Assignment On Importance Of Facility Layout Planning In Business

Facility layout and design is an important component of a business's overall operations, both in terms of maximizing the effectiveness of the production process and meeting the needs of employees. The basic objective of layout is to ensure a smooth flow of work, material, and information through a system. The basic meaning of facility is the space in which a business's activities take place. The layout and design of that space impact greatly how the work is done—the flow of work, materials, and information through the system. The key to good facility layout and design is the integration of the needs of people (personnel and customers), materials (raw, finishes, and in process), and machinery in such a way that they create a single, well-functioning system.


Small business owners need to consider many operational factors when building or renovating a facility for maximum layout effectiveness. These criteria include the following:

  1. Ease of future expansion or change—Facilities should be designed so that they can be easily expanded or adjusted to meet changing production needs. "Although redesigning a facility is a major, expensive undertaking not to be done lightly, there is always the possibility that a redesign will be necessary," said Weiss and Gershon in their book Production and Operations Management. "Therefore, any design should be flexible'¦. Flexible manufacturing systems most often are highly automated facilities having intermediate-volume production of a variety of products. Their goal is to minimize changeover or setup times for producing the different products while still achieving close to assembly line (single-product) production rates."
  2. Flow of movement—The facility design should reflect a recognition of the importance of smooth process flow. In the case of factory facilities, the editors of How to Run a Small Business state that "ideally, the plan will show the raw materials entering your plant at one end and the finished product emerging at the other. The flow need not be a straight line. Parallel flows, U-shaped patterns, or even a zig-zag that ends up with the finished product back at the shipping and receiving bays can be functional. However, backtracking is to be avoided in whatever pattern is chosen. When parts and materials move against or across the overall flow, personnel and paperwork become confused, parts become lost, and the attainment of coordination becomes complicated."
  3. Materials handling—Small business owners should make certain that the facility layout makes it possible to handle materials (products, equipment, containers, etc.) in an orderly, efficient—and preferably simple—manner.
  4. Output needs—The facility should be laid out in a way that is conducive to helping the business meet its production needs.
  1. Space utilization—This aspect of facility design includes everything from making sure that traffic lanes are wide enough to making certain that inventory storage warehouses or rooms utilize as much vertical space as possible.
  2. Shipping and receiving—The J. K. Lasser Institute counseled small business owners to leave ample room for this aspect of operations. "While space does tend to fill itself up, receiving and shipping rarely get enough space for the work to be done effectively," it said in How to Run a Small Business.
  3. Ease of communication and support—Facilities should be laid out so that communication within various areas of the business and interactions with vendors and customers can be done in an easy and effective manner. Similarly, support areas should be stationed in areas that help them to serve operating areas.
  4. Impact on employee morale and job satisfaction—Since countless studies have indicated that employee morale has a major impact on productivity, Weiss and Gershon counsel owners and managers to heed this factor when pondering facility design alternatives: "Some ways layout design can increase morale are obvious, such as providing for light-colored walls, windows, space. Other ways are less obvious and not directly related to the production process. Some examples are including a cafeteria or even a gymnasium in the facility design. Again, though, there are costs to be traded off. That is, does the increase in morale due to a cafeteria increase productivity to the extent that the increased productivity covers the cost of building and staffing the cafeteria."
  5. Promotional value—If the business commonly receives visitors in the form of customers, vendors, investors, etc., the small business owner may want to make sure that the facility layout is an attractive one that further burnishes the company's reputation. Design factors that can influence the degree of attractiveness of a facility include not only the design of the production area itself, but the impact that it has on, for instance, ease of fulfilling maintenance/cleaning tasks.
  6. Safety—The facility layout should enable the business to effectively operate in accordance with Occupational Safety and Health Administration guidelines and other legal restrictions.

"Facility layout must be considered very carefully because we do not want to constantly redesign the facility," summarized Weiss and Gershon. "Some of the goals in designing the facility are to ensure a minimum amount of materials handling, to avoid bottlenecks, to minimize machine interference, to ensure high employee morale and safety, and to ensure flexibility. Essentially, there are two distinct types of layout. Product layout is synonymous with assembly line and is oriented toward the products that are being made. Process layout is oriented around the processes that are used to make the products. Generally, product layout is applicable for high-volume repetitive operations, while process layout is applicable for low-volume custom-made goods."


Offices and manufacturing facilities are typically designed in much different ways—a reflection of the disparate products that the two entities make. "A factory produces things," wrote Stephen Konz in Facility Design. "These things are moved with conveyors and lift trucks; factory utilities include gas, water, compressed air, waste disposal, and large amounts of power as well as telephones and computer networks. A layout criterion is minimization of transportation cost." Konz pointed out, however, that the mandate of business offices is to produce information, whether disseminated in physical (reports, memos, and other documents), electronic (computer files), or oral (telephone, face-to-face encounters) form. "Office layout criteria, although hard to quantify, are minimization of communication cost and maximization of employee productivity," wrote Konz.

Layout requirements can also differ dramatically by industry. The needs of service-oriented businesses, for instance, are often predicated on whether customers receive their services at the physical location of the business (such as at a bank or pet grooming shop, for instance) or whether the business goes to the customer's home or place of business to provide the service (as with exterminators, home repair businesses, plumbing services, etc.) In the latter instances, these businesses will likely have facility layouts that emphasize storage space for equipment, chemicals, and paperwork rather than spacious customer waiting areas. Manufacturers may also have significantly different facility layouts, depending on the unique needs that they have. After all, the production challenges associated with producing jars of varnish or mountaineering equipment are apt to be considerably different than those of making truck chassis or foam beach toys. Retail outlets comprise yet another business sector that has unique facility layout needs. Such establishments typically emphasize sales floor space, inventory logistics, foot-traffic issues, and overall store attractiveness when studying facility layout issues.

Konz also observed that differences in factory and office layouts can often be traced to user expectations. "Historically, office workers have been much more concerned with status and aesthetics than factory workers," he noted. "A key consideration in many office layouts is 'Who will get the best window location?' To show their status, executives expect, in addition to preferred locations, to have larger amounts of space. Rank expects more privacy and more plush physical surroundings." In addition, he stated, "Offices are designed to be 'tasteful' and to 'reflect the organization's approach to business dealings." Conversely, in the factory setting, aesthetic elements take a back seat to utility.

Given these emphases, it is not surprising that, as a general rule, office workers will enjoy advantages over their material production brethren in such areas as ventilation, lighting, acoustics, and climate control.


Baykasoglu, Adil, Turkay Dereli, and Ibrahim Sabuncu. "An Ant Colony Algorithm for Solving Budget Constrained and Unconstrained Dynamic Facility Layout Problems." Omega. August 2006.

Cornacchia, Anthony J. "Facility Management: Life in the Fast Lane." The Office. June 1994.

Groover, M. P. Automation, Production Systems, and Computer-Integrated Manufacturing. Prentice-Hall, 1987.

J. K. Lasser Institute. How to Run a Small Business. Seventh Edition. McGraw-Hill, 1994.

Konz, Stephen. Facility Design. John Wiley & Sons, 1985.

Myers, John. "Fundamentals of Production that Influence Industrial Facility Designs." Appraisal Journal. April 1994.

Sherali, Hanif D., Barbara M.P. Fraticelli, and Russell D. Melle. "Enhanced Model Formulations for Optimal Facility Layout." Operations Research. July-August 2003.

Weiss, Howard J., and Mark E. Gershon. Production and Operations Management. Allyn and Bacon, 1989.


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In manufacturing, facility layout consists of configuring the plant site with lines, buildings, major facilities, work areas, aisles, and other pertinent features such as department boundaries. While facility layout for services may be similar to that for manufacturing, it also may be somewhat different—as is the case with offices, retailers, and warehouses. Because of its relative permanence, facility layout probably is one of the most crucial elements affecting efficiency. An efficient layout can reduce unnecessary material handling, help to keep costs low, and maintain product flow through the facility.

Firms in the upper left-hand corner of the product-process matrix have a process structure known as a jumbled flow or a disconnected or intermittent line flow. Upper-left firms generally have a process layout. Firms in the lower right-hand corner of the product-process matrix can have a line or continuous flow. Firms in the lower-right part of the matrix generally have a product layout. Other types of layouts include fixed-position, combination, cellular, and certain types of service layouts.


Process layouts are found primarily in job shops, or firms that produce customized, low-volume products that may require different processing requirements and sequences of operations. Process layouts are facility configurations in which operations of a similar nature or function are grouped together. As such, they occasionally are referred to as functional layouts. Their purpose is to process goods or provide services that involve a variety of processing requirements. A manufacturing example would be a machine shop. A machine shop generally has separate departments where general-purpose machines are grouped together by function (e.g., milling, grinding, drilling, hydraulic presses, and lathes). Therefore, facilities that are configured according to individual functions or processes have a process layout. This type of layout gives the firm the flexibility needed to handle a variety of routes and process requirements. Services that utilize process layouts include hospitals, banks, auto repair, libraries, and universities.

Improving process layouts involves the minimization of transportation cost, distance, or time. To accomplish this some firms use what is known as a Muther grid, where subjective information is summarized on a grid displaying various combinations of department, work group, or machine pairs. Each combination (pair), represented by an intersection on the grid, is assigned a letter indicating the importance of the closeness of the two (A = absolutely necessary; E = very important; I = important; O = ordinary importance; U = unimportant; X = undesirable). Importance generally is based on the shared use of facilities, equipment, workers or records, work flow, communication requirements, or safety requirements. The departments and other elements are then assigned to clusters in order of importance.

Advantages of process layouts include:

  • Flexibility. The firm has the ability to handle a variety of processing requirements.
  • Cost. Sometimes, the general-purpose equipment utilized may be less costly to purchase and less costly and easier to maintain than specialized equipment.
  • Motivation. Employees in this type of layout will probably be able to perform a variety of tasks on multiple machines, as opposed to the boredom of performing a repetitive task on an assembly line. A process layout also allows the employer to use some type of individual incentive system.
  • System protection. Since there are multiple machines available, process layouts are not particularly vulnerable to equipment failures.

Disadvantages of process layouts include:

  • Utilization. Equipment utilization rates in process layout are frequently very low, because machine usage is dependent upon a variety of output requirements.
  • Cost. If batch processing is used, in-process inventory costs could be high. Lower volume means higher per-unit costs. More specialized attention is necessary for both products and customers. Setups are more frequent, hence higher setup costs. Material handling is slower and more inefficient. The span of supervision is small due to job complexities (routing, setups, etc.), so supervisory costs are higher. Additionally, in this type of layout accounting, inventory control, and purchasing usually are highly involved.
  • Confusion. Constantly changing schedules and routings make juggling process requirements more difficult.


Product layouts are found in flow shops (repetitive assembly and process or continuous flow industries). Flow shops produce high-volume, highly standardized products that require highly standardized, repetitive processes. In a product layout, resources are arranged sequentially, based on the routing of the products. In theory, this sequential layout allows the entire process to be laid out in a straight line, which at times may be totally dedicated to the production of only one product or product version. The flow of the line can then be subdivided so that labor and equipment are utilized smoothly throughout the operation.

Two types of lines are used in product layouts: paced and unpaced. Paced lines can use some sort of conveyor that moves output along at a continuous rate so that workers can perform operations on the product as it goes by. For longer operating times, the worker may have to walk alongside the work as it moves until he or she is finished and can walk back to the workstation to begin working on another part (this essentially is how automobile manufacturing works).

On an unpaced line, workers build up queues between workstations to allow a variable work pace. However, this type of line does not work well with large, bulky products because too much storage space may be required. Also, it is difficult to balance an extreme variety of output rates without significant idle time. A technique known as assembly-line balancing can be used to group the individual tasks performed into workstations so that there will be a reasonable balance of work among the workstations.

Product layout efficiency is often enhanced through the use of line balancing. Line balancing is the assignment of tasks to workstations in such a way that workstations have approximately equal time requirements. This minimizes the amount of time that some workstations are idle, due to waiting on parts from an upstream process or to avoid building up an inventory queue in front of a downstream process.

Advantages of product layouts include:

  • Output. Product layouts can generate a large volume of products in a short time.
  • Cost. Unit cost is low as a result of the high volume. Labor specialization results in reduced training time and cost. A wider span of supervision also reduces labor costs. Accounting, purchasing, and inventory control are routine. Because routing is fixed, less attention is required.
  • Utilization. There is a high degree of labor and equipment utilization.

Disadvantages of product layouts include:

  • Motivation. The system's inherent division of labor can result in dull, repetitive jobs that can prove to be quite stressful. Also, assembly-line layouts make it very hard to administer individual incentive plans.
  • Flexibility. Product layouts are inflexible and cannot easily respond to required system changes—especially changes in product or process design.
  • System protection. The system is at risk from equipment breakdown, absenteeism, and downtime due to preventive maintenance.


A fixed-position layout is appropriate for a product that is too large or too heavy to move. For example, battleships are not produced on an assembly line. For services, other reasons may dictate the fixed position (e.g., a hospital operating room where doctors, nurses, and medical equipment are brought to the patient). Other fixed-position layout examples include construction (e.g., buildings, dams, and electric or nuclear power plants), shipbuilding, aircraft, aerospace, farming, drilling for oil, home repair, and automated car washes. In order to make this work, required resources must be portable so that they can be taken to the job for "on the spot" performance.

Due to the nature of the product, the user has little choice in the use of a fixed-position layout. Disadvantages include:

  • Space. For many fixed-position layouts, the work area may be crowded so that little storage space is available. This also can cause material handling problems.
  • Administration. Oftentimes, the administrative burden is higher for fixed-position layouts. The span of control can be narrow, and coordination difficult.


Many situations call for a mixture of the three main layout types. These mixtures are commonly called combination or hybrid layouts. For example, one firm may utilize a process layout for the majority 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 (e.g., aircraft).


Cellular manufacturing is a type of layout where machines are grouped according to the process requirements for a set of similar items (part families) that require similar processing. These groups are called cells. Therefore, a cellular layout is an equipment layout configured to support cellular manufacturing.

Processes are grouped into cells using a technique known as group technology (GT). Group technology involves identifying parts with similar design characteristics (size, shape, and function) and similar process characteristics (type of processing required, available machinery that performs this type of process, and processing sequence).

Workers in cellular layouts are cross-trained so that they can operate all the equipment within the cell and take responsibility for its output. Sometimes the cells feed into an assembly line that produces the final product. In some cases a cell is formed by dedicating certain equipment to the production of a family of parts without actually moving the equipment into a physical cell (these are called virtual or nominal cells). In this way, the firm avoids the burden of rearranging its current layout. However, physical cells are more common.

An automated version of cellular manufacturing is the flexible manufacturing system (FMS). With an FMS, a computer controls the transfer of parts to the various processes, enabling manufacturers to achieve some of the benefits of product layouts while maintaining the flexibility of small batch production.

Some of the advantages of cellular manufacturing include:

  • Cost. Cellular manufacturing provides for faster processing time, less material handling, less work-in-process inventory, and reduced setup time, all of which reduce costs.
  • Flexibility. Cellular manufacturing allows for the production of small batches, which provides some degree of increased flexibility. This aspect is greatly enhanced with FMSs.
  • Motivation. Since workers are cross-trained to run every machine in the cell, boredom is less of a factor. Also, since workers are responsible for their cells' output, more autonomy and job ownership is present.


In addition to the aforementioned layouts, there are others that are more appropriate for use in service organizations. These include warehouse/storage layouts, retail layouts, and office layouts.

With warehouse/storage layouts, order frequency is a key factor. Items that are ordered frequently should be placed close together near the entrance of the facility, while those ordered less frequently remain in the rear of the facility. Pareto analysis is an excellent method for determining which items to place near the entrance. Since 20 percent of the items typically represent 80 percent of the items ordered, it is not difficult to determine which 20 percent to place in the most convenient location. In this way, order picking is made more efficient.

While layout design is much simpler for small retail establishments (shoe repair, dry cleaner, etc.), retail stores, unlike manufacturers, must take into consideration the presence of customers and the accompanying opportunities to influence sales and customer attitudes. For example, supermarkets place dairy products near the rear of the store so that customers who run into the store for a quick gallon of milk must travel through other sections of the store. This increases the chance of the customer seeing an item of interest and making an impulse buy. Additionally, expensive items such as meat are often placed so that the customer will see them frequently (e.g., pass them at the end of each aisle). Retail chains are able to take advantage of standardized layouts, which give the customer more familiarity with the store when shopping in a new location.

Office layouts must be configured so that the physical transfer of information (paperwork) is optimized. Communication also can be enhanced through the use of low-rise partitions and glass walls.

A number of changes taking in place in manufacturing have had a direct effect on facility layout. One apparent manufacturing trend is to build smaller and more compact facilities with more automation and robotics. In these situations, machines need to be placed closer to each other in order to reduce material handling. Another trend is an increase in automated material handling systems, including automated storage and retrieval systems (AS/AR) and automated guided vehicles (AGVs). There also is movement toward the use of U-shaped lines, which allow workers, material handlers, and supervisors to see the entire line easily and travel efficiently between workstations. So that the view is not obstructed, fewer walls and partitions are incorporated into the layout. Finally, thanks to lean manufacturing and just-in-time production, less space is needed for inventory storage throughout the layout.


Finch, Byron J. Operations Now: Profitability, Processes, Performance. 2nd ed. Boston: McGraw-Hill/Irwin, 2006.

Stevenson, William J. Operations Management. 8th ed., Boston: McGraw-Hill/Irwin, 2005.

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