Operations

Management
Chapter 9 –
Layout Strategies

PowerPoint presentation to accompany

Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 9–1
 Learning Objectives
When you complete this chapter you
should be able to:

1. Discuss important issues in office layout

2. Define the objectives of retail layout
3. Discuss modern warehouse management
and terms such as ASRS, cross-docking,
and random stocking
4. Identify when fixed-position layouts are
appropriate

© 2008 Prentice Hall, Inc. 9–2

 Learning Objectives
When you complete this chapter, you
should be able to:

5. Explain how to achieve a good process-

oriented facility layout
6. Define work cell and the requirements of
a work cell
7. Define product-oriented layout
8. Explain how to balance production flow
in a repetitive or product-oriented facility

© 2008 Prentice Hall, Inc. 9–3

 Innovations at McDonald’s
 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)
 Now three separate dining sections

© 2008 Prentice Hall, Inc. 9–4

 Strategic Importance of
Layout Decisions

The objective of layout strategy

is to develop a cost-effective
layout that will meet a firm’s
competitive needs

© 2008 Prentice Hall, Inc. 9–5

 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

© 2008 Prentice Hall, Inc. 9–6

 Types of Layout
1. Office layout: Positions workers,
their equipment, and spaces/offices
to provide for movement of
information
2. Retail layout: Allocates shelf space
and responds to customer behavior
3. Warehouse layout: Addresses trade-
offs between space and material
handling
© 2008 Prentice Hall, Inc. 9–7
 Types of Layout
4. Fixed-position layout: Addresses the
layout requirements of large, bulky
projects such as ships and
buildings
5. Process-oriented layout: Deals with
low-volume, high-variety production
(also called job shop or intermittent
production)

© 2008 Prentice Hall, Inc. 9–8

 Types of Layout
6. Work cell layout: Arranges
machinery and equipment to focus
on production of a single product or
group of related products
7. Product-oriented layout: Seeks the
best personnel and machine
utilizations in repetitive or
continuous production

© 2008 Prentice Hall, Inc. 9–9

 Good Layouts Consider

1. Material handling equipment

2. Capacity and space requirements
3. Environment and aesthetics
4. Flows of information
5. Cost of moving between various
work areas

© 2008 Prentice Hall, Inc. 9 – 10

 Office Layout
 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
© 2008 Prentice Hall, Inc. 9 – 11
 Supermarket Retail Layout

 Objective is to maximize
profitability per square foot of
floor space
 Sales and profitability vary
directly with customer exposure

© 2008 Prentice Hall, Inc. 9 – 12

 Five Helpful Ideas for
Supermarket Layout
1. Locate high-draw items around the
periphery of the store
2. Use prominent locations for high-impulse
and high-margin items
3. Distribute power items to both sides of
an aisle and disperse them to increase
viewing of other items
4. Use end-aisle locations
5. Convey mission of store through careful
positioning of lead-off department
© 2008 Prentice Hall, Inc. 9 – 13
 Retail Slotting
 Manufacturers pay fees to retailers
to get the retailers to display (slot)
their product
 Contributing factors
 Limited shelf space
 An increasing number of new
products
 Better information about sales
through POS data collection
 Closer control of inventory
© 2008 Prentice Hall, Inc. 9 – 14
 Servicescapes
 Ambient conditions - background
characteristics such as lighting, sound,
smell, and temperature
 Spatial layout and functionality - which
involve customer
circulation path planning,
aisle characteristics, and
product grouping
 Signs, symbols, and
artifacts - characteristics
of building design that
carry social significance
© 2008 Prentice Hall, Inc. 9 – 15
 Warehousing and Storage
Layouts
 Objective is to optimize trade-offs
between handling costs and costs
associated with warehouse space
 Maximize the total “cube” of the
warehouse – utilize its full volume
while maintaining low material
handling costs

© 2008 Prentice Hall, Inc. 9 – 16

 Warehousing and Storage
Layouts
 Warehouse density tends to vary
inversely with the number of different
items stored
 Automated Storage and
Retrieval Systems (ASRSs)
can significantly improve
warehouse productivity by
an estimated 500%
 Dock location is a key
design element
© 2008 Prentice Hall, Inc. 9 – 17
 Cross-Docking
 Materials are moved directly from
receiving to shipping and are not
placed in storage
in the warehouse
 Requires tight
scheduling and
accurate shipments,
bar code or RFID
identification used for
advanced shipment
notification as materials
are unloaded
© 2008 Prentice Hall, Inc. 9 – 18
 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
1. Maintain list of open locations
2. Maintain accurate records
3. Sequence items to minimize travel, pick time
4. Combine picking orders
5. Assign classes of items to particular areas
© 2008 Prentice Hall, Inc. 9 – 19
 Customizing
 Value-added activities performed at
the warehouse
 Enable low cost and rapid response
strategies
 Assembly of components
 Loading software
 Repairs
 Customized labeling and packaging

© 2008 Prentice Hall, Inc. 9 – 20

 Fixed-Position Layout
 Product remains in one place
 Workers and equipment come to site
 Complicating factors
 Limited space at site
 Different materials
required at different
stages of the project
 Volume of materials
needed is dynamic
© 2008 Prentice Hall, Inc. 9 – 21
 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
© 2008 Prentice Hall, Inc. 9 – 22
 Process-Oriented Layout

 Like machines and equipment are

grouped together
 Flexible and capable of handling a
wide variety of products or
services
 Scheduling can be difficult and
setup, material handling, and labor
costs can be high

© 2008 Prentice Hall, Inc. 9 – 23

 Computer Software
 Three dimensional visualization
software allows managers to view
possible layouts and assess process,
material
handling,
efficiency,
and safety
issues

© 2008 Prentice Hall, Inc. 9 – 24

 Work Cells
 Reorganizes people and machines
into groups to focus on single
products or product groups
 Group technology identifies
products that have similar
characteristics for particular cells
 Volume must justify cells
 Cells can be reconfigured as
designs or volume changes
© 2008 Prentice Hall, Inc. 9 – 25
 Advantages of Work Cells
1. Reduced work-in-process inventory
2. Less floor space required
3. Reduced raw material and finished
goods inventory
4. Reduced direct labor
5. Heightened sense of employee
participation
6. Increased use of equipment and
machinery
7. Reduced investment in machinery
and equipment
© 2008 Prentice Hall, Inc. 9 – 26
 Requirements of Work Cells

1. Identification of families of products

2. A high level of training, flexibility
and empowerment of employees
3. Being self-contained, with its own
equipment and resources
4. Test (poka-yoke) at each station in
the cell

© 2008 Prentice Hall, Inc. 9 – 27

 Repetitive and Product-
Oriented Layout
Organized around products or families of
similar high-volume, low-variety products
1. Volume is adequate for high equipment
utilization
2. Product demand is stable enough to justify high
investment in specialized equipment
3. Product is standardized or approaching a phase
of life cycle that justifies investment
4. Supplies of raw materials and components are
adequate and of uniform quality

© 2008 Prentice Hall, Inc. 9 – 28

 Product-Oriented Layouts
 Fabrication line
 Builds components on a series of machines
 Machine-paced
 Require mechanical or engineering changes
to balance
 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
© 2008 Prentice Hall, Inc. 9 – 29
 Product-Oriented Layouts
Advantages
1. Low variable cost per unit
2. Low material handling costs
3. Reduced work-in-process inventories
4. Easier training and supervision
5. Rapid throughput

Disadvantages
1. High volume is required
2. Work stoppage at any point ties up the
whole operation
3. Lack of flexibility in product or production
rates
© 2008 Prentice Hall, Inc. 9 – 30
 Assembly-Line Balancing
 Objective is to minimize the imbalance
between machines or personnel while
meeting required output
 Starts with the precedence
relationships
1. Determine cycle time
2. Calculate theoretical
minimum number of
workstations
3. Balance the line by
assigning specific
tasks to workstations
© 2008 Prentice Hall, Inc. 9 – 31
 Operations
Management
Chapter 10 –
Human Resources
and Job Design
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 9 – 32
 Learning Objectives
When you complete this chapter you
should be able to:

1. Describe labor planning policies

2. Identify the major issues in job design
3. Identify major ergonomic and work
environment issues
4. Use the tools of methods analysis
5. Understand the contribution of the
visual workplace

© 2008 Prentice Hall, Inc. 9 – 33

 Human Resource Strategy
The objective of a human resource
strategy is to manage labor and
design jobs so people are effectively
and efficiently utilized
1. People should be effectively utilized
within the constraints of other
operations management decisions
2. People should have a reasonable quality
of work life in an atmosphere of mutual
commitment and trust
© 2008 Prentice Hall, Inc. 9 – 34
 Constraints on Human
Resource Strategy
Product strategy Process strategy
• Skills needed • Technology
• Talents needed

e
W • Machinery and

ur
• Materials used ha

ed
equipment used
t

oc
• Safety • Safety

Pr
Schedules Individual differences
• Time of day When Who • Strength and
• Time of year HUMAN fatigue
(seasonal) RESOURCE • Information
• Stability of STRATEGY processing and
schedules response

Location strategy Layout strategy

• Climate • Fixed position
re

H
he

ow
• Temperature • Process
W

• Noise • Assembly line

• Light • Work cell
• Air quality • Product
Figure 10.1
© 2008 Prentice Hall, Inc. 9 – 35
 Labor Planning
Employment Stability Policies
1. Follow demand exactly
 Matches direct labor costs to
production
 Incurs costs in hiring and
termination, unemployment
insurance, and premium wages
 Labor is treated as a variable cost

© 2008 Prentice Hall, Inc. 9 – 36

 Labor Planning
Employment Stability Policies
2. Hold employment constant
 Maintains trained workforce
 Minimizes hiring, termination, and
unemployment costs
 Employees may be underutilized
during slack periods
 Labor is treated as a fixed cost

© 2008 Prentice Hall, Inc. 9 – 37

 Work Schedules
 Standard work schedule
 Five eight-hour days
 Flex-time
 Allows employees, within limits, to
determine their own schedules
 Flexible work week
 Fewer but longer days
 Part-time
 Fewer, possibly irregular, hours

© 2008 Prentice Hall, Inc. 9 – 38

 Job Design

 Specifying the tasks that constitute

a job for an individual or a group
1. Job specialization
2. Job expansion
3. Psychological components
4. Self-directed teams
5. Motivation and incentive systems

© 2008 Prentice Hall, Inc. 9 – 39

 Labor Specialization
 The division of labor into unique tasks
 First suggested by Adam Smith in 1776
1. Development of dexterity and faster
learning
2. Less loss of time
3. Development of specialized tools
 Later Charles Babbage (1832) added
another consideration
4. Wages exactly fit the required skill

© 2008 Prentice Hall, Inc. 9 – 40

 Job Expansion

 Adding more variety to jobs

 Intended to reduce boredom
associated with labor specialization
 Job enlargement
 Job rotation
 Job enrichment
 Employee empowerment

© 2008 Prentice Hall, Inc. 9 – 41

 Psychological Components
of Job Design
Human resource strategy requires
consideration of the psychological
components
of job design

© 2008 Prentice Hall, Inc. 9 – 42

 Hawthorne Studies
 They studied light levels, but discovered
productivity improvement was
independent from lighting levels
 Introduced psychology into the workplace
 The workplace social system and distinct
roles played by individuals may be more
important than physical factors
 Individual differences may be dominant in
job expectation and contribution

© 2008 Prentice Hall, Inc. 9 – 43

 Core Job Characteristics
Jobs should include the following
characteristics
 Skill variety
 Job identity
 Job significance
 Autonomy
 Feedback

© 2008 Prentice Hall, Inc. 9 – 44

 Self-Directed Teams
 Group of empowered individuals
working together to reach a
common goal
 May be organized for long-term or
short-term objectives
 Effective because
 Provide employee empowerment
 Ensure core job characteristics
 Meet individual psychological needs

© 2008 Prentice Hall, Inc. 9 – 45

 Self-Directed Teams
To maximize effectiveness, managers should
 Ensure those who have legitimate
contributions are on the team
 Provide management support
 Ensure the necessary training
 Endorse clear objectives and goals
 Financial and non-financial rewards
 Supervisors must release control

© 2008 Prentice Hall, Inc. 9 – 46

 Benefits of Teams and
Expanded Job Designs
 Improved quality of work life
 Improved job satisfaction
 Increased motivation
 Allows employees to accept more
responsibility
 Improved productivity and quality
 Reduced turnover and absenteeism
© 2008 Prentice Hall, Inc. 9 – 47
 Motivation and Incentive
Systems
 Bonuses - cash or stock options
 Profit-sharing - profits for distribution to
employees
 Gain sharing - rewards for improvements
 Incentive plans - typically based on
production rates
 Knowledge-based systems - reward for
knowledge or skills

© 2008 Prentice Hall, Inc. 9 – 48

 Ergonomics and the Work
Environment
 Ergonomics is the study of the
interface between man and
machine
 Often called
human factors
 Operator input
to machines

© 2008 Prentice Hall, Inc. 9 – 49

 Ergonomics and Work
Methods

 Feedback to operators
 The work environment
 Illumination
 Noise
 Temperature
 Humidity

© 2008 Prentice Hall, Inc. 9 – 50

 Methods Analysis
 Focuses on how task is performed
 Used to analyze
1. Movement of individuals or material
 Flow diagrams and process charts
2. Activities of human and machine and
crew activity
 Activity charts
3. Body movement
 Micro-motion charts

© 2008 Prentice Hall, Inc. 9 – 51

 Labor Standards
 Effective manpower planning is
dependent on a knowledge of the
labor required
 Labor standards are the amount of
time required to perform a job or
part of a job
 Accurate labor standards help
determine labor requirements,
costs, and fair work
© 2008 Prentice Hall, Inc. 9 – 52