Slide1: Operations Management Chapter 9 – Layout Strategy © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 6e Operations Management, 8e


Innovations at McDonald’s: Innovations at McDonald’s Indoor seating (1950s) Drive-through window (1970s) Adding breakfast to the menu (1980s) Adding play areas (1990s) Three out of the four are layout decisions!


McDonald’s New Kitchen Layout: McDonald’s New Kitchen Layout Fifth major innovation Sandwiches assembled to order Elimination of some steps, shortening of others No food prepared ahead except patty New bun toasting machine and new bun formulation Repositioning condiment containers Savings of $100,000,000 per year in food costs


McDonald’s New Kitchen Layout: McDonald’s New Kitchen Layout


Strategic Importance of Layout Decisions: Strategic Importance of Layout Decisions The objective of layout strategy is to develop an economic layout that will meet the firm’s competitive requirements


Layout Design Considerations: 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


Types of Layout: Types of Layout Office layout Retail layout Warehouse layout Fixed-position layout Process-oriented layout Work cell layout Product-oriented layout


Types of Layout: Types of Layout Office layout - positions workers, their equipment, and spaces/offices to provide for movement of information Retail layout - allocates shelf space and responds to customer behavior Warehouse layout - addresses trade-offs between space and material handling


Types of Layout: Types of Layout Fixed-position layout - addresses the layout requirements of large, bulky projects such as ships and buildings Process-oriented layout - deals with low-volume, high-variety production (also called job shop or intermittent production)


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


Supermarket Retail Layout: Supermarket Retail Layout Objective is to maximize profitability per square foot of floor space Sales and profitability vary directly with customer exposure


Five Helpful Ideas for Supermarket 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


Retail Slotting: 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


Retail Store Shelf Space Planogram: Retail Store Shelf Space Planogram Computerized tool for shelf-space management Generated from store’s scanner data on sales Often supplied by manufacturer


Warehousing and Storage Layouts: 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


Warehousing and Storage Layouts: Warehousing and Storage Layouts All costs associated with the transaction Incoming transport Storage Finding and moving material Outgoing transport Equipment, people, material, supervision, insurance, depreciation Minimize damage and spoilage Material Handling Costs


Warehousing and Storage Layouts: Warehousing and Storage Layouts Warehouse density tends to vary inversely with the number of different items stored Automated Storage and Retrieval Systems (ASRS) can significantly improve warehouse productivity Dock location is a key design element


Cross-Docking: 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, typically with bar code identification


Random Stocking: Random Stocking Typically requires automatic identification systems (AISs) and effective information systems Random assignment of stocking locations allows more efficient use of space Maintain list of open locations Maintain accurate records Sequence items to minimize travel time Combine picking orders Assign classes of items to particular areas


Warehouse Layout: Warehouse Layout Traditional Layout


Warehouse Layout: Warehouse Layout Cross-Docking Layout


Fixed-Position Layout: 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


Process-Oriented Layout: 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


Process-Oriented Layout: Process-Oriented Layout Figure 9.3


Process-Oriented Layout: Process-Oriented Layout Arrange work centers so as to minimize the costs of material handling Basic cost elements are Number of loads (or people) moving between centers Distance loads (or people) move between centers


Process-Oriented Layout: Process-Oriented Layout where n = total number of work centers or departments i, j = individual departments Xij = number of loads moved from department i to department j Cij = cost to move a load between department i and department j


Process Layout Example: Process Layout Example 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 Arrange six departments in a factory to minimize the material handling costs. Each department is 20 x 20 feet and the building is 60 feet long and 40 feet wide.


Process Layout Example: 50 100 0 0 20 30 50 10 0 20 0 100 50 0 0 Process Layout Example Figure 9.4


Process Layout Example: Process Layout Example Receiving Shipping Testing Department Department Department (4) (5) (6) Figure 9.5 Assembly Painting Machine Shop Department Department Department (1) (2) (3)


Process Layout Example: Process Layout Example Cost = $50 + $200 + $40 (1 and 2) (1 and 3) (1 and 6) + $30 + $100 + $10 (2 and 3) (2 and 4) (2 and 5) + $40 + $100 + $50 (3 and 4) (3 and 6) (4 and 5) = $620


Process Layout Example: Process Layout Example Interdepartmental Flow Graph


Process Layout Example: Process Layout Example Painting Receiving Shipping Department Department Department (2) (4) (5) Assembly Machine Shop Testing Department Department Department (1) (3) (6)


Process Layout Example: Process Layout Example Interdepartmental Flow Graph


Process Layout Example: Process Layout Example Cost = $50 + $100 + $40 (1 and 2) (1 and 3) (1 and 6) + $60 + $50 + $20 (2 and 3) (2 and 4) (2 and 5) + $20 + $100 + $50 (3 and 4) (3 and 6) (4 and 5) = $490


Computer Software: Computer Software Graphical approach only works for small problems Computer programs are available to solve bigger problems CRAFT ALDEP CORELAP Factory Flow


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


Product-Oriented Layouts: 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


Product-Oriented Layouts: Product-Oriented Layouts


Assembly-Line Balancing: Assembly-Line Balancing Objective is to minimize the imbalance between machines or personnel while meeting required output Starts with the precedence relationships Determine cycle time Calculate theoretical minimum number of workstations Balance the line by assigning specific tasks to workstations


Copier Example: Copier Example


Copier Example: Copier Example Figure 9.13


Copier Example: Copier Example 480 available mins per day 40 units required


Copier Example: Copier Example Line-Balancing Heuristics Table 9.4


Copier Example: Copier Example Figure 9.14


Copier Example: Copier Example