~PROCESS, CAPACITY & LAYOUT STRATEGIES~

QUANTITATIVE VERSION

~LAYOUT STRATEGIES~

LINE BALANCING
● In a production line, the raw materials, parts or inputs undergo processes or tasks performed in a
sequence until the end product is achieved. Given these tasks, the design of the production line
involves determining: 1) the required number of work stations and 2) which tasks shall be assigned to
each station. Line balancing is a method utilized to aid in this design, as Example 4.1 below
illustrates.

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● Our first task is to draw the precedence diagram. This diagram will aid us with a graphical
presentation of the tasks and their sequence. From the data given, we have the following:

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● We then compute for what is known as the cycle time:

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● The total production time per day is given as 8 hours, which is equivalent to 480 minutes/day. With a
required output of 400 units a day, we have:

○
● The number of stations needed for this sequence of tasks is computed below. Note that the sum of all
task times is 3.8 minutes.

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● The table below will aid us in determining the assignment of tasks to each of the 4 work stations. In
filling out the table, keep in mind the ordered sequence and that each station can only hold a total
task time = to the cycle time.
 ○
● The table below (4.2) and the diagram under it (figure 4.5) summarize the line balancing outcome,
which has resulted in a line efficiency of 79.17%.

MINIMUM LOAD – DISTANCE VALUE METHOD

● Example 4.2 The green figure below shows the location of six departments in a work shop. The blue
table indicates the workload traffic between the departments (no. of trips). Assume that the distance
between adjacent departments (including those diagonally situated) is 10 meters and between
nonadjacent ones is 20 meters.

○
○ The load-distance value is computed as:
■ Σ (𝑛𝑜. 𝑜𝑓 𝑡𝑟𝑖𝑝𝑠) 𝑥 (𝑛𝑜. 𝑜𝑓 𝑚𝑒𝑡𝑒𝑟𝑠)
○ Thus, for the arrangement of departments in Figure 4.7 above, we have:
■ LDV = (100)(10) + (150)(20) + (30)(10) + (20)(10) + (50)(10) + (100)(20) + (20)(10) +
(130)(20) + (120)(10) = 11,000 meters
○ Note: look at the heaviest loads and see if the distance is the most suitable (heaviest loads
should be adjacent to each other)
● To achieve efficiency, the LDV should be minimized. This can done by putting departments that have
heavier work traffic among them nearer to each other in the layout. The diagram below analyzes the
current load-distance situation. To simplify the analysis, the arrows here indicate only the larger
work traffic exchanges between departments.
 ○
■ Notice here that because of the heavy load traffic among them, both stations 2 and 3
need to be located near station 1. Likewise, both 5 and 4 need to be near station 6.
○ The locations of the work stations below, have been rearranged accordingly. Note that station 4
has also been transferred nearer to station 3

■
■ The load-distance value for this arrangement is:
● LDV = (100)(10) + (150)(10) + (30)(10) + (20)(20) + (50)(10) + (100)(10) + (20)(20)
+ (130)(10) + (120)(10) = 7,600 meters
■ This is a significant reduction from the LDV of the previous facility layout.

SUMMARY
● Note that in continuous processes (as in the brewery in Figure 4.1) or in assembly-line type operations,
the process flow will dictate the location and sequence of tasks. Line balancing is applied here to
decide which adjacent tasks in the process flow can be grouped together in one work area or station.
● In job shop operations where products are customized, the load distance value method enables the
planner to arrange the location of task stations depending on the load traffic among them.
● In real and more complex facility layouts, more factors are considered in the analysis. For example,
some processes should not be placed near each other even if the pair have heavy traffic between them
(e.g. welding and painting stations if located near each other in a shop, would be a fire hazard). The
optimal arrangement may sometimes have to be balanced with other factors such as, environmental
and safety regulations, existing building constraints and costs.

AN ALTERNATIVE

● An alternative to the load-distance value method is the load-peso (or load-dollar) value method. In this
method, instead of the distance between work areas, the cost of transporting components or inputs
from one work area to another is used. The load-peso set up is analyzed with the similar objective of
minimizing the load-peso value.
○ What is the disadvantage of this alternative method compared to the load-distance value
method?

~CAPACITY PLANNING~

SINGLE PRODUCT BREAK-EVEN ANALYSIS

● Definition of variables
 ○
■ Fixed costs accrue even when no output is produced.
■ Variable costs are proportional to the volume of production.
● The break-even point is the point where total costs equal total revenue.
● When total revenue = total cost:

TR = TC or PX = F + VX
● From these basic equations we derive the following formulas for the break-even point:

○ ’
● Examples
○ Example 1
■ Berry Pies is contemplating adding a new line of pies, which will require leasing new
equipment for $6000 per month. Variable costs would be $2 per pie and pies would retail
at $7 each. a) How many pies must be sold to break-even? b) What would the profit (loss)
be if 1000 pies are made and sold in one month? c) How many pies must be sold to
realize a profit of $4000? Applying the formulas, we have the following:

●
○ Example 2
■ A manager has the option of purchasing one, two, or three machines. Variable cost is $10
per unit, and revenue is $40 per unit. Fixed costs and output capacities are as follows:

●
■ a) Determine the break-even point in units for each option.

●
■ b) If the projected annual demand is between 580 and 660 units, how many machines
should the manager purchase?
● Purchase 2 machines.
● With a maximum capacity of 300, one machine cannot produce the number of
units required for it to achieve breakeven (320 units).
 ● With option 3, if the demand turns out to be less than 667 units (the maximum
projected demand is 660), the three machines will not break-even.
● Therefore choose the option of 2 machines where even at the lowest demand
projection of 580, the company will reach break-even point and profit.

MULTIPRODUCT BREAK-EVEN ANALYSIS

● The computation for the break-even point for the multiproduct case begins with the computation for
the break-even point in pesos or dollars using the formula:

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● Examples
○ Example 1
■ The table below summarizes products data of Le Bistro. Fixed costs are $3000 per
month.

●
■ Filling out the table below will aid us in our computations for the variables required in
the formula.

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● Substituting the values, we thus have:

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○ Note that the fixed cost given us, F = $ 3000 is a monthly figure and must
therefore be multiplied by 12 to be consistent with the other figures we
obtained, that were all annual values.
○ Example 2
■ Le Bistro operates 52 weeks a year and 6 days a week. a) What is the daily $ breakeven
amount? b) What is the breakeven number of sandwiches that must be sold daily?
 ●

BOTTLENECK ANALYSIS

● Consider the chair manufacturing line shown below.

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● To determine the production capacity of this assembly line, the slowest work station which limits or
constrains the output capacity must first be identified.
○ This slowest work station is called the bottleneck. The processing time in this station is called
the bottleneck time.
● The bottleneck is therefore a limiting factor or constraint to the production capacity.
○ We clearly see here that the station that prepares the mortise and tenon is the line’s bottleneck.
● Examples
○ Example 1
■ If the chair factory operates 8 hours a day, 26 days a month, what is the monthly
capacity of this assembly line?

■
○ Example 2
■ To increase its capacity, the factory adds another production line as shown below. This
new line has its own complete and separate personnel and equipment. What is the
capacity of this new system?

●
■ Notice that while the mortise and tenon process remains the slowest, it now has two
stations that together actually process 2 chairs in 40 minutes; (thus, an average of 20
minutes per chair). Similarly, all the other doubled stations will halve their processing
times per chair. Note that the packing process was not given a second station.
■ The actual processing times per chair are now:

●
● Because of the additional assembly line for the first four processes, packing for
transport (which did not get an additional station) has now become the
bottleneck with its original time of 22 minutes per chair. The new capacity of the
factory is thus:
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~DESIGN & EFFECTIVE CAPACITY~

DEFINITION OF TERMS

UTILIZATION RATE & EFFICIENCY

● From these three measures, we can determine the utilization rate and efficiency of a production line or
operation, as:

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● Examples
○ Example 1
■ machine that he now plans to use in his ground meat operations. From time trials he
made, Gini estimates that his shop which consists of three grinding machines and four
personnel has a design capacity of 90 kilograms per 8-hour work day. About 1 hour of
the workday is used for setting up and cleaning between batches of runs, and for
personnel breaks. On the first week of operations, the meat shop averaged an output of
600 kilograms/day. Compute for the following:
● a) the shop’s daily effective capacity; b) the utilization rate; and c) the efficiency
of the system.
■ Solution

●
○ Example 2
■ During the community lockdown, Gini Ling’s average 5-day week sales went down to
1200 kilograms. Since his employees lived within the factory compound, he decided that
he could keep his three machines running and his four personnel working but at lower
utilization and pay. a) To meet this new demand, how many hours per week did his
machines and personnel have to work? b) In the first week, morale was low and
efficiency went down to 80%. If efficiency is expected to remain at 80% for some time,
how many hours per week are required? c) What is the new utilization rate?
■ Solution
 ● a) The pre-lockdown actual output/week was:
○ (600 kg/day)(5 days/week) = 3000 kg/week
○ 3000 kg was produced in (8 hours)(5 days) = 40 hours. The demand is now
1200 kg/week, thus, by ratio, we have:

SUMMARY OF FORMULAS
● LINE BALANCING
○ Cycle Time

■
● Note: multiply production time per day by 60 if it’s in minutes and multiply by
3,600 if its in seconds
○ Example: if work day is 8 hours and tasks are done in minutes, multiply 8
by 60 to get 480
○ Number of stations

■
● Round answer up since there are only whole stations
○ Table + precedence diagram

■
○ Efficiency and percent idle time

■
𝑡𝑜𝑡𝑎𝑙 𝑖𝑑𝑙𝑒 𝑡𝑖𝑚𝑒
● Can be: 1 - (𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠𝑡𝑎𝑡𝑖𝑜𝑛𝑠)(ℎ𝑖𝑔ℎ𝑒𝑠𝑡 𝑠𝑡𝑎𝑡𝑖𝑜𝑛 𝑐𝑦𝑐𝑙𝑒 𝑡𝑖𝑚𝑒)
 Note: cycle time here isn’t always the cycle time you originally computed for. The
●
cycle time is the one with the max/ biggest amount of time consumed among the
stations
○ Example: station A has the least idle time (0.0) with 1.2 min cycle time so
assign 1.2 as the assigned cycle time
● MINIMUM LOAD - DISTANCE VALUE METHOD
○ Load-Distance Value
■ LDV = Σ [(𝑛𝑜. 𝑜𝑓 𝑡𝑟𝑖𝑝𝑠) 𝑥 (𝑛𝑜. 𝑜𝑓 𝑚𝑒𝑡𝑒𝑟𝑠)]
● SINGLE PRODUCT BREAKEVEN
○ Terms

■
○ Break-even Equation
■ TR = TC or PX = F + VX

■
○ Profit (loss) if x units are made and sold

■
○ How many units must be sold to realize a 4000 profit

■
● MULTIPRODUCT BREAKEVEN

■
○ Table

■
● BOTTLENECK ANALYSIS
○ Bottleneck = the slowest work station (longest minutes per unit)
○ Capacity

■
● If work days are 8 hours, 26 days, bottleneck is 40 minutes

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 ○ Since bottleneck is in minutes, x 60. If in seconds, x 3,600
● UTILIZATION & EFFICIENCY

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○
■ Design Capacity = capacity * operating work hours
■ Planned unproductivity = capacity * unplanned unproductivity hours