Operations Management

1. Jones & Robinson Operations Management Chapter 4 Locating, Designing and Managing Facilities

2. Learning Objectives • Explain how firms select locations for their facilities  • Explain outsourcing • Review site selection criteria for different organizations • Describe the layout of work and equipment within different types of operations processes • Explain what is meant by the Servicescape and the effect this has on customers • Explore trends in operations design

3. Selecting Locations for Operations • Access to raw materials • Availability of energy supplies • Provision of other utilities, such as water supply • Nature of transportation networks • Nature of communication links • Availability of land or property

4. Other Location Selection Criteria • Local labour markets. • Access to markets or customers. • Proximity to or distance from competitors. • Business climate. • Government policies.

5. Outsourcing Make or buy decision – necessary for all firms to decide as this has a bearing on profitability. Outsourcing – the shifting of production or a service from in-house to another supplier • Reduced operating costs • Restructuring opportunities • Allows focus on core activities • Access to better capability for the outsourced product or service

6. Outsourcing Some potential disadvantages • Financial costs • Loss of control • Increased risk – security of information – quality of product or service – supply risk – loss of expertise

7. Specific Site Selection • Size of trading area – how far will customers travel to get to the operation? • Market structure • Demographics • Travel patterns • Access • Visibility Many companies use a weighted factor technique based on the above criteria to select sites

8. Specific Site Selection • Weighted factor technique. A business selects the most important criteria in relation to a site and then weights them according to their relative importance. • Regression modelling. A more sophisticated approach based on statistics is undertaken on each site. • Expert estimation. A technique based on previous experience and intuition. • Location intelligence. This technique has emerged recently, combining geographic data such as aerial maps, demographics, and business information to facilitate site selection

9. Bucking the Trend! Competitive clustering. This refers to operations that co-locate next to each other so deliberately site their operation next to one or more competitors. e.g. high street shops Saturation marketing. This refers to a single company co-locating lots of its operations together so that it creates market dominance. For example – ‘Lettuce Entertain You’, a restaurant chain that has 38 different restaurants - all in Chicago! Personalpreferences. Sometimes a location is selected for no other reason than founder or owner wants to locate there. e.g. The Oban Chocolate Company

10. Process Layout Types in Operations • Fixed position layout • Process layout • Product layout • Cell layout

11. Fixed Position Layout • Recipient of the processing is stationary and the resources, plant and people come to the service. • motorway building • shipbuilding • construction site • solicitor’s office • open heart surgery • high class restaurant.

12. Fixed Position Layout • Advantages • High product flexibility • Product or customer remain in one place • High variety of tasks • Disadvantages • High unit cost • May be difficult to schedule tasks • Limited space may be a problem

13. Process Layout • Similar products or processes (or those with similar needs) are grouped together. The product (or Customer) travels between the resources. • X-ray department in a hospital • specialist machining or processing • restaurant kitchen • tinned or frozen food in a supermarket.

14. Process Layout • Advantages • High product mix flexibility • Not liable to be disrupted • Easy to control • Disadvantages • Complex flow process • May generate high work in process (WIP) inventory • Low utilization of equipment

15. Product Layout • All operations follow the same sequence of processes. • automobile assembly • self-service cafeteria • paper manufacturing • television and domestic goods assembly

16. Product Layout • Advantages • High volumes give low costs • Specialized equipment opportunity • Disadvantages • Work can be repetitive • Inflexible process • Flow easily disrupted

17. Cell Layout • Self contained areas which contain all of the processes to complete a particular operation or service. • maternity unit in a hospital • ‘lunch’ products in a supermarket • sports ‘shop’ within a department store • final machining, testing and packing in a factory.

18. Cell Layout • Advantages • Fast throughput process • Group work adds to motivation • Often used in lean operations • Disadvantages • Need extra equipment • Low utilization of some equipment • Costly to reorganize

19. Servicescape • Bitner (1992) summarizes the different elements of a Servicescape into three composite dimensions namely: • ambient conditions - such as temperature and lighting • spatial layout and functionality • signs, symbols, and artefacts • Different operations use different combinations of the elements to influence particular forms and sets of behaviour. • e.g. retail clothing stores such as Karen Millen or Gap can each create very different kinds of displays and interiors depending on their market

20. Trends in Operations Design • Production-lining service – organizing plant, equipment and employees in a product flow layout. Removes the barrier between back of house and front of house operations • Decoupling back of house (BoH) from front of house (FoH) – removing some of the activities altogether, such as food preparation for local authority schools and hospitals • These are best illustrated by the Servuction System

21. Servuction System

22. Trends in Operations Design • Self-Service – employees are removed from many FoH operations, such as supermarkets. This is covered further in Chapter 8 • Co-Branding – more than one kind of operation within the same premises. Uses same BoH facility but different FoH staff. Example – Little Chef and Burger King share the same premises in the UK.

23. Facilities Management • Includes: • property strategy • space management • communications infrastructure • building maintenance and cleaning • energy and utilities monitoring • waste management and recycling • security and reception services • contract services management