layout strtgy 3

Layout Layout StrategiesStrategies

Dr. Syed Amir Iqbal.

Innovations at McDonald’sInnovations at McDonald’s Indoor seating (1950s)Indoor seating (1950s) Drive-through window (1970s)Drive-through window (1970s) Adding breakfast to the menu Adding breakfast to the menu

(1980s)(1980s) Adding play areas (late 1980s)Adding play areas (late 1980s) Redesign of the kitchens (1990s)Redesign of the kitchens (1990s) Self-service kiosk (2004)Self-service kiosk (2004) Now three separate dining sectionsNow three separate dining sections

Innovations at McDonald’sInnovations at McDonald’s Indoor seating (1950s)Indoor seating (1950s) Drive-through window (1970s)Drive-through window (1970s) Adding breakfast to the menu Adding breakfast to the menu

(1980s)(1980s) Adding play areas (late 1980s)Adding play areas (late 1980s) Redesign of the kitchens (1990s)Redesign of the kitchens (1990s) Self-service kiosk (2004)Self-service kiosk (2004) Now three separate dining sectionsNow three separate dining sections

Six out of the Six out of the seven are seven are

layout layout decisions!decisions!

McDonald’s New LayoutMcDonald’s New Layout

Seventh major innovation Seventh major innovation Redesigning all 30,000 outlets around Redesigning all 30,000 outlets around

the worldthe world Three separate dining areasThree separate dining areas

Linger zone with comfortable chairs and Linger zone with comfortable chairs and Wi-Fi connectionsWi-Fi connections

Grab and go zone with tall countersGrab and go zone with tall counters Flexible zone for kids and familiesFlexible zone for kids and families

Facility layout is a source of Facility layout is a source of competitive advantagecompetitive advantage

McDonald’s is McDonald’s is considered to considered to

be more be more innovative innovative

compared to compared to Apple !Apple !

IntroductionIntroduction• Facility layout planning includes decisions regarding the physical Facility layout planning includes decisions regarding the physical

allocation of the economic activity centers in a facility.allocation of the economic activity centers in a facility.– An economic activity center is any entity occupying space.An economic activity center is any entity occupying space.– The objective of plant layout planning is a more effective work flow at The objective of plant layout planning is a more effective work flow at

the facility, allowing workers and equipment being more productive.the facility, allowing workers and equipment being more productive.• Facility layout techniques apply to the case where several physical means Facility layout techniques apply to the case where several physical means

have to be located in a certain area, either industrial processes or services.have to be located in a certain area, either industrial processes or services.• The objective of the chapter is not only Plant layout but re-layout also The objective of the chapter is not only Plant layout but re-layout also

(most common situation for a company).(most common situation for a company).• To carry out an appropriate plant layout, it’s important to take into To carry out an appropriate plant layout, it’s important to take into

account the business strategic and tactical objectivesaccount the business strategic and tactical objectives– Example: space requirements/cost per m2 in Malls; Example: space requirements/cost per m2 in Malls;

accessibility/privacy in offices.accessibility/privacy in offices.

• To make a decision about layout planning, 4 different To make a decision about layout planning, 4 different questions must have an answer:questions must have an answer:– Which centers do we have to consider?Which centers do we have to consider?– How much space and capacity is required for each center?How much space and capacity is required for each center?

• If there is not enough space, productivity may be reduced.If there is not enough space, productivity may be reduced.• Too much space is expensive and may also reduce productivity.Too much space is expensive and may also reduce productivity.

– How must the space be configured at each center?How must the space be configured at each center?• Space quantity, shape and the elements of the work center are Space quantity, shape and the elements of the work center are

related to each other.related to each other.– Where should each center be located at within the facility?Where should each center be located at within the facility?

• The allocation of the different centers may affect productivity.The allocation of the different centers may affect productivity.

IntroductionIntroduction

• The plant layout process starts at an aggregate level, taking into account the different departments. As soon as we get into the details, the different issues arise, and the original configuration may be changed through a feedback process.

• Most (if not all of them) layouts are designed properly for the initial conditions of the business, although as long as the company grows and has to be adapted to internal and external changes, a re-layout is necessary.


• The reasons for a re-layout are based on 3 types of The reasons for a re-layout are based on 3 types of changes:changes:– Changes in production volumes.Changes in production volumes.– Changes in processes and technology.Changes in processes and technology.– Changes in the product.Changes in the product.

• The frequency of the re-layout will depend on the The frequency of the re-layout will depend on the requirements of the process.requirements of the process.


• Symptoms that allow us to detect the need for a re-layout:Symptoms that allow us to detect the need for a re-layout:– Congestion and bad utilization of space.Congestion and bad utilization of space.– Excessive stock in process at the facility.Excessive stock in process at the facility.– Long distances in the work flow process.Long distances in the work flow process.– Simultaneous bottle necks and workstations with idle time.Simultaneous bottle necks and workstations with idle time.– Qualified workers carrying out too many simple operations.Qualified workers carrying out too many simple operations.– Labor anxiety and discomfort. Accidents at the facility.Labor anxiety and discomfort. Accidents at the facility.– Difficulty in controlling operations and personnel.Difficulty in controlling operations and personnel.


Facility Layout DefinitionFacility Layout Definition• A facility layout is an arrangement of everything needed for

production of goods or delivery of services. A facility is an entity that facilitates the performance of any job. It may be a machine tool, a work centre, a manufacturing cell, a machine shop, a department, a warehouse, etc. (Heragu, 1997).

ProductLayouts

FixedPositionLayouts Mixed LayoutsProcess Layouts

QuantityQuantity

Number of Different ProductsNumber of Different Products

• The layout design generally depends on the products variety and the production volumes. Four types of organization are referred to, namely fixed product layout, process layout, product layout and cellular layout (Dilworth, 1996).

http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V0H-4R2GS3S-2&_user=5674735&_coverDate=11/05/2007&_alid=646172600&_rdoc=2&_fmt=full&_orig=search&_cdi=5647&_sort=d&_docanchor=&view=c&_ct=211&_acct=C000053929&_version=1&_urlVersion=0&_userid=5674735&md5=e47ccd28a13defa3d980826b6a5a91ed#bib57

http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V0H-4R2GS3S-2&_user=5674735&_coverDate=11/05/2007&_alid=646172600&_rdoc=2&_fmt=full&_orig=search&_cdi=5647&_sort=d&_docanchor=&view=c&_ct=211&_acct=C000053929&_version=1&_urlVersion=0&_userid=5674735&md5=e47ccd28a13defa3d980826b6a5a91ed#bib36

Objectives of Plant LayoutObjectives of Plant Layout• The main objective consists of organizing equipment The main objective consists of organizing equipment

and working areas in the most efficient way, and at and working areas in the most efficient way, and at the same time satisfactory and safe for the personnel the same time satisfactory and safe for the personnel doing the work.doing the work.– Sense of UnitySense of Unity

• The feeling of being a unit pursuing the same objective.The feeling of being a unit pursuing the same objective.

– Minimum Movement of people, material and Minimum Movement of people, material and resources.resources.

– SafetySafety• In the movement of materials and personnel work flow.In the movement of materials and personnel work flow.

– FlexibilityFlexibility• In designing the plant layout taking into account the changes In designing the plant layout taking into account the changes

over short and medium terms in the production process and over short and medium terms in the production process and manufacturing volumes.manufacturing volumes.

Objectives of Plant LayoutObjectives of Plant Layout• These main objectives are reached through the attainment of the These main objectives are reached through the attainment of the

following facts:following facts:– Congestion reduction.Congestion reduction.– Elimination of unnecessary occupied areas.Elimination of unnecessary occupied areas.– Reduction of administrative and indirect work.Reduction of administrative and indirect work.– Improvement on control and supervision.Improvement on control and supervision.– Better adjustment to changing conditions.Better adjustment to changing conditions.– Better utilization of the workforce, equipment and services.Better utilization of the workforce, equipment and services.– Reduction of material handling activities and stock in process.Reduction of material handling activities and stock in process.– Reduction on parts and quality risks.Reduction on parts and quality risks.– Reduction on health risks and increase on workers safety.Reduction on health risks and increase on workers safety.– Moral and workers satisfaction increase.Moral and workers satisfaction increase.– Reduction on delays and manufacturing time, as well as increase in Reduction on delays and manufacturing time, as well as increase in

production capacity.production capacity.• All these factors will not be reached simultaneosly, so the best solution All these factors will not be reached simultaneosly, so the best solution

will be a balance among them.will be a balance among them.

Strategic Importance of Strategic Importance of Layout DecisionsLayout Decisions

The objective of layout strategy The objective of layout strategy is to develop a cost-effective is to develop a cost-effective layout that will meet a firm’s layout that will meet a firm’s

competitive needscompetitive needs

Factors affecting Plant LayoutFactors affecting Plant Layout• The final solution for a Plant Layout has to take into account a The final solution for a Plant Layout has to take into account a

balance among the characteristics and considerations of all balance among the characteristics and considerations of all factors affecting plant layout, in order to get the maximum factors affecting plant layout, in order to get the maximum advantages.advantages.

• The factors affecting plant layout can be grouped into 8 The factors affecting plant layout can be grouped into 8 categories:categories:1.1. MaterialsMaterials2.2. MachineryMachinery3.3. LaborLabor4.4. Material HandlingMaterial Handling5.5. Waiting TimeWaiting Time6.6. Auxiliary ServicesAuxiliary Services7.7. The buildingThe building8.8. Future ChangesFuture Changes

• The factors affecting plant layout can be grouped The factors affecting plant layout can be grouped into 8 categories:into 8 categories:– MaterialsMaterials

• The layout of the productive equipment will depend on the The layout of the productive equipment will depend on the characteristics of the product to be managed at the characteristics of the product to be managed at the facility, as well as the different parts and materials to work facility, as well as the different parts and materials to work on.on.

• Main factors to be considered: size, shape, volume, Main factors to be considered: size, shape, volume, weight, and the physical-chemical characteristics, since weight, and the physical-chemical characteristics, since they influence the manufacturing methods and storage they influence the manufacturing methods and storage and material handling processes.and material handling processes.

• The sequence and order of the operations will affect plant The sequence and order of the operations will affect plant layout as well, taking into account the variety and quantity layout as well, taking into account the variety and quantity to produce.to produce.

Factors affecting Plant LayoutFactors affecting Plant Layout

• The factors affecting plant layout can be grouped The factors affecting plant layout can be grouped into 8 categories:into 8 categories:– MachineryMachinery

• Having information about the processes, machinery, tools Having information about the processes, machinery, tools and necessary equipment, as well as their use and and necessary equipment, as well as their use and requirements is essential to design a correct layout.requirements is essential to design a correct layout.

• The methods and time studies to improve the processes The methods and time studies to improve the processes are closely linked to the plant layout.are closely linked to the plant layout.

• Regarding machinery, we have to consider the type, total Regarding machinery, we have to consider the type, total available for each type, as well as type and quantity of available for each type, as well as type and quantity of tools and equipment.tools and equipment.

• It’s essential as well to know about space required, shape, It’s essential as well to know about space required, shape, height, weight, quantity and type of workers required, height, weight, quantity and type of workers required, risks for the personnel, requirements of auxiliary services, risks for the personnel, requirements of auxiliary services, etc.etc.


• The factors affecting plant layout can be grouped into The factors affecting plant layout can be grouped into 8 categories:8 categories:– LaborLabor

• Labor has to be organized in the production process (direct labor, Labor has to be organized in the production process (direct labor, supervision and auxiliary services).supervision and auxiliary services).

• Environment considerations: employees’ safety, light conditions, Environment considerations: employees’ safety, light conditions, ventilation, temperature, noise, etc.ventilation, temperature, noise, etc.

• Process considerations: personnel qualifications, flexibility, Process considerations: personnel qualifications, flexibility, number of workers required at a given time as well as the type of number of workers required at a given time as well as the type of work to be performed by them.work to be performed by them.

– Material HandlingMaterial Handling• Material handling does not add value to the product; it’s just Material handling does not add value to the product; it’s just

waste.waste.• Objective: Minimize material handling as well as combining with Objective: Minimize material handling as well as combining with

other operations when possible, eliminating unnecessary and other operations when possible, eliminating unnecessary and costly movements.costly movements.


• The factors affecting plant layout can be grouped into The factors affecting plant layout can be grouped into 8 categories:8 categories:– LaborLabor

• Labor has to be organized in the production process (direct Labor has to be organized in the production process (direct labor, supervision and auxiliary services).labor, supervision and auxiliary services).

• Environment considerations: employees’ safety, light conditions, Environment considerations: employees’ safety, light conditions, ventilation, temperature, noise, etc.ventilation, temperature, noise, etc.

• Process considerations: personnel qualifications, flexibility, Process considerations: personnel qualifications, flexibility, number of workers required at a given time as well as the type of number of workers required at a given time as well as the type of work to be performed by them.work to be performed by them.

– Material HandlingMaterial Handling• Material handling does not add value to the product; it’s just Material handling does not add value to the product; it’s just

waste.waste.• Objective: Minimize material handling as well as combining with Objective: Minimize material handling as well as combining with

other operations when possible, eliminating unnecessary and other operations when possible, eliminating unnecessary and costly movements.costly movements.


• The factors affecting plant layout can be grouped The factors affecting plant layout can be grouped into 8 categories:into 8 categories:– Waiting time - StockWaiting time - Stock

• Objective: Continuous Material Flow through the facility, Objective: Continuous Material Flow through the facility, avoiding the cost of waiting time and demurrages that avoiding the cost of waiting time and demurrages that happen when the flow stops.happen when the flow stops.

• On the other hand, the material waiting to flow through the On the other hand, the material waiting to flow through the facility not always represents a cost to avoid. As stock facility not always represents a cost to avoid. As stock sometimes provides safety to protect production, sometimes provides safety to protect production, improving customer service, allowing more economic improving customer service, allowing more economic batches, etc.batches, etc.– It’s necessary then to consider space for the required stock It’s necessary then to consider space for the required stock

at the facility when designing the layout.at the facility when designing the layout.• Resting time to cool down or heating up…Resting time to cool down or heating up…


• The factors affecting plant layout can be grouped The factors affecting plant layout can be grouped into 8 categories:into 8 categories:– Auxiliary ServicesAuxiliary Services

• Support the main production activities at the plant:Support the main production activities at the plant:– Related to labor: Accessibility paths, fire protection Related to labor: Accessibility paths, fire protection

installations, supervision, safety, etc.installations, supervision, safety, etc.– Related to material: quality control.Related to material: quality control.– Related to machinery: maintenance and electrical and water Related to machinery: maintenance and electrical and water

lines.lines.• The auxiliary services represent around 30% of the space The auxiliary services represent around 30% of the space

at a facility.at a facility.• The space dedicated to auxiliary services is usually The space dedicated to auxiliary services is usually

considered as waste.considered as waste.– It’s important to have efficient services to insure that their It’s important to have efficient services to insure that their

indirect costs have been minimized. indirect costs have been minimized.


• The factors affecting plant layout can be grouped into The factors affecting plant layout can be grouped into 8 categories:8 categories:– The buildingThe building

• If it has been already selected, its characteristics will be a If it has been already selected, its characteristics will be a constraint at the moment of designing the layout, which is constraint at the moment of designing the layout, which is different if the building has to be built.different if the building has to be built.

– Future changesFuture changes• One of the main objectives of plant layout is flexibility.One of the main objectives of plant layout is flexibility.• It’s important to forecast the future changes to avoid having an It’s important to forecast the future changes to avoid having an

inefficient plant layout in a short term.inefficient plant layout in a short term.• Flexibility can be reached keeping the original layout as free as Flexibility can be reached keeping the original layout as free as

possible regarding fixed characteristics, allowing the adjustment possible regarding fixed characteristics, allowing the adjustment to emergencies and variations of the normal process activities.to emergencies and variations of the normal process activities.

• Possible future extensions of the facility must be taken into Possible future extensions of the facility must be taken into account, as well as the feasibility of production during re-layout.account, as well as the feasibility of production during re-layout.


Layout Design Layout Design ConsiderationsConsiderations

Higher utilization of space, equipment, Higher utilization of space, equipment, and peopleand people

Improved flow of information, materials, Improved flow of information, materials, or peopleor people

Improved employee morale and safer Improved employee morale and safer working conditionsworking conditions

Improved customer/client interactionImproved customer/client interaction FlexibilityFlexibility

Types of LayoutTypes of Layout

1.1. Office layout Office layout 2.2. Retail layout Retail layout 3.3. Warehouse layoutWarehouse layout4.4. Fixed-position layoutFixed-position layout5.5. Process-oriented layoutProcess-oriented layout6.6. Work-cell layout Work-cell layout 7.7. Product-oriented layoutProduct-oriented layout


1.1. Office layout: Positions workers, Office layout: Positions workers, their equipment, and spaces/offices their equipment, and spaces/offices to provide for movement of to provide for movement of informationinformation

2.2. Retail layout: Allocates shelf space Retail layout: Allocates shelf space and responds to customer behavior and responds to customer behavior

3.3. Warehouse layout: Addresses trade-Warehouse layout: Addresses trade-offs between space and material offs between space and material handlinghandling


4.4. Fixed-position layout: Addresses Fixed-position layout: Addresses the layout requirements of large, the layout requirements of large, bulky projects such as ships and bulky projects such as ships and buildingsbuildings

5.5. Process-oriented layout: Deals with Process-oriented layout: Deals with low-volume, high-variety production low-volume, high-variety production (also called job shop or intermittent (also called job shop or intermittent production)production)


6.6. Work cell layout: Arranges Work cell layout: Arranges machinery and equipment to focus machinery and equipment to focus on production of a single product or on production of a single product or group of related productsgroup of related products

7.7. Product-oriented layout: Seeks the Product-oriented layout: Seeks the best personnel and machine best personnel and machine utilizations in repetitive or utilizations in repetitive or continuous productioncontinuous production

Good Layouts ConsiderGood Layouts Consider

1.1. Material handling equipmentMaterial handling equipment2.2. Capacity and space requirementsCapacity and space requirements3.3. Environment and aestheticsEnvironment and aesthetics4.4. Flows of informationFlows of information5.5. Cost of moving between various Cost of moving between various

work areaswork areas

Layout StrategiesLayout Strategies

Table 1Table 1

OfficeOffice RetailRetailWarehouse Warehouse

(storage)(storage)ExamplesExamples

Allstate InsuranceAllstate InsuranceMicrosoft Corp.Microsoft Corp.

Kroger’sKroger’s Supermarket SupermarketWalgreen’sWalgreen’sBloomingdale’sBloomingdale’s

Federal-Mogul’sFederal-Mogul’s warehouse warehouseThe Gap’sThe Gap’s distribution center distribution center

Problems/IssuesProblems/IssuesLocate workers Locate workers requiring frequent requiring frequent contact close to contact close to one anotherone another

Expose customer Expose customer to high-margin to high-margin itemsitems

Balance low-cost Balance low-cost storage with low-storage with low-cost material cost material handlinghandling


Table 1Table 1

Project Project (fixed position)(fixed position)

Job Shop Job Shop (process oriented)(process oriented)

ExamplesExamplesIngall Ship BuildingIngall Ship Building Corp. Corp.Trump PlazaTrump PlazaPittsburgh AirportPittsburgh Airport

Arnold Palmer HospitalArnold Palmer HospitalHard Rock CaféHard Rock CaféOlive GardenOlive Garden

Problems/IssuesProblems/Issues

Move material to the Move material to the limited storage areas limited storage areas around the sitearound the site

Manage varied material Manage varied material flow for each productflow for each product


Table 1Table 1

Work Cells Work Cells (product families)(product families)

Repetitive/ Continuous Repetitive/ Continuous (product oriented)(product oriented)

ExamplesExamplesHallmark CardsHallmark CardsWheeled CoachWheeled CoachStandard AeroStandard Aero

Sony’s TV assemblySony’s TV assembly line lineToyota ScionToyota Scion

Problems/IssuesProblems/IssuesIdentify a product Identify a product family, build teams, family, build teams, cross train team cross train team membersmembers

Equalize the task time Equalize the task time at each workstationat each workstation

Office LayoutOffice Layout Grouping of workers, their equipment, Grouping of workers, their equipment,

and spaces to provide comfort, and spaces to provide comfort, safety, and movement of informationsafety, and movement of information

Movement of Movement of information is main information is main distinctiondistinction

Typically in state of Typically in state of flux due to frequent flux due to frequent technological technological changeschanges

Relationship ChartRelationship Chart

Figure 1Figure 1

Relationship ChartRelationship Chart

Supermarket Retail LayoutSupermarket Retail Layout

Objective is to maximize Objective is to maximize profitability per square foot of profitability per square foot of floor spacefloor space

Sales and profitability vary Sales and profitability vary directly with customer exposuredirectly with customer exposure

Five Helpful Ideas for Five Helpful Ideas for Supermarket LayoutSupermarket Layout

1.1. Locate high-draw items around the Locate high-draw items around the periphery of the storeperiphery of the store

2.2. Use prominent locations for high-impulse Use prominent locations for high-impulse and high-margin itemsand high-margin items

3.3. Distribute power items to both sides of Distribute power items to both sides of an aisle and disperse them to increase an aisle and disperse them to increase viewing of other itemsviewing of other items

4.4. Use end-aisle locationsUse end-aisle locations5.5. Convey mission of store through careful Convey mission of store through careful

positioning of lead-off departmentpositioning of lead-off department

Store LayoutStore Layout

Figure 2Figure 2

Retail SlottingRetail Slotting Manufacturers pay fees to retailers Manufacturers pay fees to retailers

to get the retailers to display (slot) to get the retailers to display (slot) their producttheir product

Contributing factorsContributing factors Limited shelf spaceLimited shelf space An increasing number of new An increasing number of new

productsproducts Better information about sales Better information about sales

through POS data collectionthrough POS data collection Closer control of inventoryCloser control of inventory

Retail Store Shelf Space Retail Store Shelf Space PlanogramPlanogram

Computerized Computerized tool for shelf-tool for shelf-space space managementmanagement

Generated from Generated from store’s scanner store’s scanner data on salesdata on sales

Often supplied Often supplied by manufacturerby manufacturer

5 facings5 facings

Shampoo

Shampoo

Shampoo

Shampoo

Shampoo

Conditioner

Conditioner

Shampoo

Shampoo

Shampoo

Shampoo

Conditioner

2 ft.2 ft.

ServicescapesServicescapes Ambient conditions - background Ambient conditions - background

characteristics such as lighting, sound, characteristics such as lighting, sound, smell, and temperaturesmell, and temperature

Spatial layout and functionality - which Spatial layout and functionality - which involve customer involve customer circulation path planning, circulation path planning, aisle characteristics, and aisle characteristics, and product groupingproduct grouping

Signs, symbols, and Signs, symbols, and artifacts - characteristics artifacts - characteristics of building design that of building design that carry social significancecarry social significance

Warehousing and Storage Warehousing and Storage LayoutsLayouts

Objective is to optimize trade-offs Objective is to optimize trade-offs between handling costs and costs between handling costs and costs associated with warehouse spaceassociated with warehouse space

Maximize the total “cube” of the Maximize the total “cube” of the warehouse – utilize its full volume warehouse – utilize its full volume while maintaining low material while maintaining low material handling costshandling costs


All costs associated with the transactionAll costs associated with the transaction Incoming transportIncoming transport StorageStorage Finding and moving materialFinding and moving material Outgoing transportOutgoing transport Equipment, people, material, supervision, Equipment, people, material, supervision,

insurance, depreciationinsurance, depreciation Minimize damage and spoilageMinimize damage and spoilage

Material Handling CostsMaterial Handling Costs


Warehouse density tends to vary Warehouse density tends to vary inversely with the number of different inversely with the number of different items storeditems stored

Automated Storage and Automated Storage and Retrieval Systems (ASRSs) Retrieval Systems (ASRSs) can significantly improve can significantly improve warehouse productivity by warehouse productivity by an estimated 500%an estimated 500%

Dock location is a key Dock location is a key design elementdesign element

Random StockingRandom Stocking Typically requires automatic identification Typically requires automatic identification

systems (AISs) and effective information systems (AISs) and effective information systemssystems

Random assignment of stocking locations Random assignment of stocking locations allows more efficient use of spaceallows more efficient use of space

Key tasksKey tasks1.1. Maintain list of open locationsMaintain list of open locations2.2. Maintain accurate recordsMaintain accurate records3.3. Sequence items to minimize travel, pick timeSequence items to minimize travel, pick time4.4. Combine picking ordersCombine picking orders5.5. Assign classes of items to particular areasAssign classes of items to particular areas

CustomizingCustomizing

Value-added activities performed at Value-added activities performed at the warehousethe warehouse

Enable low cost and rapid response Enable low cost and rapid response strategiesstrategies Assembly of componentsAssembly of components Loading softwareLoading software RepairsRepairs Customized labeling and packagingCustomized labeling and packaging

Shipping and receiving docks

Office

Cus

tom

izat

ion

Conveyor

Storage racks

Staging

Warehouse LayoutWarehouse LayoutTraditional LayoutTraditional Layout

Storage System PerformanceStorage System PerformancePerformance measures for storage systems:Performance measures for storage systems:• Storage capacity - two measures:Storage capacity - two measures:

– Total volumetric spaceTotal volumetric space– Total number of storage compartments (e.g., unit loads)Total number of storage compartments (e.g., unit loads)

• Storage density - volumetric space available for Storage density - volumetric space available for storage relative to total volumetric space in facilitystorage relative to total volumetric space in facility

• Accessibility - capability to access any item in Accessibility - capability to access any item in storagestorage

• System throughput - hourly rate of storage/retrieval System throughput - hourly rate of storage/retrieval transactionstransactions

• Utilization and availability (reliability)Utilization and availability (reliability)

Storage Location StrategiesStorage Location Strategies• Randomized storage - incoming items are Randomized storage - incoming items are

stored in any available locationstored in any available location– Usually means nearest available open locationUsually means nearest available open location

• Dedicated storage - incoming items are Dedicated storage - incoming items are assigned to specific locations in the assigned to specific locations in the storage facilitystorage facility– Typical bases for deciding locations:Typical bases for deciding locations:

• Items stored in item number sequenceItems stored in item number sequence• Items stored according to activity levelItems stored according to activity level• Items stored according to activity-to-space ratiosItems stored according to activity-to-space ratios

Inventory Level as a Inventory Level as a Function of TimeFunction of Time

Comparison of Storage Comparison of Storage StrategiesStrategies

• Less total space is required in a storage system Less total space is required in a storage system that uses a randomized storage strategythat uses a randomized storage strategy– Dedicated storage requires space for maximum Dedicated storage requires space for maximum

inventory level of each iteminventory level of each item• Higher throughput rates are achieved in a Higher throughput rates are achieved in a

system that uses dedicated storage strategy system that uses dedicated storage strategy based on activity levelbased on activity level– The most active items can be located near the The most active items can be located near the

input/output pointinput/output point– Compromise: Class-based dedicated storageCompromise: Class-based dedicated storage

• Items divided into classes according to activity levelItems divided into classes according to activity level• Random storage strategy used within each classRandom storage strategy used within each class


Suppose that a total of 50 SKUs must be stored in a storage system. For Suppose that a total of 50 SKUs must be stored in a storage system. For each SKU, average order quantity = 100 cartons, average depletion rate = 2 each SKU, average order quantity = 100 cartons, average depletion rate = 2 cartons/ day. and safety stock level = 10 cartons. Each carton requires one cartons/ day. and safety stock level = 10 cartons. Each carton requires one storage location in the system. Based on this data, each SKU has an storage location in the system. Based on this data, each SKU has an inventory cycle that lasts 50 days. Since there are 5O SKU’s in all, inventory cycle that lasts 50 days. Since there are 5O SKU’s in all, management has scheduled incoming orders so that a different SKU arrives management has scheduled incoming orders so that a different SKU arrives each day. Determine the number of storage locations required in the system each day. Determine the number of storage locations required in the system under two alternative strategies: (a) randomized storage and (b) dedicated under two alternative strategies: (a) randomized storage and (b) dedicated storage.storage.

52

• Our estimates of space requirements are based on average order quantities and other values in the problem statement.

• Let us first calculate the maximum inventory level and average inventory level for each SKU. The inventory for each SKU varies over time as shown in Figure. The maximum inventory level, which occurs just after an order has been received. is the sum of the order quantity and safety stock level.

Maximum inventory level = 100 + 10 = 110 cartons

• The average inventory is the average of the maximum and The average inventory is the average of the maximum and minimum inventory levels under the assumption of uniform minimum inventory levels under the assumption of uniform depletion rate. The minimum value occurs just before an order is depletion rate. The minimum value occurs just before an order is received when the inventory is depleted to the safety stock level.received when the inventory is depleted to the safety stock level.

Minimum inventory level = 10 cartonsMinimum inventory level = 10 cartonsAverage inventory level = (110 + 10)/12 = 60 cartonsAverage inventory level = (110 + 10)/12 = 60 cartons

(a) Under a randomized storage strategy, the number of locations (a) Under a randomized storage strategy, the number of locations required for required for each SKU is equal to the average inventory level each SKU is equal to the average inventory level of the item.since incoming of the item.since incoming orders are scheduled each day orders are scheduled each day throughout the 50-day cycle. This means that throughout the 50-day cycle. This means that when the when the inventory level of one SKU near the beginning of its cycle is high, inventory level of one SKU near the beginning of its cycle is high,

the level for another SKU near the end of its cycle is low. the level for another SKU near the end of its cycle is low. Thus, the number Thus, the number of storage locations required in the of storage locations required in the system is:system is:

Number of storage locations = (50 SKUs)(60 cartons) = 3000 locationsNumber of storage locations = (50 SKUs)(60 cartons) = 3000 locations 53


(b) Under a dedicated storage strategy, the number of (b) Under a dedicated storage strategy, the number of locations required for each SKU must equal its maximum locations required for each SKU must equal its maximum inventory level. Thus, the number of storage locations inventory level. Thus, the number of storage locations required in the system is:required in the system is:Number of storage locations = (50 SKUs){110 cartons) = 5500 Number of storage locations = (50 SKUs){110 cartons) = 5500

locationslocations

54


Conventional Storage Conventional Storage MethodsMethods

• Bulk storage - storage in an open floor areaBulk storage - storage in an open floor area– Problem: achieving proper balance between storage Problem: achieving proper balance between storage

density and accessibilitydensity and accessibility• Rack systems - structure with racks for pallet loadsRack systems - structure with racks for pallet loads

– Permits vertical stacking of materialsPermits vertical stacking of materials• Shelving and bins - horizontal platforms in Shelving and bins - horizontal platforms in

structural framestructural frame– Steel shelving comes in standard sizesSteel shelving comes in standard sizes– Finding items can be a problemFinding items can be a problem

• Drawer storage - entire contents of each drawer can Drawer storage - entire contents of each drawer can be viewedbe viewed

Bulk StorageBulk Storage

Bulk storage arrangements: (a) high-density bulk storage provides low accessibility, (b) bulk storage with loads forming rows and blocks for improved accessibility

Pallet Rack SystemPallet Rack System

Pallet loads placed on racks in multi-rack structure

Drawer StorageDrawer Storage

Automated Storage Automated Storage SystemsSystems

Mechanized and automated storage Mechanized and automated storage equipment to reduce the human resources equipment to reduce the human resources required to operate a storage facilityrequired to operate a storage facility

• Significant investment Significant investment • Level of automation variesLevel of automation varies– In mechanized systems, an operator In mechanized systems, an operator

participates in each storage/retrieval participates in each storage/retrieval transactiontransaction

– In highly automated systems, loads are In highly automated systems, loads are entered or retrieved under computer controlentered or retrieved under computer control

Objectives and Reasons for Objectives and Reasons for Automating Storage OperationsAutomating Storage Operations• To increase storage capacity To increase storage capacity • To increase storage densityTo increase storage density• To recover factory floor space currently used for WIPTo recover factory floor space currently used for WIP• To improve security and reduce pilferageTo improve security and reduce pilferage• To reduce labor cost and/or increase productivityTo reduce labor cost and/or increase productivity• To improve safetyTo improve safety• To improve inventory controlTo improve inventory control• To improve stock rotationTo improve stock rotation• To improve customer serviceTo improve customer service• To increase throughputTo increase throughput

Types of Automated Storage Types of Automated Storage SystemSystem

1.1. Automated Storage/Retrieval System Automated Storage/Retrieval System (AS/RS)(AS/RS)– Rack system with mechanized or Rack system with mechanized or

automated crane to store/retrieve loadsautomated crane to store/retrieve loads

2.2. Carousel Storage SystemCarousel Storage System– Oval conveyor system with bins to contain Oval conveyor system with bins to contain

individual itemsindividual items

AS/RSAS/RSUnit load Unit load

AS/RS with AS/RS with one aisleone aisle

AS/RS TypesAS/RS Types

• Unit load AS/RS - large automated system for pallet Unit load AS/RS - large automated system for pallet loadsloads

• Deep-lane AS/RS - uses flow-through racks and Deep-lane AS/RS - uses flow-through racks and fewer access aislesfewer access aisles

• Miniload AS/RS - handles small loads contained in Miniload AS/RS - handles small loads contained in bins or drawers to perform order pickingbins or drawers to perform order picking

• Man-on-board AS/RS - human operator rides on the Man-on-board AS/RS - human operator rides on the carriage to pick individual items from storagecarriage to pick individual items from storage

• Automated item retrieval system - picks individual Automated item retrieval system - picks individual itemsitems

• Vertical lift storage modules (VLSM) - uses a vertical Vertical lift storage modules (VLSM) - uses a vertical aisle rather than a horizontal aisle as in other AS/RS aisle rather than a horizontal aisle as in other AS/RS typestypes

AS/RS ApplicationsAS/RS Applications1.1. Unit load storage and retrievalUnit load storage and retrieval– Warehousing and distribution operationsWarehousing and distribution operations– AS/RS types: unit load, deep lane (food industry)AS/RS types: unit load, deep lane (food industry)

2.2. Order pickingOrder picking– AS/RS types: miniload, man-on-board, item AS/RS types: miniload, man-on-board, item

retrievalretrieval3.3. Work-in-process storage Work-in-process storage – Helps to manage WIP in factory operationsHelps to manage WIP in factory operations– Buffer storage between operations with different Buffer storage between operations with different

production ratesproduction rates– Supports JIT manufacturing strategySupports JIT manufacturing strategy

Carousel Storage SystemsCarousel Storage Systems• Horizontal Horizontal – Operation is similar to overhead conveyor Operation is similar to overhead conveyor

system used in dry cleaning establishmentssystem used in dry cleaning establishments– Items are stored in bins suspended from the Items are stored in bins suspended from the

conveyorconveyor– Lengths range between 3 m and 30 mLengths range between 3 m and 30 m– Horizontal is most common typeHorizontal is most common type

• Vertical Vertical – Operates around a vertical conveyor loopOperates around a vertical conveyor loop– Less floor space required, but overhead room Less floor space required, but overhead room

must be providedmust be provided

Horizontal Carousel Storage Horizontal Carousel Storage SystemSystem

Manually operated horizontal carousel storage system

Carousel ApplicationsCarousel Applications1.1. Storage and retrieval operationsStorage and retrieval operations– Order pickingOrder picking– Kitting of parts for assemblyKitting of parts for assembly

2.2. Transport and accumulationTransport and accumulation– Progressive assembly with assembly stations Progressive assembly with assembly stations

located around carousellocated around carousel3.3. Work-in-processWork-in-process– WIP applications in electronics industry are WIP applications in electronics industry are

commoncommon4.4. Unique applicationsUnique applications– Example: time testing of electrical productsExample: time testing of electrical products

Engineering Analysis of Engineering Analysis of Automated Storage SystemsAutomated Storage Systems

1.1. Automated Storage/Retrieval SystemsAutomated Storage/Retrieval Systems– Sizing the AS/RSSizing the AS/RS– AS/RS throughput analysisAS/RS throughput analysis

2.2. Carousel storage systemsCarousel storage systems– Storage capacityStorage capacity– Throughput analysisThroughput analysis

Sizing the AS/RS Rack Structure.Sizing the AS/RS Rack Structure.

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Engineering Analysis of Automated Storage Engineering Analysis of Automated Storage SystemsSystems

Automated Storage/Retrieval SystemsAutomated Storage/Retrieval Systems

Capacity per aisle = 2 nynz

where ny == number of toad compartments along the length of the aisle, and nz = numberof load compartments that make up the height of the aisle.Let x and y - the depth and width dimensions of unit load (e.g., 1 standard pallet size), and z = the height of the unit load.

Top and side views of a unit load AS/RS, with nine storage compartments horizontally (n,. = 9) and six compartments vertically( n, = 6).

where W, L, and H are the width, length, and height of one aisle of where W, L, and H are the width, length, and height of one aisle of the AS/RS rack structure (mm, in); .x, y, and z are the dimensions of the AS/RS rack structure (mm, in); .x, y, and z are the dimensions of the unit load (mm, in); and a, b, and c are allowances designed into the unit load (mm, in); and a, b, and c are allowances designed into each storage compartment to provide clearance for the unit load and each storage compartment to provide clearance for the unit load and to account for the size of the supporting beams in the rack structure to account for the size of the supporting beams in the rack structure (mm, in).(mm, in).

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Each aisle of a six-aisle Automated Storage/Retrieval System is Each aisle of a six-aisle Automated Storage/Retrieval System is to contain 50 storage compartments in the length direction and to contain 50 storage compartments in the length direction and

8 compartments in the vertical direction. All storage 8 compartments in the vertical direction. All storage compartments will be the same size to accommodate standard compartments will be the same size to accommodate standard size pallets of dimensions: x = 36 in and y = 48 in. The height of size pallets of dimensions: x = 36 in and y = 48 in. The height of a unit load z = 30 in. Using the allowances a = 6 in, b = 8 in, and a unit load z = 30 in. Using the allowances a = 6 in, b = 8 in, and c = 10 in, determine (a) how many unit loads can be stored in c = 10 in, determine (a) how many unit loads can be stored in the AS/RS, and (b) the width, length, and height of the AS/RS. the AS/RS, and (b) the width, length, and height of the AS/RS.

The rack structure will be built 18 in above floor level.The rack structure will be built 18 in above floor level.

(a) Capacity per aisle = 2(50(8)) = 800 loads/aisle(a) Capacity per aisle = 2(50(8)) = 800 loads/aisleWith six aisles, AS/RS capacity = 6(800) = 4800 loadsWith six aisles, AS/RS capacity = 6(800) = 4800 loads(b) W = 3(x + a) = 3(36 + 6) = 126 in/aisle(b) W = 3(x + a) = 3(36 + 6) = 126 in/aisleWith 6 aisles, AS/RS width = 6(126) = 756 in = 63 ft.With 6 aisles, AS/RS width = 6(126) = 756 in = 63 ft.L = nL = nyy (y + b) = 50(48 + 8) = 2800 in = 233.33 ft. (y + b) = 50(48 + 8) = 2800 in = 233.33 ft.H = nH = nzz (z + c) = 8(30 + 10) = 320 in = 26.67 ft. (z + c) = 8(30 + 10) = 320 in = 26.67 ft.Given that the rack structure is built 18 in above floor Given that the rack structure is built 18 in above floor level, H = 320 + 18 = 338 in = 28.167 ft.level, H = 320 + 18 = 338 in = 28.167 ft.

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AS/RS Throughput.AS/RS Throughput.•System throughput is defined as the hourly rate of SIR System throughput is defined as the hourly rate of SIR transactions that the automated storage system can perform.transactions that the automated storage system can perform.•A transaction involves depositing a load into storage or A transaction involves depositing a load into storage or retrieving a load from storage.retrieving a load from storage.•Here it is assumes:Here it is assumes:(1) randomized storage of loads in the AS/RS [i.e., any (1) randomized storage of loads in the AS/RS [i.e., any compartment in the storage aisle is equally likely to be selected compartment in the storage aisle is equally likely to be selected for a transaction)for a transaction)(2) storage compartments are of equal size, (2) storage compartments are of equal size, (3) the P&D station is located at the base and end of the aisle, (3) the P&D station is located at the base and end of the aisle, (4) constant horizontal and vertical speeds of the SIR machine, (4) constant horizontal and vertical speeds of the SIR machine, andand(5) simultaneous horizontal and vertical travel.(5) simultaneous horizontal and vertical travel. 72



For a single command cycle, the load to be entered or retrieved is For a single command cycle, the load to be entered or retrieved is assumed to be located at the center of the rack structure, as in assumed to be located at the center of the rack structure, as in Figure. Thus, the SIR machine must travel half the length and half Figure. Thus, the SIR machine must travel half the length and half the height of the AS/RS, and it must return the same distance. The the height of the AS/RS, and it must return the same distance. The single command cycle time can therefore be expressed by:single command cycle time can therefore be expressed by:

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where tc = cycle lime of a single command cycle (min/cycle),L = length of the AS/RS rack structure (m, ft), vy = velocity of the SIR machine along the length of the AS/RS (m/min. ft/min), H = height of the rack structure (m, ft), Vz = velocity of the SIR machine in the vertical direction of the AS/RS (m/min, ft/min), and Tpd = pickup-and-deposit lime (min). Two P&D times are required per cycle. representing load transfers to and from the SIR machine.

Assumed travel trajectory of the SIR machine for (a)

single command

Production SystemProduction SystemThe production system is the collection of people, The production system is the collection of people, equipment and procedures organized to accomplish equipment and procedures organized to accomplish the manufacturing operations of a company or any the manufacturing operations of a company or any organization.organization.

• Facilities: The facilities of the production Facilities: The facilities of the production systems consist of the factory, the equipment systems consist of the factory, the equipment in the factory and the way equipment is in the factory and the way equipment is organized.organized.

• Manufacturing support systems: This is the set Manufacturing support systems: This is the set of procedures use by the company to manage of procedures use by the company to manage production and to solve the technical and production and to solve the technical and logistics problems encountered in ordering logistics problems encountered in ordering material , moving work through the factory and material , moving work through the factory and ensuring that products meet quality standards. ensuring that products meet quality standards. Product design and certain business functions Product design and certain business functions are included among the manufacturing support are included among the manufacturing support system.system.

Production SystemProduction System

Production System Production System FacilitiesFacilities

• The facilities in the production system are the factory, The facilities in the production system are the factory, production machines and tooling, material handling production machines and tooling, material handling equipment, inspection equipment, and the computer equipment, inspection equipment, and the computer systems that control the manufacturing operations.systems that control the manufacturing operations.

• Facilities include plant layout, which is the way the Facilities include plant layout, which is the way the equipment is physically arranged in the factory.equipment is physically arranged in the factory.

• The equipment is usually arranged into logical The equipment is usually arranged into logical groupings and we refer to these equipment groupings and we refer to these equipment arrangements and workers who operates them as arrangements and workers who operates them as Manufacturing Systems.Manufacturing Systems.

• Manufacturing systems can be individual work cells, Manufacturing systems can be individual work cells, consisting of a single production machine and worker consisting of a single production machine and worker assigned to that machine. However, commonly a assigned to that machine. However, commonly a manufacturing system is a group of machines and manufacturing system is a group of machines and workers.workers.

Production quantityProduction quantityProduction quantity refers to Production quantity refers to the number of units of a the number of units of a given part or product given part or product produced annually by the produced annually by the plant. The annual part or plant. The annual part or product quantities produced product quantities produced in a given factory can be in a given factory can be classified into three ranges:classified into three ranges:– Low Production: Low Production:

Quantities in the range of 1 Quantities in the range of 1 to 100 units per year.to 100 units per year.

– Medium Production: Medium Production: Quantities in the range of Quantities in the range of 100 to 10,000 units 100 to 10,000 units annuallyannually

– High Production: High Production: Quantities in the range of Quantities in the range of 10,000 to millions of units.10,000 to millions of units.

Production quantityProduction quantity• Product variety refers to the different product designs or Product variety refers to the different product designs or

types that are produced in a plant. types that are produced in a plant. • When the number of product types made in a factory is high, When the number of product types made in a factory is high,

this indicates high product variety.this indicates high product variety.• There is an inverse correlation between product variety and There is an inverse correlation between product variety and

production quantity in terms of factory operations When production quantity in terms of factory operations When product variety is high, production quantity tends to be low; product variety is high, production quantity tends to be low; and vice versa.and vice versa.

• Hard product variety is when the products differ Hard product variety is when the products differ substantially. In an assembled product, hard variety is substantially. In an assembled product, hard variety is characterized by a low proportion of common parts among characterized by a low proportion of common parts among the products; in many cases, there are no common parts. the products; in many cases, there are no common parts. The difference between a car and a truck is hard. The difference between a car and a truck is hard.

• Soft product variety is when there are only small differences Soft product variety is when there are only small differences between products, such as the differences between car between products, such as the differences between car models made on the same production line. There is high models made on the same production line. There is high proportion of common parts among assembled products proportion of common parts among assembled products whose variety is soft. The variety between different product whose variety is soft. The variety between different product categories tends to be hard; the variety between different categories tends to be hard; the variety between different models within the same product category tends to be soft.models within the same product category tends to be soft.

System classificationSystem classification• On the basis of production quantity, On the basis of production quantity,

production facilities can be classified as:production facilities can be classified as:– Low production quantityLow production quantity– Medium production quantityMedium production quantity– High production quantityHigh production quantity

• On the basis of plant layout: On the basis of plant layout: – Fixed-position layoutFixed-position layout– Process layoutProcess layout– Cellular layout, andCellular layout, and– Product layout.Product layout.

System classificationSystem classification

Low Production QuantityLow Production QuantityJob shop – makes low quantities of specialized Job shop – makes low quantities of specialized

and customized productsand customized products• Also includes production of components for Also includes production of components for

these productsthese products• Products are typically complex (e.g., specialized Products are typically complex (e.g., specialized

machinery, prototypes, space capsules)machinery, prototypes, space capsules)• Equipment is general purposeEquipment is general purpose• Plant layouts:Plant layouts:– Fixed positionFixed position– Process layoutProcess layout

Fixed-Position LayoutFixed-Position Layout Product remains in one place Product remains in one place Workers and equipment come to siteWorkers and equipment come to site Complicating factorsComplicating factors

Limited space at siteLimited space at siteDifferent materials Different materials

required at different required at different stages of the projectstages of the project

Volume of materials Volume of materials needed is dynamicneeded is dynamic

Alternative StrategyAlternative Strategy As much of the project as possible As much of the project as possible

is completed off-site in a product-is completed off-site in a product-oriented facilityoriented facility

This can This can significantly significantly improve efficiency improve efficiency but is only but is only possible when possible when multiple similar multiple similar units need to be createdunits need to be created

Fixed-Position LayoutFixed-Position Layout

Process-Oriented LayoutProcess-Oriented Layout

Like machines and equipment are Like machines and equipment are grouped togethergrouped together

Flexible and capable of handling a Flexible and capable of handling a wide variety of products or wide variety of products or servicesservices

Scheduling can be difficult and Scheduling can be difficult and setup, material handling, and labor setup, material handling, and labor costs can be highcosts can be high

Process LayoutProcess Layout

Surgery

Radiology

ER triage room

ER Beds Pharmacy

Emergency room admissions

Billing/exit

Laboratories


Patient A - broken leg

Patient B - erratic heart pacemaker

Figure 3Figure 3


Arrange work centers so as to Arrange work centers so as to minimize the costs of material minimize the costs of material handlinghandling

Basic cost elements areBasic cost elements are Number of loads (or people) moving Number of loads (or people) moving

between centersbetween centers Distance loads (or people) move Distance loads (or people) move

between centersbetween centers


Minimize cost = Minimize cost = ∑ ∑∑ ∑ X Xijij C Cijij

nn

i i = 1= 1

nn

j j = 1= 1

wherewhere nn == total number of total number of work centers or departmentswork centers or departmentsi, ji, j == individual individual departmentsdepartmentsXXijij == number of loads number of loads moved from department i to moved from department i to department jdepartment jCCijij == cost to move a load cost to move a load between department i and between department i and department jdepartment j

layout strtgy 3

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