful clarification your lecture makes: cycle time here is the maximum time spent at any one station, whereas flow time is the time to complete all stations Slide 41. Cycle time can also be viewed as the time between completed items rolling off the line.

2Formula

t_i = completion time for element i · n = actual number of workstations · C_a = actual cycle time (max workstation time on the line) · C_d = desired cycle time

3Step-by-Step Method

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, recognising cycle time and precedence constraints.
5. Calculate the efficiency of the line.
6. Determine whether the theoretical minimum number of workstations or an acceptable efficiency level has been reached; if not, return to step 4.

4Worked Example

5Important Points

• Cycle time is set by the required output rate, not by any individual task time.
• The theoretical minimum number of stations is a lower bound — always round up; actual grouping may need more.
• Efficiency uses the actual number of stations and the actual cycle time; balance delay is the complement.
• Product-layout goal = equalise work at each station (vs. process-layout goal = minimise material handling cost).

6Exam-Ready Answer

7Common Mistakes

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8. Capacity Planning & Expansion Strategies Core syllabus concept

1Understand the Concept

Capacity is the maximum capability to produce, and capacity planning establishes the overall level of productive resources for a firm p. 258. Long-term capacity planning is a strategic decision extending over a horizon long enough to obtain those resources — usually a year or more for building or expanding facilities. Capacity decisions affect product lead times, customer responsiveness, operating costs, and the firm's ability to compete: inadequate capacity can lose customers and limit growth, while excess capacity can drain resources and prevent investment in more lucrative ventures.

Your lecture sets out the capacity planning process itself Slide 2: estimate the capacity of present facilities → forecast long-range future capacity needs → identify and analyse sources of capacity to meet those needs → select from among the alternative sources.

Three basic strategies exist for the timing of capacity expansion relative to steady demand growth:

• Capacity lead strategy — capacity is expanded in anticipation of demand growth. This aggressive strategy is used to lure customers from competitors who are capacity-constrained or to gain a foothold in a rapidly expanding market; it also allows the firm to respond to unexpected surges and provide superior service during peak demand.
• Average capacity strategy — capacity is expanded to coincide with average expected demand. A moderate strategy in which managers are certain they can sell at least some portion of the expanded output and will endure some periods of unmet demand; roughly half the time capacity leads demand and half the time it lags.
• Capacity lag strategy — capacity is increased after an increase in demand has been documented. This conservative strategy produces a higher return on investment but may lose customers; it is used in industries with standard products and cost-based or weak competition, assuming lost customers will return once capacity expands.

Capacity can also be added incrementally or in one large step — incremental expansion is less risky but more costly. An attractive alternative to expanding capacity at all is outsourcing, in which suppliers absorb the risk of demand uncertainty.

2Simple Explanation

3Example

4Important Points

• Capacity = maximum capability to produce; capacity planning establishes the firm's overall level of productive resources.
• Inadequate capacity loses customers and limits growth; excess capacity drains resources.
• Three timing strategies: lead (before demand), average (with demand), lag (after demand).
• How much to increase depends on: (1) volume and certainty of anticipated demand, (2) strategic objectives regarding growth, customer service and competition, (3) costs of expansion and operation.
• Incremental expansion is less risky but more costly than one-step expansion; outsourcing shifts demand risk to suppliers.
• Ways to expand long-term capacity: subcontract with other companies; acquire other companies, facilities or resources; develop sites and construct buildings/buy equipment; expand, update or modify existing facilities; reactivate standby facilities.

5Exam-Ready Answer

6Possible Exam Questions

• Explain the lead, lag, and average capacity strategies with examples.
• Describe the steps in the capacity planning process.
• What factors determine how much capacity a firm should add?
• Compare incremental and one-step capacity expansion.
• A startup expects rapid but uncertain demand growth. Which capacity strategy would you recommend, and why?

7Common Mistakes

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9. Best Operating Level, Economies & Diseconomies of Scale Core syllabus concept

1Understand the Concept

The best operating level for a facility is the percent of capacity utilisation that minimises average unit cost p. 259. Crucially, the textbook notes that rarely is the best operating level at 100% of capacity — at higher levels of utilisation, productivity slows and things start to go wrong. An industry with 80% average utilisation therefore has a 20% capacity cushion for unexpected surges in demand.

Below that level, economies of scale apply: average cost per unit decreases as volume increases toward the best operating level, because fixed costs are spread over more units, longer production runs allocate a smaller proportion of labour to setups, there is proportionally less material scrap, quantity discounts become available on material purchases, and operating efficiency rises as workers gain experience. Beyond that level, diseconomies of scale set in: average cost per unit increases as volume rises past the best operating level, because increased congestion of workers and material contributes to inefficiency, difficulty in scheduling, damaged goods, reduced morale, and increased use of overtime.

2Simple Explanation

3Example

4Important Points

• Best operating level = the % of capacity utilisation that minimises average unit cost — rarely 100%.
• Capacity cushion = % of capacity held in reserve for unexpected occurrences (100% − average utilisation).
• Economies of scale: fixed costs spread over more units; smaller proportion of labour on setups; proportionally less scrap; quantity discounts on materials; experience effects.
• Diseconomies of scale: congestion of workers and material → inefficiency, scheduling difficulty, damaged goods, reduced morale, more overtime.

5Exam-Ready Answer

6Possible Exam Questions

• Explain economies and diseconomies of scale with an example.
• What is the best operating level? Why is it rarely at 100% of capacity?
• Define capacity cushion and explain its purpose.

7Common Mistakes