How to Develop a Well-Honed Strategy for Facility Planning and Layout

By doing it correctly, you’ll have a platform upon which to grow the organization.

By Peter Christian

In this time of a business explosion in the U.S., many companies are faced with expanding, procuring, or building a new facility in order to meet their increasing sales and resultant production demands. When sales slump, they have difficulty thinking about planning for growth. Now that they are busy fulfilling demands, there tends to be a time crunch for them to conduct this important function. Their focus is on handling new business and creating innovative ways to package and deliver new and existing products and services.

This is exactly why strategic facility planning is so important. It forces company leaders to think about the what-ifs. Maybe they would be doing things differently now if, a few years ago, they had asked themselves a few questions, like, “How quickly and to what level will my business expand? Can I expand my current facility, or will I have to find or build a new one? If I need to find or build something new, how large should it be and where should it be located?”

Strategic facility planning is a platform upon which to create scenarios that will help grow the organization. Nobody can accurately predict the future, but a company that prepares for it is one step ahead of the game. A strategic facility plan encompasses a two-to-five-year time frame considering all owned or leased space that sets a direction based on the organization’s strategic objectives.

The plan helps the company’s leaders to do a better job and ensures that all employees are working toward the same goals and objectives. A flexible and implementable plan based on the specific and unique considerations of the organization is developed through the process described below.

Set the Objectives

• Provide the vision. Vision is what starts the planning and layout process. Without a proper vision, a new or expanded facility cannot be properly developed. The vision needs to support the long-term (five years or greater) business strategic plan. If this is not available, one should be created before a facility plan is developed.
• Establish the organization. While vision is arguably the most important factor for facility planning, it doesn’t do any good without a proper business organization. This covers all aspects, including budgeting, development, and the actual building or expansion of the facility. Without proper organization, there will undoubtedly be stakeholder disputes that are detrimental to the company’s vision and take precious time and effort to resolve.
• Conduct needed research. Research is crucial to the development of a new or revamped facility. Without proper research and fact finding, company leaders won’t be able to know what their business really needs. Understanding the requirements is a crucial step in developing the right facility and will also be vital in keeping it functioning at a high level for years to come.
• Develop a budget. Someone must be able to approve the capital necessary for the proposed facility. That becomes very murky without a proper budget. In doing facility planning, a company needs to know what the spending limits are and what money can and will be spent on. A budget will not only influence how the money is spent but will also influence what resources are to be considered in the facility’s development.

Devise the Plan

A thorough facilities plan identifies the type of facility needed in the next five years, the geographic location of the space, the expected costs, and a timeline for achieving the goals set out in the company’s strategic plan.  The plan is built by gathering and analyzing data on current space requirements and utilization, and then forecasting future needs and expectations. This is done in a number of steps:

• Establishing current needs and capabilities. This forms a baseline from which to develop not only what will be needed in the near term, but also what will be required for the long term. By knowing what the current capabilities are, a projection of what needs to be added for the future is more easily developed.
• Establishing future needs. Planning only for the here and now is very short sighted. By taking growth into account, companies can project what will need to be considered for the future. Even if they do not build that capacity immediately, there will be a plan in place to add capacity as they go along, recognizing at what point (or points) additional capacity will be needed and have to be added.
• Setting the stage for the layout. Much of the information gathered during the planning process will be used to ultimately develop the layout that will be required. The key to good facility layout and design is the integration of the needs of people (personnel and customers), materials (raw, finished, and in-process), and machinery in such a way that a single, well-functioning system is created.
• Allow for efficiency and flow. The basic objective of a layout is to ensure a smooth flow of work, material, and information through a system. The definition of a facility is the space in which a business’s activities take place. The layout and design of that space will impact greatly how the work is done, covering the flow of work, materials, and information.

Create the Layout

 Business owners and executive management need to consider many operational factors for maximum layout effectiveness when building or renovating a facility. Any design that is considered should be flexible. Flexible manufacturing systems accommodate intermediate-volume production of a variety of products. The goal is to minimize changeover or setup times for producing different products, while still achieving close to single-product production rates.

A facility should be laid out in a way that is conducive to helping the business meet its production needs. The layout must be considered very carefully because the company does not want to have to repeatedly change the design of the facility.

Manufacturers may use layouts that differ significantly from company to company, depending on their unique needs. The production challenges associated with producing computers will be considerably different from those of making automobiles. In that regard, there are typically three basic layout types to be considered.

*  Product layouts arrange activities according to the sequence of operations that need to be performed to assemble a particular product. Each product or family of like products has its own “line” specifically designed to meet the family’s requirements. The flow of work is orderly and efficient, moving from one workstation until a finished product comes off the end. Because the line is set up for similar types of products or services, special machines can be purchased to match the products’ specific processing requirements.

The advantage of the product layout is its efficiency and ease of use. The disadvantage is its inflexibility. Significant changes in product design may require that a new line be built and new equipment purchased. The fixed cost of a product layout (mostly for equipment), when allocated over fewer units, can send the price of a product soaring. The major concern in a product layout is balancing so that no one workstation becomes a bottleneck and holds up the flow of work through the line.

*  Process layouts, also known as functional layouts, group similar activities together in departments or work centers according to the process or function they perform. For example, in a machine shop, all drills would be located in one work center, lathes in another, and milling machines in still another. A process layout is characteristic of intermittent operations, service shops, job shops, or batch production, which serve different customers with different needs. The volume of each customer’s order is low, and the sequence of operations required to complete a customer’s order can vary considerably. The equipment in a process layout is general purpose, and the workers are skilled at operating the equipment in their particular department.

The advantage of this layout is its flexibility to produce many different types of products. The disadvantage is its inefficiency, as jobs or customers do not flow through the system in an orderly manner. Backtracking is common, and movement from department to department can take a considerable amount of time. Queues tend to develop. Each new arrival may require that an operation be set up differently for its particular processing requirements. Although workers can operate multiple machines or perform different tasks in a single department, their workload often fluctuates, from queues of jobs waiting to be processed to idle time between jobs.

* Mixed or Hybrid layouts are a cross between a product and a process layout. This layout maintains some of the efficiencies of product layouts and some of the flexibility of process layouts. For example, one firm may utilize a process layout for most of its process, along with an assembly in one area. Alternatively, a firm may utilize a fixed-position layout for the assembly of its final product but use assembly lines to produce the components and subassemblies that make up the final product, such as aircraft.

Crafting the layout

In order to properly lay out a facility and to save time and effort, the company should first take all of its information and plans and organize them in an overall fashion. If they initially try to develop a detailed layout with all equipment and workspaces, it could be a daunting task. By developing an overall layout based on spaces and relationships first, and then moving into a very detailed layout once this is set, they will make this stage of the planning much easier and less time-consuming. The process for then creating the layout includes the following steps:

* Final data gathering and analysis.  The details of the operations should be developed using all of the data and information from the planning phase and collecting additional information as required. Once all aspects of the facility have been reviewed by all stakeholders, the actual layout can commence. The steps involved in this process are described below.

1. Conduct observations and studies on the shop floor and evaluate the current assembly method(s) and the relationship in the process flow among all departments.
2. Review the current flow of material and movement in the operation.
3. Determine current capacities and operational constraints.
4. Identify and understand the key processes and material handling needs of the operations.
5. Understand and include all safety and ergonomic challenges as part of the optimization.
6. Understand the strategic growth plans of the business by product line.
7. Develop facility analysis worksheets that include the following:

• Special considerations (Equipment, handling equipment monuments, etc.)
• Material handling requirements.
• Product information, including all product families and product flows, such as routings, process sheets, and any process (value) maps and flow charts.
• Manning levels and capacity by operation or work center.
• Production standards and historical data and metrics for up to the two most recent years.
• Inventory levels by month and by product/item number for the two most recent  years.
• Product and Item storage details, such as unit quantities; storage media type and dimensions; stacking height and restrictions; and special considerations.
• Shipping and receiving.
• R & D area and equipment.
• Safety and environmental functions
• Utilities (power, water, compressed air)
• Ventilation/heat/air conditioning
• Waste (solid, water, etc.)
• Special considerations
• Constraints

* Layout establishment

1. Develop a macro layout. Before getting to a detailed layout, a spatial layout and associated systems are developed. This procedure produces several viable layouts that include spaces, locations, and relationships for all functional areas. Each layout has its advantages and disadvantages.
2. Review and select. All stakeholders review the various macro options and select the one that is optimum for the company’s needs.
3. Develop the detailed layout. Utilizing the macro layout, all details of the facility are laid out. All equipment, workstations, desks, and so on are placed in each functional location.
4. Finalize the layout. The stakeholders review the detailed layout and decide upon any changes. Once these are made, the layout is signed off. This can now be used to provide the necessary details to an architect, building designer, and contractor for developing proposals and to conduct the work necessary to make the facility a reality.

As you can see, much thought and effort are needed to arrive at a correctly sized, located, and detailed facility. Taking short cuts to this process endangers the creation of a proper design that fulfills the current and future needs of the enterprise. While organizations want to expedite this work, taking one’s time and making sure all the i’s are dotted and the t’s are crossed will more than pay for itself.

About the Author

Peter H. Christian was a founding partner and president of Enterprise Systems Partners Inc. (espi), a prominent business consulting company in Pennsylvania’s Lehigh Valley. He has worked with more than 300 clients throughout the United States in the areas of manufacturing improvements, information system selection and implementation, and project and product management.

Peter’s more than 40 years of corporate experience and knowledge includes a track record of accomplishments in operational strategic planning, continuous improvement, lean manufacturing, facility planning, and supply chain. Through his efforts,  companies have collectively realized millions of dollars in cost reductions and profit improvements while adding and retaining thousands of jobs.

Prior to espi, Peter was an executive director at Crayola Corporation. He held director’s positions in engineering, quality, operations, and research and development, and played an instrumental part in the company’s 15-year growth of 700 percent.

Peter holds a B.S. in industrial engineering from Rutgers University and an M.S. in industrial engineering from Lehigh University. He is a certified Jonah with the Goldratt Institute and in senior project management with the AMA. He has been a guest lecturer at Lehigh University’s Industrial and Systems Engineering Department and an adjunct instructor at Northampton County Community College. He has been published in IIE magazine, Industrial Management magazine, the Packaging Journal, the ASQC Journal, IIE Solutions, and Consulting magazine. He can be reached at (610) 554-6486 or via email at pchristian@ent-sys.com.