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Conceptual Facility Planning: A Case Study
By Thomas A. Westerkamp

They needed a bigger and better facility to conduct business. What did they do? Start tearing out walls? Well….

When a company in the metalworking industry forecasted that their growth would exceed capacity, they applied a solution known as Conceptual Facility Planning. This quickly helped them find possible options and answered the questions: What labor resources would be needed? What equipment would be required? What space? Where would they be located? What would it cost? How long would it take? How would they get from here to there?

The metalworking company’s analysis showed that, soon, with their present facilities, they would be unable to produce enough product to meet forecasted sales. The after-study report defined several optional solutions. It showed the selection criteria used, and identified the best option as a combination of keeping one plant as is, but rearranging work flow more efficiently, with the addition of more efficient equipment over time. It also recommended adding equipment and space at the second location, which had the land available. Total budget cost for executing the plan was slightly over $3,000,000 U.S. Dollars. And an additional 78 employees would be required as the peak year of the sales forecast was reached. Equipment purchases totaling $2,400,000 would be phased in, and obsolete equipment salvaged as production levels began to exceed current capacity.

The primary benefit of executing this plan would be that the company could meet projected sales of over $6,000,000 annually. Other benefits that would accompany implementation were: better labor productivity, higher machine utilization, improved material flow, lower material handling cost,; and better management control.

Study Components
The study components included establishing objectives, developing a study method and approach, developing a sales forecast, examining facility options, and developing a transition plan, schedule, and cost.

Objectives
The company met with the project team. If subject matter experts were available, the team could have been comprised of in-house staff. In this case, staff was fully utilized, and time was of the essence, so the decision was made to use outside consulting resources.

The objective given to the consultants by management was: to recommend the best conceptual configuration of existing and new facilities, labor, and equipment to manufacture the company’s products. The consultants were to analyze workloads, space demands, and other conditions, and present their evaluation and recommendations for a conceptual facility plan. The study required eight weeks to complete, using one consultant, a consulting manager part-time, and a company program champion who provided liaison with management and access to company data. At key milestones, management met with the consultant in a Steering Committee to review progress and address policy decisions.

The Study Method Planning and Development
The conceptual facility plan started with an objective analysis of major production operations. This analysis was performed in order to provide:

  • An accurate assessment of capacity at that time

  • Capacity deficiency that would arise based on comparison with the sales forecast

  • Conceptual recommendations for a specific program to satisfy current and forecasted facility needs

The following steps were employed during the study:

  • Use existing data, reports, interviews with supervisors and managers, and tours through the facilities, determine the present situation

  • Determine present and projected workloads

  • Develop space modules for all work centers

  • Develop future space demands for expanded production levels

  • Develop optional combinations and criteria to evaluate and rank them

  • Prepare simple, conceptual block layouts

  • Collect the information and prepare conceptual recommendations for future manufacturing facilities

During this preparation stage, a study program schedule, showing key milestones, timing and duration, was prepared. This schedule was presented for management approval, and when approved, was used to monitor program progress.

Sales Forecasts
By communicating with marketing and sales management, the consultants developed a summary of current and projected production volumes, by major product group. From this information, a detailed sales list by product and plant location was prepared. This forecast was the basic premise used to develop future facility requirements, including workload, equipment, manufacturing space, support space, storage space, and facility optional solutions.

Modular Work Station Development
The sales forecast was converted into workload standard hours by work center. The workload for a product equaled the number of units multiplied by the standard hours needed to complete one unit. The workload by work center was then converted into work modules in order to identify space requirements. Each equipment item in each work center module was analyzed for potential shortage, combination, or surplus. An outcome was the recommended removal of many obsolete, depreciated, low-productivity machines and replacing them with fewer, more modern machining centers. This would increase machine utilization and reduce space and material handling requirements. After practical combinations were made, space requirements were adjusted to calculate final adjusted space needs in square feet.

A detailed report was prepared showing a summary of the progress logic flow used and how actual numbers were derived. The data was provided in the study report under Future Space Demands.

Facility Options
When the space demands were calculated, optimum facility configuration was developed. In this study, thirteen conceivable options (see Figure 1, Thirteen Options) were placed were on the table, each with low to high potential to solve the problem.

Figure 1. Thirteen combinations.
Logically, all options but three were eliminated by the management steering committee and consultant team for obvious reasons, leaving three remaining high-potential solutions. A full discussion of the options was included in the report under Alternative Expansion
Plan Options.

The remaining three options were examined and rated against six evaluation criteria:

  • Physical facilities

  • Organization

  • Material supply

  • Marketing and shipping

  • Reorganization of manufacturing plants

  • Transition and implementation

The Project Team defined each of these facility criteria in detail, using a multi-factor approach, and the Steering Committee ranked them by importance (See Figure 2. Ratings).

Figure 2 Ratings.
Note that Figure 2 shows a unanimous preference for Option 1. Further examination of the alternatives resulted in selecting Alternative D, Maintain Plant A as is, and Expand Plant B. Definition and rankings by importance of each criterion were included in the study report under Option Evaluation and Selection.

Transition Plan
Applying the criteria to each option in turn yielded the final selected Option I D, which best met all of the criteria. Once this selection was approved, the transition planning began. Allocation of products to existing and expanded facilities, space, new equipment, manufacturing support and storage space was allocated to the two facilities, using the work center modules previously developed. A transition plan and schedule was developed showing how each of the components would phase into the selected optimum solution. As the plan was developed, the Team calculated budget costs for expanded space at one facility, adding support equipment, such as electrical distribution, air compressors, purchase of equipment, movement of some machines, phasing out some machines, and recruiting labor resources. As each major step in the transition was planned, the cost was rolled up to provide an overall transition budget.

The result of the Conceptual Facility Plan effort was a facility that would meet the added production demands at a higher productivity level, lower cost per unit of output, and higher profit margin for the business. Savings gains offset costs, providing a breakeven point within three years.

While this Conceptual Facility Plan case study focused on a manufacturing example, the same approach has already yielded impressive results with healthcare, education, finance, government, and many other service industries.

Thomas A. Westerkamp is a consultant, lecturer, and author of the newly-published Maintenance Manager's Standard Manual 5th Edition and AWARE.MPS, Maintenance Productivity Suite. He founded Productivity Network Innovations, LLC (PNI), www.pninc.com in 1986.

Tom has held positions of Partner and Director, H. B. Maynard and Company, Inc., now a part of Accenture, and plant engineer and master mechanic in the paperboard industry. He has written over 200 articles for Maintenance Solutions, a publication of Trade Press Publishing, and for numerous trade journals, and has presented maintenance management webcasts. He works with clients in manufacturing, service industries and government to install integrated performance management/CMMS and shop floor control programs in single- and multi-facility maintenance operations in the U.S., including Alaska, and in Aruba, Canada, and India.
tawest@comcast.net

Printed with permission Construction SAVVY May/June 2014.


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