MGT_214OPERATIONS_MANAGEMENTCHAPTER_06Layout_DecisionsPrepared_by

MGT 214 OPERATIONS MANAGEMENT

CHAPTER 06

Layout Decisions

Prepared by: Ms. Dalal Bamufleh

YANBU UNIVERSITY COLLEGE

Management Science Department

MCDONALD’S LOOK FOR COMPETITIVE ADVANTAGE THROUGH LAYOUT

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MCDONALD’S LOOK FOR COMPETITIVE ADVANTAGE THROUGH LAYOUT

Indoor seating (1950s)

Drive-through window (1970s)

Adding breakfast to the menu (1980s)

Adding play areas (late 1980s)

Redesign of the kitchens (1990s)

Self-service kiosk (2004)

21st Century look: 3 dining sections

Slide 3

MCDONALD’S LOOK FOR COMPETITIVE ADVANTAGE THROUGH LAYOUT

Three separate dining areas

Linger zone with comfortable chairs and Wi-Fi connections

Grab and go zone with tall counters and with bar stools.

Flexible zone for kids and families with colorful and movable furniture

Facility layout is a source of competitive advantage (CSF)

Slide 4

Strategic Importance of Layout Decisions

The objective of layout strategy is to develop an effective and efficient layout that will meet the firm’s competitive needs and requirements.

An effective layout can help an organization achieve a strategy that support differentiation, low cost or response.

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Strategic Importance of Layout Decisions

Layout Design Considerations:

Higher utilization of space, equipment, and people

Improved flow of information, materials, or people

Improved employee morale and safer working conditions

Improved customer/client interaction

Flexibility

Layout designs needs to be viewed as dynamic

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Types of Layout

Office layout

Retail layout

Warehouse layout

Fixed-position layout

Process-oriented layout

Work-cell layout

Product-oriented layout

Slide 7

Good layouts requires determining the following:

Material handling equipment

Capacity and space requirements

Environment and aesthetics

Flows of information

Cost of moving between various work areas

Slide 8

Types of Layout

Office Layout

Requires the grouping of workers, their equipment, and spaces to provide comfort, safety, and movement of information

Movement of information is main distinction

Typically in state of flux due to frequent technological changes

Electronic data and paper work

Relationship chart

Slide 9

Office Layout

Some of the universal layout considerations: working conditions, teamwork, authority …etc

Private or open cubicles?

Slide 10

Open Cubicles

Private Cubicles

Office Layout

Private office

Low or high file cabinets

Slide 11

Office Layout

Same entrance, rest room, lockers and cafeteria for all employees?

Two major trends:

Technology such as cell phone, iPods, faxes, Internet, and laptop computers increase layout flexibility.

Modern firms create dynamic needs for space and services.

Slide 12

Retail Layout

Objective is to maximize profitability per square foot of floor space

Sales and profitability vary directly with customer exposure

OM try to expose customers to as many products as possible

 rate of exposure,  sales and  return on investment

How to change exposure?

Slide 13

Retail Layout

Five Helpful Ideas for Supermarket Layout:

Locate high-draw items around the periphery of the store

Use prominent locations for high-impulse and high-margin items

Distribute power items to both sides of an aisle and disperse them to increase viewing of other items

Use end-aisle locations

Convey mission of store through careful positioning of lead-off department

Slide 14

Retail Layout

Category Management

Slotting fees: Manufacturers pay fees to retailers to get the retailers to display (slot) their product

Contributing factors:

Limited shelf space

Massive new products

Limit small firms ability to expand

Slide 15

Retail Layout

Servicescapes:

Ambient conditions - background characteristics such as lighting, sound, smell, and temperature

Spatial layout and functionality - which involve, aisle characteristics (width, direction, shelf spacing...etc.) , and product grouping

Signs, symbols, and artifacts - characteristics of building design that carry social significance e.g.: Wal-Mart greeter at the door, Disneyland's entrance

Slide 16

Slide 17

Warehousing and Storage Layouts

Objective is to optimize trade-offs between handling costs and costs associated with warehouse space

Maximize the utilization of the total “cube” of the warehouse – utilize its full volume while maintaining low material handling costs

Slide 18

Warehousing and Storage Layouts

Material Handling Costs:

All costs associated with the transaction

Incoming transport

Storage

Finding and moving material

Outgoing transport of the materials to be warehoused

Equipment, people, material, supervision, insurance, and depreciation

Minimize damage and spoilage

Slide 19

Warehousing and Storage Layouts

Automated Storage and Retrieval Systems (ASRSs) can significantly improve warehouse productivity

Slide 20

Warehousing and Storage Layouts

An important component of warehouse layout is the relationship between the receiving/ unloading area and the shipping/ loading area.

Slide 21

Warehousing and Storage Layouts

1. Cross-Docking

Materials are moved directly from receiving to shipping and are not placed in storage in the warehouse

Reduces distribution, inventory and facility costs

Requires tight scheduling and accurate product identification e.g. bar code

Slide 22

Warehousing and Storage Layouts

2. Random Stocking

Typically requires automatic identification systems (AISs) and effective information systems

Random assignment of stocking locations allows more efficient use of space

Key tasks:

Maintain list of open locations

Maintain accurate records of existing inventory and its locations

Sequence items to minimize travel, and pick time

Combine picking orders to reduce picking time

Assign classes of items to particular areas

 facility utilization,  labor cost, but requires very accurate records

Slide 23

Warehousing and Storage Layouts

3. Customizing

Value-added activities performed at the warehouse

Assembly of components

Loading software

Repairs

Customized labeling and packaging

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Fixed-Position Layout

Project remains in one place and workers and equipment come to site

E.g.: ship, highway, bridge, house, operation room

Complicating factors

Limited space at site

Different materials required at different stages of the project

Volume of materials needed is dynamic

Slide 25

Fixed-Position Layout

Alternative Strategy

As much of the project as possible is completed off-site in a product-oriented facility

This can significantly improve efficiency but is only possible when multiple similar units need to be created

Slide 26

Work Cells

Reorganizes people and machines into groups to focus on single products or product groups

Volume must justify cells

Group technology identifies products that have similar characteristics for particular cells

Cells can be reconfigured as designs or volume changes

Slide 27

Work Cells

Improving Layouts Using Work Cells

Slide 28

Current layout - workers in small closed areas. Cannot increase output without a third worker and third set of equipment.

Improved layout - cross-trained workers can assist each other. May be able to add a third worker as additional output is needed.

U-shaped line may reduce employee movement and space requirements while enhancing communication, reducing the number of workers, and facilitating inspection

Work Cells

Improving Layouts Using Work Cells

Slide 29

Current layout - straight lines make it hard to balance tasks because work may not be divided evenly

Improved layout - in U shape, workers have better access. Four cross-trained workers were reduced.

U-shaped line may reduce employee movement and space requirements while enhancing communication, reducing the number of workers, and facilitating inspection

Process-Oriented Layout

Low volume,  high variety

Like machines and equipment are grouped together

Efficient when making products with different requirements, or when handling different needs of customers

Each product requires different sequence of operations

E.g.: ER Process

Slide 30

Process-Oriented Layout

Slide 31

Surgery

Radiology

ER triage room

ER Beds

Pharmacy

Emergency room admissions

Billing/exit

Laboratories

Patient A - broken leg

Patient B - erratic heart pacemaker

Process-Oriented Layout

Advantages:

Flexibility

Capability of handling a wide variety of products or services

Disadvantages:

General-purpose use of equipment  labor skills and cost,  required level of training and experience

Orders take more time to move through the system because of difficult scheduling, changing setup, and unique material handling

Slide 32

Process-Oriented Layout

Arrange departments/ work centers so as to minimize the costs of material handling

Material handling cost in this approach depend on:

Number of loads (or people) moving between centers

Distance-related cost of moving loads (or people) between centers

Slide 33

Process-Oriented Layout

Designing process- oriented layout steps:

Construct a “from-to matrix”

Determine the space requirements

Develop an initial schematic diagram

Determine the cost of this layout

Try to improve the layout

Prepare a detailed plan

Slide 34

Process-Oriented Layout

Slide 35

Department Assembly Painting Machine Receiving Shipping Testing

(1) (2) Shop (3) (4) (5) (6)

Assembly (1)

Painting (2)

Machine Shop (3)

Receiving (4)

Shipping (5)

Testing (6)

Department Assembly Painting Machine Receiving Shipping Testing

(1) (2) Shop (3) (4) (5) (6)

Assembly (1) 50 100 0 0 20

Painting (2) 30 50 10 0

Machine Shop (3) 20 0 100

Receiving (4) 50 0

Shipping (5) 0

Testing (6)

Number of loads per week

Example 1:

Page: 385

1. Construct a “from-to matrix”

Process-Oriented Layout

2. Determine the space requirements

Slide 36

Area 1 Area 2 Area 3

Area 4 Area 5 Area 6

60’

40’

Receiving Shipping Testing

Department Department Department

(4) (5) (6)

Assembly Painting Machine Shop

Department Department Department

(1) (2) (3)

Process-Oriented Layout

Slide 37

3. Develop an initial schematic diagram

100

Machine Shop (3)

Testing

(6)

Shipping

(5)

Receiving

(4)

Assembly

(1)

Painting

(2)

Process-Oriented Layout

Slide 38

4. Determine the cost of this layout

X= Number of loads

C= Cost for moving load

The cost of moving adjacent department is estimated to be $1, and 2$ for nonadjacent departments.

Cost = ∑ ∑ Xij Cij

i = 1

j = 1

Cost = $50 + $200 + $40

(1 and 2) (1 and 3) (1 and 6)

+ $30 + $50 + $10

(2 and 3) (2 and 4) (2 and 5)

+ $40 + $100 + $50

(3 and 4) (3 and 6) (4 and 5)

= $570

Process-Oriented Layout

Slide 39

5. Try to improve the layout

100

Machine Shop (3)

Testing

(6)

Shipping

(5)

Receiving

(4)

Painting

(2)

Assembly

(1)

Cost = 50 + (30X2) + 10 + 50 + 100 + 20 + 100 + (20X2) +50

= $ 480

Process-Oriented Layout

Slide 40

6. Prepare a detailed plan

Area 1 Area 2 Area 3

Area 4 Area 5 Area 6

60’

40’

Receiving Shipping Testing

Department Department Department

(4) (5) (6)

Painting Assembly Machine Shop

Department Department Department

(1) (2) (3)

Repetitive and Product-Oriented Layout

 High volume,  low variety products

Repetitive production and continuous production use product layout.

Two types of layout: Fabrication line and Assembly line.

Fabrication line

Builds components on a series of machines

Machine-paced

Require mechanical or engineering changes to balance

Slide 41

Repetitive and Product-Oriented Layout

Assembly line

Puts fabricated parts together at a series of workstations

Paced by work tasks

Balanced by moving tasks

Both types of lines must be balanced so that the time to perform the work at each station is the same

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END OF LECTURE

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