UNIT II PLANT LOCATION AND LAYOUT

Factors affecting Plant location –Plant Layout – Principles of Plant Layout – Types of Plant
Layout – Methods of Plant and Facility Layout – Storage Space requirements – Plant Layout
procedure – Line Balancing methods.
2.1 FACTORS AFFECTING PLANT LOCATION
Decisions regarding selecting a location need a balance of several factors. The factors can
influence the business in the long run.
1.Nearness to raw material
Source of raw materials is one of the most important factors influencing the selection of a
plant site. This is particularly true if large volumes of raw materials are consumed because
location near the raw materials source permits considerable reduction in transportation and
storage charges. Attention should be given to the purchased price of the raw materials,
distance from the source of supply, purity of raw material, availability storage requirements.
2. Nearness to markets
If the plant is located near to the market, reduces the cost of transportation as well as the
chances of the finished products getting damaged and spoiled in the way.
3. Availability of work force
Service organizations and labour-intensive Industries are extremely sensitive to the
availability, the skill level and the pay rate of the workforce in recent times low wage rates
and non-union deals have caused some manufacturers to change location Single union deals
have also helped to locate facilities previously they had not existed.
4. Availability of fuel and power
Because of the wide spread use of electrical power the availability of fuel or gas has not
remained a deciding factor in most of the cases for plant location. The location of thermal
power plants (like Bokhara Thermal Plant) and steel plants near coal fields are for cutting
down cost of the fuel transportation.
5. Availability of water
Water is another important requirement for industries. Many industries are established near
rivers, canals and lakes, because of this reason. Iron and steel industry, textile industries and
chemical industries require large quantities of water, for their proper functioning.
6.Transportation facility
Transport facilities, generally, influence the location of industry. The transportation with its
three modes, i.e., water, road, and rail collectively plays an important role. So the junction
points of water-ways, roadways and railways become humming centres of industrial activity.
Accordingly the plant location is decided Transportation costs depend mainly on the weight
carried and the distance to be covered In some industries.
7. Communication facilities
Every business firm requires every type of business information regarding the position of
labor, market, raw materials and finished goods. These information can be collected and
distributed only if there is adequate communication facilities As communications facilities
are not adequately available in rural areas, industries are very much reluctant to start their
business there.
8. Climatic conditions
Climate conditions also influence the location decision. Some industries need special type of
climate to run the unit effectively. Scientific development and new inventions have lowered
down the importance of the factor. So due to the development of artificial humidification,
cotton textile industry can now be started in any region of the county. Climate is more
important for agricultural product like tea, coffee, rubber, cotton etc. even today.
9.Government policy
Government plays an important role on the location of industry. In India Government follows
the policy of balanced regional growth of the country.
In order to implement this policy, Government offers several incentives to entrepreneurs to
industrial units in backward regions or no-industry regions. It offers tax concessions or loan
facilities or factory sheds at cheaper rates. Sometimes Government announces certain
disincentives to industries located at a certain place.
10. Characteristics of the land
Sites, generally, should be flat and well served by adequate transport facilities. Large areas
are required to build factories. The factors like shape of the site, cost, drainage the probability
of floods and possibility of earthquakes also influence the selection of plant location.
11.Waste disposal
In recent years, many legal restrictions have been placed on the methods for disposing of
waste materials from the process industries. The site selected for a plant should have
adequate capacity and facilities for processing waste disposal.
12.Community attitude
Success of Industry depends very much on the attitude of local people and whether they want
to work or not.
13. Security
Considerations like law and order situation, political stability and safety also influence the
location decision. No entrepreneur will like to start the industry at a place which is not safe
and where there are law and order disturbances off and on.
14. Momentum of an early start
Already established industry in a certain area will produce skilled labor in that trade. Thus
future industries in that area will have no difficulty with respect to the skilled labor e.g.
Ludhiana is famous for cycle industries and Faridabad for engineering industries.
15. Personal preferences
Personal preferences and prejudices of an entrepreneur also play an important role in the
choice of location. Economic consideration does not weight much.
16. Cultural facilities
Cultural facilities of the community are important to sound growth. Churches, libraries,
schools, civic theaters, concert associations, and other similar groups, if active and dynamic,
do much to make a community progressive. The problem of recreation deserves special
consideration. The efficiency, character, and history of both state and local government
should be evaluated.
2.2 PLANT LAYOUT
Plant layout is a planning concerned with the arrangement of departments, work groups
within the departments, workstations, machines and stores within a production facility. The
objective is to ensure a smooth work flow in the plant or a particular traffic pattern.
The selection of particular pattern of layout depends on following facts:
1. Objectives of the layout, space availability, and the distance to be travelled between
elements in the layout.
2. Volume of product or service to be produced.
3. Number of operations and amount of flow required between the elements in the layout.
4. Space requirement for the elements in the layout.
Objectives of Plant Layout
The objectives of plant layout are to:
1. utilize the available space effectively.
2. ensure smooth flow of materials.
3. improve the productivity.
4. reduce material-handling cost.
5. provide safety.
6. utilize labour effectively.
7. provide flexibility in operation.
8. provide easy supervision and control.
9. provide easy maintenance.
10. facilitate coordination and face-to-face communication.
11. reduce manufacturing cycle time or customer service time.
2.3 PRINCIPLES OF PLANT LAYOUT
While designing the plant layout, the following principles must be kept in view:
(i) Principle of Minimum Movement
Materials and labour should be moved over minimum distances; saving cost and time of
transportation and material handling.
(ii) Principle of Space Utilization
All available cubic space should be effectively utilized – both horizontally and vertically.
(iii) Principle of Flexibility
Layout should be flexible enough to be adaptable to changes required by expansion or
technological development.
(iv) Principle of Interdependence
Interdependent operations and processes should be located in close proximity to each other;
to minimize product travel.
(v) Principle of Overall Integration
All the plant facilities and services should be fully integrated into a single operating unit; to
minimize cost of production.
(vi) Principle of Safety
There should be in-built provision in the design of layout, to provide for comfort and safety
of workers.
(vii) Principle of Smooth Flow
The layout should be so designed as to reduce work bottlenecks and facilitate uninterrupted
flow of work throughout the plant.
(viii) Principle of Economy
The layout should aim at effecting economy in terms of investment in fixed assets.
(ix) Principle of Supervision
A good layout should facilitate effective supervision over workers.
(x) Principle of Satisfaction
A good layout should boost up employee morale, by providing them with maximum work
satisfaction.
2.4 TYPES OF PLANT LAYOUT
Product Layout
In product layout, the machines are arranged according to the sequence of operations on a
product. This is suitable for only mass or continuous production due to the requirement of
high productivity. This layout is used in refinery, thermal power plant, chemical or fertilizer
industry, etc. All the machines are arranged in a line as shown in the figure.

Advantages
1. It reduces material-handling time and hence the material-handling cost.
2. It increases the productivity due to ease of automation of the processes.
3. It reduces the manufacturing time.
4. It simplifies production planning and control systems.
5. It simplifies tasks, enabling unskilled workers to learn a task quickly.
6. It is more suitable to make to stock.
Disadvantages
1. It has poor flexibility in accommodation of production of new product.
2. Special-purpose equipment and duplication is required to minimize the time of completion
of the operations.
3. A breakdown of one machine or absence of one operator may stop the entire line of
production.
4. To prevent the production breakdown, there is requirement of high work-in-process
inventory.
5. Workers may become bored by the endless repetition of similar jobs.
6. It is less suitable to make to order.
Process Layout
The process layout is a layout in which similar machines are arranged according to their
nature or functions of operations not on sequence of operations, for example, all lathe
machines are arranged at one place, all the milling machines are arranged at another place
and so on. A part being worked travels according to the established sequence of operations,
from area to area, where the required machines are located for each operation. This type of
layout is normally used in a service organization, for example, hospitals, where areas are
dedicated to particular types of medical care or facility. A schematic diagram of process
layout is shown in the figure in which the flow of material is zigzag.

There are following advantages and disadvantages of process layout:

Advantages
1. It is more flexible compared to product layout as equipment and personnel can be used for
any product.
2. Investment required is less as duplication is not necessary unless volume is large.
3. Supervisors and workers get exposure of cross-functional skills.
4. Changing work nature creates interest among the workers and makes work more satisfying
for the people who prefer variety.
5. This layout is more suitable for make to order or smaller volume of production.
Disadvantages
1. It requires highly skilled workers.
2. Backtracking and long movements in the handling of materials minimize the efficiency and
increase the material-handling time and cost.
3. Waiting time is more in process layout.
4. Production planning and control is complex in comparison to product layout.
5. Workers’ wages are higher due to involvement of highly skilled workers.
6. Due to frequent changes in the nature of the job, productivity becomes low.
Difference between Product Layout and Process Layout
The differences between product and process layouts are shown in Table.
Combination Layout
These days most of the manufacturing industries have adopted this type of layout. A
combination of process and product layout combines the advantages of both type of layout.
In this layout system, a set of machinery or equipment is grouped together in a section and
each set of machines or equipment is used to perform similar kind of operations to produce a
family of component. This layout is suitable where an item is being made in different types
and sizes. In such cases, machinery is organised in a process layout but the process grouping
is then arranged in a sequence to manufacture various types and sizes of product.
A sample combination for manufacturing forged crank shaft is shown in the figure.

1. Forging hammers 2. Inspection

3. Grinding 4. Heat treatment
5. Final inspection
Advantages
1. Production planning and control is easy.
2. Work flow is continuous and smooth.
3. Inspection is easier.
4. Less floor area is required.
5. Better utilization of machines is achieved.
6. Over all cost of production is less.
7. Material handling cost is low.
Disadvantages
1. All machines cannot be used to their maximum capacity leading to poor facility utilization
and higher capital cost.
2. Trained workers are required for this layout.
3. Routing and scheduling is difficult.
4. It needs more frequent inspection.
Fixed Position Layout
In this layout, machines and workers move to the site and products remain in a fixed position
for its entire manufacturing period. This layout is used for bulky and fragile products such as
planes, ships, railway wagon, etc. This is generally used for assembly shop.

The advantages and disadvantages of fixed position layout are as follows:

Advantages
1. It reduces the movement of work items and minimizes damage or cost of handling.
2. There is no problem like rearrangement of a machine or reassignment of jobs to workers.
Disadvantages
1. Skilled and versatile workers are required because same workers are involved in more than
one operation.
2. The poor availability of necessary combination of skills may increase the wage.
3. Movement of people and equipment to and from the work site may be expensive.
4. Utilization of equipment may be low because the equipment may be left at a location
where it will be needed again in the next few days rather than moved to another location
where it would be productive.
2.6 METHODS OF PLANT AND FACILITY LAYOUT
A layout furnishes details of the building to accommodate various facilities.
Information required for plant layout includes: dimensions of work places, sequence of
operations, flow pattern of materials, storage space for raw material, in-process inventory and
finished goods, offices, toilets etc.
Methods
• Process Flow chart – shows how different parts are assembled to form sub-assemblies
which lead to finished products.
• Material movement patterns – flow pattern of materials-in-process is traced and
layout is built around it.
• Layout analogues - includes 2D templates and 3D models.
Templates – shows the plan of various facilities and the building. They show actual floor
space utilization.

• 2D template – machine outline and detail

• Block template – boundary of the maximum projected area of the machine
Advantages of Two-Dimensional Templates
(1) They are the least costly.
(2) They can be readily interpreted and followed by technical hands.
(3) Duplicate copies can be made.
Disadvantages
(1) Non-technical persons find it difficult to grasp the clear picture.
(2) Overhead facilities cannot be visualized
(b) Three Dimensional Models: They are scale models of a facility and, more near to the real
situation as, besides length and width they show the height of a facility also. Models are
especially suitable for persons who are not familiar with plant layout practice. Models are
made up of wood or die cast plastic. They show minor details and can be mounted on a thick
plastic sheet acting as the floor plan. Models are used mainly to develop floor plans and
elevations. Models can be made for production machines, workers, material handling
equipments or any other facility.
Advantages of Three-Dimensional Models:
(1) Layout is easier for the lay men to understand.
(2) Layout can easily be explained to management.
(3) Models can be shifted easily and quickly to study operational arrangements.
(4) Overhead structures can be easily checked.
(5) They convey more or less a real situation.
Disadvantages:
(1) They require more storage area.
(2) They are expensive.

The Correlation Chart: It involves drawing a grid with rows presenting alternative solutions
(See Fig). Plant items can be ground floor, first floor or other floors of a multistorey building.
After the grid has been drawn the next step involves applying the constraints and objectives
of layout. For example, the constraints to the layout may be that, (1) X cannot be done on
ground floor (G.F.), (2) Y cannot be performed on first storey (1S). Similarly there can be
objectives, (3) W should be done on second storey, and so on there are other objectives (4),
(5), etc. Constraints and objectives are then applied to the squares. When a constraint stops an
item going into a square, then in that square the number of that constraint is marked. After
that the objectives or preferences are applied.

Travel Chart:
A travel chart as the name suggests is a chart or record of the amount of travel by the material
in-process while going from machine to machine or from one department to another. The
amount of travel depends upon the frequency of movements between sections or departments.
A travel chart helps improving the existing plant layout.
The following example will explain a travel chart:

The following example will explain a travel chart:

1st Step:
Existing plant layout showing the locations of various departments (A to F) is given in Fig.
4.11.

2nd Step:
Movements A to B are 20; B to A, 10; B to C, 15 ;A to F, 25 ;C to D, 30; D to C,50;D to F,
40; E to F, 10 and F to E, 15.
3rd Step:
A square grid is drawn and the various movements are marked.

4th Step:
Fig 4.12 is simplified by combining movements like to B (20) and B to A (10) which involve
same distance and therefore total movements B D A = 20 + 10 = 30.
The simplified travel chart (See Fig. 4.13) shows the movements as follows:
According to these figures maximum number of movements are between departments C and
D, hence in the plant layout these two departments should be side by side. The next lesser
number of movements are between D and F, hence D and F should also lie closer to each
other and so on.
As a result the existing plant layout can be modified as follows:

Departments C and D (80), D and F (40), A and B (30), A and F (25), E and F (25) are closer
to each other whereas 5 and C which have minimum number of movements (i.e., 15) between
them areaway from each other. A travel chart is advantageous because it brings out the
relative importance of having different pairs of departments close to each other but it gives an
optimum linear arrangement which may not be always required.
Load Path Matrix Method:
The method aims at reducing the transportation of in-process inventory from section to
section. Like travel chart it also helps deciding the position of one department in relation to
the other; The ultimate purpose is to modify the existing layout or the preliminary plant
layout made by other techniques. The departments having mass flow of material or goods are
placed close to each other. The following example will illustrate the method.
Step 1 and 2:
From the matrix (step 1) a diagram (See Fig. 4.16) is made showing the locations of different
departments and the amount of material flowing among various departments (like B, C, etc.).
Line joining AC shows that 20 kg. of material moves per day from departments to department
C and so on. It can be seen that 40 kgs. of material while going from 4 to D passes B.
If D department is brought in place of B then 40 kgs (i.e., maximum) of material will move
comparatively less distance. Similarly, material movements from C to E and E to D can be
considered. The aim is to reconstruct this sequence diagram so that bigger loads travel small
distances.
Step 3:
Trial and error method can be used in order to modify the sequence diagram of step 2 and a
comparatively better sequence diagram is drawn in Fig. 4.17. This has been obtained by
placing those departments close to each other which involve movements of larger amounts of
materials.

Facility Location
Facility location is a common issue for both new and existing businesses.
In global supply chain management, facility location in terms of offshore manufacturing or
global marketing plays a key role. The area of study of facility location has become wider.
The criteria that influence the decision of location of manufacturing plant have been
discussed below:
Proximity to market: The new plant location is always preferred to closeness to market so
that the transportation cost and distribution time can be minimized.
Business climate: It includes the presence of similar businesses, companies in the same
industry, and other multinational companies..
Total costs: The objective is to minimize the total cost. The costs due to a particular region
may include inbound logistics costs and outbound logistics costs. Land, construction, labour,
taxes and energy costs make up the regional costs.
Infrastructure: Rail, road, air and sea port connectivity are vital for a business
Availability of labour: Skilled labour at low cost is another factor for facility location
because labour cost is a major part of total production cost.
Availability of suppliers: A quality supplier base makes a given location more preferable.
Availability of raw material: Availability of raw material is an important factor for plant
location, for example, for thermal power plant coal and water should be easily available.
Similarly, for Iron and Steel Company, iron ore should be easily available.
Free trade zones: Free trade zone is a closed facility into which foreign goods can be bought
without custom duties.
Political risk: The uncertain geopolitical relationships among the countries present both
opportunities and challenges. Political risks in both the country of location and the host
country impudence location decisions.
Trading blocs: Various trading blocs have agreement among the member countries. As per
agreement, firms locate or relocate within a bloc to take advantage of new market
opportunities or lower total costs afforded by the trading agreement.
Facility location methods: The following methods are used for plant location:
1. Factor-rating method
2. Transportation method for linear programming
3. Centroid method
4. Cost–volume–profit ratio/Break-even analysis
Factor-rating Method
In this method, all the important factors for plant location are considered and they are
assigned with some weights based on their importance. The proposed locations are rated
against the factors and finally weighted average ratings are calculated for those locations. The
location having highest overall rating is selected for plant location.
Transportation method
This method is based on minimization of transportation cost considering the source and
supply constraints. This method is generally used for existing facilities, i.e. from which
source to which destination products are to be supplied. This method is discussed in detail in
‘Transportation and Assignment’ chapter.
Centroidal Method
This method is generally used to locate the warehouses or distribution centre so that
maximum number of markets can be covered easily. The facility is located very near to the
potential markets. The distance of various markets and corresponding volume of demand are
considered to locate the new facility so that the total transportation cost can be minimized.
Let us consider five different markets A, B, C, D and E are located at different location as
shown in the figure and the demands of these markets are VA, VB, VC, VD, and VE,
respectively.

Cost–Volume–Profit Ratio/Break-Even Analysis

In this method, it is assumed that fixed cost and variable cost vary from location to location.
Thus, the total cost is a function of volume. It is decided that which location involves
minimum cost for a fixed volume of production. For example, three locations A, B and C are
shown in the figure with a total cost and volume. It is observed from the figure that for less
than or equal to volume X1 location A is profitable; between X1 and X3 volume location B is
profitable; and for more than X3 volume location C is profitable.

2.7 STORAGE SPACE REQUIREMENTS

The following items and the amount of stock holding determine the storage space
requirements:
a) Incoming new materials
b) Checking and sorting the raw material
c) Inspection of raw material
d) Temporarily storing the new material before it is placed at the proper location.
e) In-process inventory
f) Tools and other supplies
g) Finished products.

The space to be provided for above factors depends upon:

1) Size and weight of raw material, in-process goods, and finished goods,
2) Their quantities and
3) Frequency of use.
- Liquid materials are stored in drums, cans, barrels and bottles.
- Gases are kept in cylinders.
- Solid materials can be placed in boxes, barrels, bags, pallets, containers etc.
- Casting or forgings can be stored in pallets and stocked in rows.
- Toxic materials are generally stored in well ventilated areas.
The storage space should be such that the materials can be quickly and easily taken out for
delivery or stocked as soon as they are received in the factory. Suitable equipment can be
used for handling the material. Bins, drums, barrels, racks, shelves, tanks, tote boxes, pallets,
etc. may be usefully employed for storage purposes.
Storage space should be adequate, considering the material requirements and the load bearing
capacity of the soil if heavy materials are to be stored. Aisles are passages for the movements
of men and materials. Depending upon the type and size of the material to be stored, the
amount and frequency of men movements and other traffic involved, and the size of material
handling equipment, the aisles and the sub-aisles are designed. Generally, aisles can be 1.5-3
metres wide and sub-aisles between racks may be 75 cm wide. The aisles should not have
many turns or blind corners which may cause accidents.
A window as a part of the enclosed store space can be used for issuing scalable and portable
products, which can be passed on to the workers through the same so that operators can be
kept outside the store room. It is very necessary for an effective store room control.
The figure shows the plan view of a store room indicating various spaces required:
(1) Incoming material receiving gate,
(2) Place for dumping raw material,
(3) Place for sorting and checking of raw materials,
(4) Place for raw material inspection,
(5) Place for temporarily storing the materials before putting them on racks, etc.
(6) Proper place for storing each type of material,
(7) Main aisles,
(8) Side aisles,
(9) Service window,
(10) Boxes containing materials to be issued, and
(11) Counters for keeping materials, to be issued, which have been brought from (6) and will
be placed in (10).
2.8 PLANT LAYOUT PROCEDURE
To build the layout around the productive process and then design the building around
the layout.
Various procedural steps in plant layout are:
a) Accumulate basic data
b) Analyse and coordinate basic data
c) Decide the equipment and machinery required
d) Select the material handling system
e) Sketch plan of the plot for making factory building
f) Determine a general flow pattern
g) Design the individual work station
h) Assemble the individual layout into the total layout
i) Calculate storage space required
j) Make flow diagrams for work stations and allocate them to areas on plot plan
k) Plan and locate service areas
l) Make master layout
m) Check final layout
n) Get official approval of the final layout, and
o) Install the approved layout.
Accumulate basic data
- Volume and rate of production
- Product specification and bill of materials
- Process sheets indicating tools, equipments, the method and the product which will be
manufactured.
- Flow process charts
- Standard time to complete each operation etc.
Analyse and coordinate basic data in order to find,
- The workforce size and type
- Number of work stations required
- Type of equipment required
- Storage and other space requirements
Assembly chart and operation process chart help coordinating basic data.
Decide equipment and machinery required
Number of equipment required to meet a particular production target can be calculated by
knowing :
i) Number of articles to be produced.
ii) Capacity of each equipment.
iii) Time in which the order is to be completed, etc.
Select the material handling system for moving raw material, semi-finished goods and final
products. The type of material handling equipment to be selected depends upon:
- Material / product to be moved
- Container in which it will be moved.
- Length of movement
- Frequency of movement
- Speed of movement etc.
Sketch plan of the plot to mark building outline, roads, storage and service areas etc.
- The plan orientation should utilise maximum, the natural heat, light and other weather
condition.
Determine a general flow patter
- Machinery may be laid as per production process requirements and plant building be
erected around the same.
Design individual work stations: Each work station should be laid for achieving optimum
- Performance of operations,
- Materials and space utilization and
 - Safety and comfort of employees etc.
Assemble the individual work station layout into the total layout in accordance with the
general flow pattern and the building facilities.
Calculate the storage space required
- Stores accommodate raw materials, in process goods and finished products.
Make flow diagrams for work stations and allocate them to areas on plot plan.
Plan and locate service areas such as offfices, toilets and wash rooms, tool rooms, dispensary
etc.
Make master layout by using templates and models.
Check final layout
Get official approval of the final layout.
Install the approved layout.
2.9 LINE BALANCING METHODS
Line balancing is the distribution of load on different workstations to minimize the idle time.
The work to be performed at a workstation is equal to the sum of the tasks assigned to that
workstation.
There are certain rules of line balancing as given below:
1. Identify the cycle time and determine the minimum number of workstations using the
following formulas:

2. Tasks are assigned to work stations moving left to right through the precedence diagram.
3. Before each assignment, use the following criteria to determine which tasks are eligible
to be assigned to a workstation
(a) All proceeding tasks should be arranged in the sequence.
(b) The task time does not exceed the time remaining at the workstation, if no
task is eligible, move to the next workstation.
4. After each task assignment, determine the time remaining at the current workstation
by subtracting the sum of task times already assigned to it from the cycle time.
5. Break ties, if any, using the following rules:
(a) Assign the task with the longest task time.
(b) Assign the task with the greatest number of followers.
(c) If there is still a tie, choose one task arbitrarily.
6. Continue until all tasks have been assigned to work stations.
7. Compute appropriate measures (per cent idle time and efficiency) for the set of
assignments.

8. If efficiency is unsatisfactory, rebalance using a different decision rule.

To assign the task on the work stations, at first assign the task of largest activity time.
- The sequence of operations should not be disturbed.
- Suppose two tasks have same activity time then see the total number of activities.
- Assign the activity first on the workstation having largest number of followers.

PROBLEMS
Example 1: The following tasks must be performed on an assembly line in the sequence and
times specified in the table.
Table: Tasks with the predecessors and completion time

(a) Draw the schematic precedence diagram.

(b) What is the theoretical minimum number of stations required to meet a forecast demand
of 500 units per 8-hour day?
(c) Use the longest-task-time rule and balance the line in the minimum number of stations to
produce 500 units per day.
(d) Find the efficiency.
Solution:
(a) Precedence diagram (Network diagram) as per sequence of operations is shown in the
figure.
To assign the task on the work stations, at first assign the task of largest activity time
considering the sequence of operations. The sequence of operations should not be disturbed.
Suppose two tasks have same activity time than see the total number of followers (activities)
and assign the activity first on the workstation having largest number of followers. Here,
followers mean the activities linked to the said activity till the end and to be completed. The
assignment of tasks on the five workstations and idle time on the workstations are shown
below as:
Example 2: An operations manager narrowed the search for a new facility location to four
communities. The annual fixed costs (land, property taxes, insurance, equipment and
buildings) and the variable costs (labour, materials, transportation and variable overhead) are
shown in Table 2.5:
(a) Plot the total cost curves for all the communities on a single graph. Identify on the graph
the approximate range over which each community provides the lowest cost.
(b) Using break-even analysis, calculate the break-even quantities over the relevant ranges.
If the expected demand is 12,000 units per year, what is the best location?

(b) From the graph shown in Figure 2.3:

Below 5000 units: A is the best location
Between 5000 and 40,000 units: B is the best location
Above 40,000 units: C is the best location
For 12,000 units: B is the best location.