Operations Management Layout Strategy

1. Operations ManagementLayout Strategy Based on Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e Prentice Hall

2. GLOBAL COMPANY PROFILE: MCDONALD’S THE STRATEGIC IMPORTANCE OF LAYOUT DECISIONS TYPES OF LAYOUT FIXED-POSITION LAYOUT PROCESS-ORIENTED LAYOUT OFFICE LAYOUT RETAIL LAYOUT WAREHOUSING AND STORAGE LAYOUTS REPETITIVE AND PRODUCT-ORIENTED LAYOUT Outline

3. Layout Strategy • Driven by operational effectiveness for a given Operational strategy: • Low cost • High throughput • Quick response • Rapid development • The layout for each operational approach is unique and that in its design many factors have to be considered: • Scale of operations • Technology used • Links with processes at other stages of the supply chain

4. Examples • Typical manufacturing plant layouts: • aircraft assembly, • car assembly, • food production, • chemical plants and • steel mills. • Typical service sector layouts: • supermarkets, • hotels, • restaurants, • theatres, and • football grounds.

5. What does Layout achieve • Heizer & Render suggest that in most cases, layout will strive to accommodate the following criteria: • Higher utilization of space, equipment and people • Improved flow of information, materials or people • Improved staff morale and safer working conditions • Improved customer interaction • Flexibility • Achieving all of the above criteria will be a substantial challenge for operations strategists and planners and, in some cases, they may undertake a weighted options ranking to determine their priority criteria.

6. What does Layout achieve • Flexibility means: • Modular layouts, which can be assembled in various combinations • Pre-fabricated layouts, which can easily be moved/changed • Moveable workstations • Multi-skilled workforce • Good leadership • Encouragement of team working within and between teams • Understanding of supply chain needs and partnership approach

7. What does Layout achieve • What makes a good layout? • A good layout must be fit for purpose and add maximum designed value at minimum added cost to the product or service. Therefore the characteristics of each layout will probably be unique. The problem that many companies often experience is fitting effective layouts into less than effective space or buildings if they want to change operations on an existing site.

8. Layout and Flow Seek a structured, logical flow of materials and components through the layout with value being added at each part of the transformation – affected by small changes . Examples: Retail sector: purchasing habits of customers Art gallery: visitors flow through other exhibits before arriving at the special attraction. The flow of materials can affect the costs and general effectiveness of the operation. Queue management studies of people are undertaken by all major companies which involve large throughputs of customers - for example at airports, football grounds, supermarkets and banks.

9. Layout Decisions • Wide-ranging and numerous variables • Finding optimal solution is very complex • Substantial research in Layout Decisions • Decisions are more an “art” than “science”

10. Innovation at McDonald’s • Indoor seating (1950’s) • Drive-through window (1970s) • Adding breakfast to the menu (1980s) • Adding play areas (1990s) (three out of the four are layout decisions)

11. McDonald’s - New Kitchen Layout • Fifth major innovation - kitchen design • No food prepared ahead except patty • Elimination of some steps, shortening of others • New bun toasting machine (11 seconds vs 30 seconds) • Repositioning condiment containers (one motion, not two) • Sandwiches assembled in order • Production levels controlled by computer • Discard only meat when sandwiches do not sell fast enough • Savings of $100,000,000 per year in food costs

12. Objectives of the Layout Strategy • Develop an economical layout which will meet the requirements of: • product design and volume (product strategy) • process equipment and capacity (process strategy) • quality of work life (human resource strategy) • building and site constraints (location strategy)

13. What is Facility Layout • Location or arrangement of everything within & around buildings • Objectives are to maximize • Customer satisfaction • Utilization of space, equipment, & people • Efficient flow of information, material, & people • Employee morale & safety

14. Strategic Importance of Layout Proper layout enables: • 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

15. Six Layout Strategies • Fixed-position layout • Process-oriented layout • Office layout • Retail/service layout • Warehouse layout • Product-oriented layout

16. Six Layout Strategies • Fixed-position layout • large bulky projects such as ships and buildings • Operations static static, workers and materials come to the site. • Lack of space , limited resources for all of the workers and their individual operations – eg building industry • Project management essential to co-ordinate activities • Problems areovercome by fabricating components off-site and fitting assemblies on site

17. Six Layout Strategies • Process-oriented layout • deals with low-volume, high-variety production (“job shop”, intermittent production) • Operations simultaneously handle a wide range of products or services – eg job shop approach low volume, high variety set of customers needs. Flexibility built into operations.

18. Six Layout Strategies • Office layout • positions workers, their equipment, and spaces/offices to provide for movement of information • Producing and adding value to information is very similar to industrial applications

19. Six Layout Strategies • Office layout • Small teams of workers will share a work cell and each may either initiate or add value to the work of the others – each office worker remains someone’s supplier and someone’s customer • Example Open plan - more cost-effective utilisation of layout, people work in ‘pods’ and communication flows amongst staff is easy, and informal. Staff can be more easily distracted and lack privacy. Individual offices are often regarded as status symbols.

20. Six Layout Strategies - continued • Retail/service layout • Allocates shelf space and responds to customer behavior • Maximizing profitability per square foot of floor space • Expose customers to as many products as possible; tills are often at the rear or side of stores so we have to pass through the goods to pay for our purchases. Profitability of the products may be linked directly to exposure to the public and supermarkets have developed this approach to a fine art. Where products are stocked denotes their selling strategy. Immediately beyond the entrance, at the end of aisles, at eye height on the shelves.

21. Six Layout Strategies - continued • Retail/service layout • Supermarket own-brand products are generally more profitable than other branded products and always maintain key positions on shelves within the store either with priority over other brands or alongside them. • Other basic food items are placed apart so we have to move through the store between them, dairy products and baked products are never adjacent.

22. Six Layout Strategies - continued • Warehouse layout • addresses trade-offs between space and material handling • Find the optimum between storage and layout. • Highly automated and characterized by high ceilings, multiple stacking bins and automated lifts/picking equipment. • Utilise as much of the space as possible while minimising handling costs - flow of goods into and from the warehouse.

23. Six Layout Strategies - continued • Product-oriented layout • seeks the best personnel and machine use in repetitive or continuous production • Maximize cost-effectiveness on similar goods manufactured on repetitive and continuous production.

24. Six Layout Strategies - continued • Product-oriented layout • Fabrication builds components, which form part of a larger operation. Assembly places the fabricated parts together to complete the operation, a car seat and all of its associated parts is fabricated then assembled into the car body. • Each part of the operation must be balanced with all others otherwise gaps and bottlenecks will occur - create a smooth flow of work across the operation and ensure that all workstations are working effectively.

25. Project Job Shop Office Retail Warehouse Repetitive /Continuous (fixed-position) (Process- (storage) oriented) (product- oriented) Examples Insurance Microsoft Supermarket Woolworths Clicks International Warehouse Foschini distribution center Sony’s TV Assembly Line ToyotaMinivans Hospital Olive Garden Ship Building Corp. The Waterfront Cape Town Airport Problem Move material to the limited storage areas around the site Manage varied material flow for each product Locate workers requiring frequent contact close to each other Expose customer to high-margin items Balance low-cost storage with low-cost material handling Equalize the task time at each workstation Layout Strategies

26. Layout Example - Office

27. Requirements of a Good Layout • an understanding of capacity and space requirements • selection of appropriate material handling equipment • decisions regarding environment and aesthetics • identification and understanding of the requirements for information flow • identification of the cost of moving between the various work areas

28. Constraints on Layout Objectives • Product design & volume • Process equipment & capacity • Quality of work life • Building and site

29. Layout strategy Example Criteria Service/retail Drug store Expose customer to high Grocery store margin items Department store Storage Distributor Minimize storage and Warehouse handling costs Product oriented TV assembly line Minimize line imbalance, delay, and idle time Layout Strategies, Examples, and Criteria

30. Areas of Concern in Layout Strategy Communication Service Areas Material Attributes Layout Strategy Warehousing Work Cell Safety Material Flow

31. Fixed-Position Layout • Design is for stationary project • Workers and equipment come to site • Complicating factors • Limited space at site • Changing material needs

32. Factors Complicating a Fixed Position Layout • There is limited space at virtually all sites • At different stages in the construction process, different materials are needed – therefore, different items become critical as the project develops • The volume of materials needed is dynamic

33. Process-Oriented Layout • Design places departments with large flows of material or people together • Department areas having similar processes located in close proximity • e.g., All x-ray machines in same area • Used with process-focused processes

34. E.R.Triage room Patient A - broken leg E.R. Admissions Patient B - erratic pacemaker Surgery Hallway Radiology E.R. beds Pharmacy Billing/exit Emergency Room Layout

35. Computer Programs to Assist in Layout • CRAFT • SPACECRAFT • CRAFT 3-D • MULTIPLE • CORELAP • ALDEP • COFAD • FADES - expert system

36. Cellular Layout - Work Cells • Special case of product-oriented layout - in what is ordinarily a process-oriented facility • Consists of differentmachines brought together to make a product • Temporary arrangement only • Example: Assembly line set up to produce 3000 identical parts in a job shop

37. Improving Layouts by Moving to the Work Cell Concept

38. Work Cells - Some Advantages • Reduced work-in-process inventory • Less floor space required • Reduced raw material and finished goods inventories required • Reduced direct labor costs • Heightened sense of employee participation • Increased utilization of equipment machinery • Reduced investment in machinery and equipment

39. Inventory Floor space Direct labor costs Equipment utilization Employee participation Quality Work Cell Advantages

40. Saws Drills Office Work Cell Tool Room Work Cell Floor Plan

41. Requirements for Cellular Production • Identification of families of products - group technology codes • High level of training and flexibility on the part of the employees • Either staff support or flexible, imaginative employees to establish the work cells initially • Test (poka-yoke) at each station in the cell

42. Work Cells, Focused Work Centers and the Focused Factory Work Cell A temporary assembly-line-oriented arrangement of machines and personnel in what is ordinarily a process-oriented facility Example: job shop with rearranged machinery and personnel to produce 30 unique control panels Focused Work A permanent assembly-line-oriented arrangement of machines and personnel in what is ordinarily a process-oriented facility Center Example: manufacturing of pipe brackets at a shipyard Focused Factory A permanent facility to produce a product or component in a product-oriented facility Example: a plant to produce window mechanisms for automobiles

43. Office Layout • Design positions people, equipment, & offices for maximum information flow • Arranged by process or product • Example: Payroll dept. is by process • Relationship chart used • Examples • Insurance company • Software company © 1995 Corel Corp.

44. Accounting Finance Fin. Acct. Manager Brand X Office Layout Floor Plan

45. Video Retail/Service Layout • Design maximizes product exposure to customers • Decision variables • Store flow pattern • Allocation of (shelf) space to products • Types • Grid design • Free-flow design

46. Retail Layouts - Some Rules of Thumb • Locate high-draw items around the periphery of the store • Use prominent locations such as the first or last aisle for high-impulse and high margin items • Remove crossover aisles that allow customers the opportunity to move between aisles • Distribute what are known in the trade as “power items” (items that may dominate a shopping trip) to both sides of an aisle, and disperse them to increase the viewing of other items • Use end aisle locations because they have a very high exposure rate

47. Grocery Store Bread Meat Produce Milk Frozen Foods Check-out Carts Office Retail /Service Layout -Grid Design

48. Store Layout - with Dairy, Bread, High Drawer Items in Corners

49. Apparel Store Trans.Counter Feature Display Table Retail/Service Layout - Free-Flow Design

50. 5facings • Computerized tool for shelf-space management • Generated from store’s scanner data on sales • Often supplied by manufacturer • Example: P&G PERT PERT PERT PERT PERT VO-5 VO-5 VO-5 SUAVE SUAVE VO-5 VO-5 2 ft. Retail Store Shelf Space Planogram