Executive Summary

Hightec Inc is the manufacturer of transducers that converts gas or liquid

pressure into an electrical signal. It rents a 12000 square foot building which
comprises of 4 sections viz office, engineering, assembly and a machine shop.
The employee strength of the firm is 80.

The firm is facing many problems related to the inefficiency of the plant layout.
Some of them are:

Due to the space constraint they are not able to purchase the machines which
are expected to give a higher productivity.

Machine shop is over occupied.

A lot of machines are being used in second and third shift which is beyond
justification.

There is a lot of handling time due to inefficiency.

Apart from that there are several other problems like the privacy of the
employees is being hampered

Alternatives

Hightec has two alternatives

Build a new plant : one of the alternatives is to build a new plant in an area
19000 square foot. The costs involved are $100,000 for purchasing the land and
$40/ square foot for construction.

Rent an additional building: it contains renting a building of 7000 square foot.

The costs involved are a rent of $2800/month for each building and a one time

investment of $15000 for building the corridor.

Question

Which expansion option would you recommend to Glenn Moore? Justify your
position.

Solution
 Buying a new plant Renting additional area(yrly)

Land $100,000 Rent $67200

Construction $760,000 Corridor(1 time) $15000

$860,000

Given the cost of capital is 15%

If we opt for building new plant then it will cost $860,000*.15 i.e. $129,000 while
renting the yearly cost is $67,200 so financially renting seems to be the better
alternative.

From the above calculations it is clear that building new plant will involve a huge
initial cash outflow. Thus it would be better not to block the money in the form of
bulding. Instead we should pay it in instalment in the form of monthly rent.

Question 2

Design an effective block plan and evaluate it. Cite any qualitative consideration
that you believe make your design attractive.
 1 2 3 4 5 6 7 8 9 1 1 1 1 1 1 Are
department 0 1 2 3 4 5 a

1 administrati I A E U A E O O O O I E O U 3
ve office
2 conference I U U U U U U U U U U U U U 1
room
3 eng & matl A U I U U O A E E I E E U O 2
mngmnt
4 productn E U I U A A A A A I I E O A 1
mangr
5 lunch room U U U U U U U U U U U U U U 2
6 computer A U U A U A X U U U O I U U 1
7 Inventory E U O A U A A O O O O U U U 2
strage
8 machine O U A A U X A A X I O U U I 6
shop
9 assembly O U E A U U O A A A I U I A 7
area
10 cleaning O U E A U U O X A O O U U U 1
11 welding O U I I U U O I A O O U U U 1
12 electronic I U E I U O O O I O O E U U 1
13 sales & E U E E U I U U U U U E O U 2
accntng
14 shipping O U U O U U U U I U U U O U 1
15 load test U U O A U U U I A U U U U U 1
32

From the above table Total Closeness Rating (TCR) of each department was
calculated .The basis of calculating TCR was

A E I O U X

125 25 5 1 0 -125
Following were the scores of each department

TCR rating for each department

E I O U X TCR
A

1 2 3 2 5 2 0 340
2 0 0 1 0 13 0 5
3 2 4 2 2 4 0 362
4 6 2 3 1 2 0 816
5 0 0 0 0 14 0 0
6 3 0 1 1 8 1 256
7 3 1 0 5 5 0 405
8 4 0 2 2 4 2 262
9 5 1 2 2 4 0 662
10 2 1 0 4 6 1 154
11 1 0 3 4 6 0 144
12 0 2 3 5 4 0 70
13 0 4 1 1 8 0 106
14 0 0 1 3 10 0 8
15 2 0 1 1 10 0 256
30 18 22 36 100 4

Following algorithm is used to decide the placement preference of the

department:

1. The first department placed in the layout is the one with the greatest TCR
value. If a tie exists, choose the one with more As.

2. If a department has an X relationship with he first one, it is placed last in the

layout. If atie exists, choose the one with the smallest TCR value.

3. The second department is the one with an A relationship with the first one. If
a tie exists,choose the one with the greatest TCR value.

4. If a department has an X relationship with he second one, it is placed next-to-

the-last of last in the layout. If a tie exists, choose the one with the smallest TCR
value.
5. The third department is the one with an A relationship with one of the placed
departments.If a tie exists, choose the one with the greatest TCR value.

6. The procedure continues until all departments have been placed.

(Source: www.personal.psu.edu)

Following were the placement orders obtained

Department TCR Plcmnt

order

340
1 administrative 6
office

2 conference 5 12
room
3 eng & matl 362 5
mngmnt
4 productn mangr 816 1
5 lunch room 0 13
6 Computer 256 14
7 inventory 405 3
storage
8 machine shop 262 4
9 assembly area 662 2
10 Cleaning 154 15
11 Welding 144 8
12 Electronic 70 10
13 sales & accntng 106 9
14 Shipping 8 11
15 load test 256 7

Following algorithm is considered for placing the departments

1. The department with placement order 1 is placed first somewhere in the

middle of the space available.

2. If a block is fully adjacent to a block where any department is placed then

it is given a score of 125 and if it is partial adjacent(diagonal blocks)then
it is given a score of of 125 that is 62.5

3. For each position, Weighted Placement (WP) is the sum of the

numerical values for all pairs of adjacent departments.

4. The first department selected is placed in the middle.

 5. The new department is located based on the greatest WP value.

6. In case of tie the department at the west in the counterclockwise direction

is select(Source: www.personal.psu.edu)

Following are the various iterations

62.5
125 62.5

125 4 125

62.5 125 62.5

62.5
187.5 187.5 62.5
125 9 4 125
62.5 187.5 187.5 62.5

62.5
187.5 187.5 62.5

187.5 9 4 125

187.5 7 312.5 62.5

62.5 125 62.5 0

62.5
187.5 187.5 62.5
187.5 9 4 187.5
187.5 7 8 187.5
62.5 187.5 187.5 62.5

62.5
187.5 250 187.5 62.5

187.5 3 9 4 187.5

62.5 312.5 7 8 187.5

 0 62.5 187.5 187.5 62.5

62.5
187.5 250 187.5 62.5
187.5 3 9 4 187.5
62.5 1 7 8 187.5
62.5 187.5 250 187.5 62.5

62.5
187.5 250 187.5 62.5

187.5 3 9 4 187.5

62.5 1 7 8 187.5

62.5 312.5 15 312.5 62.5

0 62.5 125 62.5 0

62.5
187.5 250 187.5 62.5

187.5 3 9 4 187.5

62.5 1 7 8 187.5

62.5 11 15 13 187.5

62.5 187.5 250 187.5 62.5

 0
62.5 125 62.5 0
62.5 312.5 12 312.5 62.5
187.5 3 9 4 187.5
250 1 7 8 250
187.5 11 15 13 187.5
62.5 187.5 250 187.5 62.5
62.5
187.5 187.5 62.5

187.5 14 12 312.5 62.5

250 3 9 4 187.5

250 1 7 8 250

187.5 11 15 13 187.5

62.5 187.5 250 187.5 62.5

62.5
187.5 250 62.5 62.5
187.5 14 12 2 187.5
250 3 9 4 250
250 1 7 8 250
187.5 11 15 13 187.5
62.5 187.5 250 187.5 62.5

0
62.5 187.5 250 187.5 62.5
62.5 312.5 14 12 2 187.5
125 5 3 9 4 250
62.5 312.5 1 7 8 250
0 187.5 11 15 13 187.5
0 62.5 187.5 250 187.5 62.5

62.5
187.5 250 250 187.5 62.5
187.5 6 14 12 2 187.5
125 5 3 9 4 250
62.5 312.5 1 7 8 250
0 187.5 11 15 13 187.5
0 62.5 187.5 250 187.5 62.5
 62.5
187.5 250 250 187.5 62.5
187.5 6 14 12 2 187.5
250 5 3 9 4 250
187.5 10 1 7 8 250
62.5 312.5 11 15 13 187.5
0 62.5 187.5 250 187.5 62.5

Thus final block plan comes out to be

6
14 12 2
5 3 9 4
10 1 7 8
11 15 13

Based on the space available for each department and the block plan developed
following is the recommended facility layout

6
13 13 9 9 12 2

5 1 15 9 9 9 4

5 1 14 3 9 9 8 8 8

10 1 11 3 8 8 8 7 7

Following are the advantages of this plant

Cleaning area is kept away from the machine shop

The departments of production viz machine shop, assembly room as well as the
conference room is kept adjacent to production managers cabin
Computer is kept near to sales and accounting and administrative area

Inventory storage area is very close to the machine shop and to the assembly
area

Sales and accounting department is close to the administrative area

Lunch room is kept separated away at one of the corners.