A simulation-based approach for risk assessment of facility layout designs under stochastic product demands

In traditional facility layout design method, the facility layout is governed by the flow intensity between departments, which is the product flow quantity between departments. A facility layout design must maintain its efficiency over time while coping with the uncertainty in product demand. An error in the product demand assessment can render the layout inefficient with respect to material handling costs. Analytical models for the determination of the risk involved in a facility layout design are difficult to derive when the problem of size and complexity increases. This paper presents a simulation-based method for predicting the uncertainty associated with the layout. The validation of the simulation approach against analytical procedures is first detailed. The methodology for the simulation based approach is provided. Three scenarios of increasing complexity and size are also detailed. Results from case studies have shown that the procedure results in reduction of risk as high as 80%.