This work focused on virtual factory environment created to assess the value of Virtual Reality (VR) and animation based software for design, visualisation and planning of production facilities (i.e. their user friendliness for the user to perform specific operation). The project largely focused on what desk-top VR techniques can do to assist the design and planning of production facilities and application of techniques to solve plant layout problems using 3D and 2D views. The first part describes an approach to a virtual bi-cycle factory by means of a three dimensional modelling system and animation based simulation package (PC version o f Animation Package 3D Studio Max) by taking into account the real data of a factory. This part also discussed how 3D solid modelling and animation based simulation can aid engineers in analysing the virtual factory's layout with a view (i) to identify bottlenecks in the existing factory (ii) proper utilisation of space and other facilities by applying plant layout problem solving techniques. Also the usability of the Superscape VRT 5.5 and 3D Studio Max System were assessed for how easy or difficult it was for the user to perform specific operations. The last part of the work deals with the application of CIM (Computer Intregated Manufacturing) concept in one of the virtual factories created earlier and to analyse the simulation result. Firstly, the applicability of the 3D Studio Max system was assessed for its user friendliness (for the user to perform specific operations). The designer can build a virtual factory ju st like constructing a miniature model of the real factory. A 3D model of a real bi-cycle parts manufacturing factory has been modelled using 3D Studio Max Software. Participant can navigate through virtual factory and examine the virtual factory from different viewing points. After visualising different sections of the factory using viewing points, it is considered that both the factory walkthrough and the visualisation facilities were useful for designing and planning activities in virtual environment. Various bottlenecks of the bi-cycle parts manufacturing factory layout were identified using 2D and 3D views and scientific factory layout problem solving concepts and techniques. The old layout and the new layout were compared using the concept of CRAFT (Computerised relocation of facilities technique) and further changes were made until the new layout was found to be the better one. Secondly, a simple toy factory, which makes a toy sports car (for four to six year old children), has been modelled using Desktop Virtual Reality System (Superscape VRT 5.5).The factory model has been designed to visualise shop floor virtually and to test both the factory walk through and visualisation facilities. It was found that the factory walkthrough and viewing point facilities o f Superscape VRT 5.5 is better th an that o f 3D Studio MAX. Participant can navigate freely through the virtual factory using Superscape VRT 5.5 mouse where as for the case o f 3D Studio MAX, participant cannot navigate freely through the virtual factory using the mouse. Lastly the process modelling and simulation software SimCad has been used to simulate the processes o f the bi-cycle parts manufacturing factory in 2D. Simulation results were analysed. The results were found to be satisfactory.