Operations Management and Strategic Management · Operations Planning

Facility Location and Layout Planning for CMA Intermediate

Updated 10 October 2026 · Fact-checked

Facility location is the choice of where to set up a plant, based on factors like raw material, labour, power, transport and market. Layout planning is how you arrange machines, people and materials inside it. The main layouts are process, product, fixed position and cellular. Choose the layout that matches volume and variety.

Understand Facility Location and Layout Planning

A facility location decision answers one question: where should the plant, warehouse or service outlet be built? It is a long-term, costly decision. Once the building and machines are in place, moving is hard. So the choice must weigh cost, access and future growth.

Location factors fall into groups. Economic factors include nearness to raw materials, markets, labour, power, water and transport. Non-economic factors include government policy, incentives, climate, community attitude and living conditions. A manufacturer of heavy, bulky raw material (like cement) tends to locate near the material. A firm whose product becomes costly to ship, or perishable, tends to locate near the market. Service firms usually locate near customers.

Layout planning comes after location. It decides how to arrange departments, machines, workstations and storage inside the facility. A good layout cuts material handling, reduces waiting, uses space well and keeps workers safe.

There are four basic layouts. In a process (functional) layout, similar machines are grouped together, like a lathe section and a drilling section. It suits low volume and high variety, such as a job shop. In a product (line) layout, machines are arranged in the order of operations for one product. It suits high volume and low variety, such as bottling or assembly lines.

In a fixed position layout, the product stays in one place and workers, tools and materials come to it. It suits very large or heavy items such as ships, bridges and buildings. In a cellular layout, machines are grouped into cells, each making a family of similar parts (group technology). It combines some benefits of product layout with the flexibility of process layout. Always link the layout to the production system and volume.

Key rules to remember

Layout matching rule: Low volume + high variety → Process layout; High volume + low variety → Product layout; Medium volume with part families points to cellular layout. Very large, immovable items point to fixed position.
Location choice rule: Choose the site with the lowest total cost and best fit with qualitative factors; Weigh economic factors first, then non-economic factors. Cost-led factors alone can mislead.
Weighted factor score: Score of a site = Σ (weight of factor × rating of site on that factor); Pick the site with the highest total. Weights should add up to 1 or 100.

How to solve Facility Location and Layout Planning questions

Use this method for both theory questions and short case questions on location and layout.

1Read the question and mark whether it asks about location, layout, or both.
2For location, list the factors under economic and non-economic heads, then link each to the business in the case.
3If sites are scored, apply the weighted factor method: multiply weight by rating, sum for each site and compare.
4For layout, note the volume, variety and product size given in the case.
5Match these to the layout: process, product, fixed position or cellular.
6Give two or three reasons for your choice and mention one limitation.
7If asked to compare layouts, use a point-by-point format with the same headings for both.
8Close with a one-line conclusion that states your recommendation.

Quickest way: Volume-variety shortcut

When to use it: Use this for MCQs and short case questions that ask you to pick a layout or a location driver.

Look for keywords: 'job shop' or 'varied orders' means process layout.
'Continuous', 'assembly line' or 'mass production' means product layout.
'Ship', 'bridge', 'building' or 'heavy project' means fixed position.
'Part families' or 'group technology' means cellular layout.
For location, ask what is heavy or perishable: material-heavy means near source, perishable or service means near market.

Common mistakes in Facility Location and Layout Planning

Mixing up process layout and product layout.
Both names sound similar and students memorise them without the logic.
Fix: Remember: process layout groups machines by function; product layout arranges them in the sequence of one product.
Listing location factors without linking them to the business.
Students write a generic list from notes.
Fix: Pick the three or four factors that matter most for the case and explain why.
Treating cellular layout as the same as process layout.
Both use groups of machines.
Fix: In cellular layout, a cell has different machines grouped to make a family of parts. In process layout, a section has the same type of machine.
Saying fixed position layout means nothing moves.
The name is misread.
Fix: The product stays fixed. Workers, tools and materials move to it.
Adding weights and ratings instead of multiplying in the weighted factor method.
Rushing under time pressure.
Fix: Multiply weight by rating for each factor first, then total the products.
Ignoring non-economic factors in a location answer.
Students focus only on cost.
Fix: Always add a short note on government policy, incentives, climate and community.

Worked examples

Example 1

Aarav Auto Components must choose between Site P and Site Q for a new plant. Factor weights and ratings (out of 10) are: Raw material access, weight 0.40, P = 8, Q = 6; Labour availability, weight 0.30, P = 5, Q = 9; Transport links, weight 0.30, P = 7, Q = 6. Which site should be chosen?

Show the solution

Site P: 0.40 × 8 = 3.2; 0.30 × 5 = 1.5; 0.30 × 7 = 2.1.
Total for P = 3.2 + 1.5 + 2.1 = 6.8.
Site Q: 0.40 × 6 = 2.4; 0.30 × 9 = 2.7; 0.30 × 6 = 1.8.
Total for Q = 2.4 + 2.7 + 1.8 = 6.9.
Compare: 6.9 is greater than 6.8.

Answer: Choose Site Q, with a weighted score of 6.9 against 6.8 for Site P. The margin is small, so check qualitative factors before a final decision.

Example 2

Distinguish between product layout and process layout. Name a suitable business for each.

Show the solution

State the basis of arrangement: product layout follows the sequence of operations for one product; process layout groups similar machines by function.
Volume and variety: product layout suits high volume and low variety; process layout suits low volume and high variety.
Flow: product layout has a smooth, fixed flow and low handling; process layout has varied routes and more handling.
Flexibility and cost: product layout is inflexible and needs high investment; process layout is flexible and uses general-purpose machines.
Work-in-process: product layout keeps it low; process layout has more and longer waiting.
Examples: a soft drink bottling plant uses product layout; a tool room or job-order engineering workshop uses process layout.

Answer: Product layout fits mass, standard production with a fixed flow, such as bottling. Process layout fits varied, small-batch work with flexible routing, such as a job workshop.

Exam tips

Comparison questions are common. Write a point-by-point format with the same headings for both items, not two separate paragraphs.
In MCQs, spot keywords like 'job shop', 'assembly line', 'ship building' and 'part families' to pick the layout in seconds.
For location answers, split factors into economic and non-economic heads. It earns structure marks.
In written answers, add one advantage and one limitation for each layout to score the full 14 marks of a long question.
If a weighted score question appears, show the multiplication line by line so you earn step marks even if the total slips.

Practice questions from Operations Planning

Facility Location and Layout Planning: frequently asked questions

What are the main factors affecting plant location?

The main factors are nearness to raw materials, market, labour, power, water and transport. Non-economic factors include government policy, incentives, climate and community attitude. The weight of each depends on the type of business.

What is the difference between product layout and process layout?

Product layout arranges machines in the sequence of operations for a single product and suits high volume and low variety. Process layout groups similar machines together and suits low volume and high variety, as in job shops.

When is a fixed position layout used?

It is used when the product is too large or heavy to move, such as a ship, a bridge or a building. The product stays in place and workers, tools and materials are brought to it.

What is cellular layout?

Cellular layout groups different machines into cells, and each cell makes a family of similar parts. It is based on group technology. It gives some of the flow benefits of product layout while keeping some flexibility.