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Oxford University Press, 2012. All rights reserved.

Operations Management

Chapter 4

Locating, Designing and

Managing Facilities

Jones & Robinson


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Jones & Robinson: Operations Management

Explain how firms select locations for their facilities

Explain outsourcing

Review site selection criteria for different organizations

Describe the layout of work and equipment withindifferent types of operations processes

Explain what is meant by the Servicescape and the

effect this has on customers

Explore trends in operations design

Learning Objectives


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Access to raw materials

Availability of energysupplies

Provision of other utilities,such as water supply

Nature of transportationnetworks

Nature of communicationlinks

Availability of land or property

Selecting Locations for Operations


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Local labourmarkets.

Access to markets orcustomers.

Proximity to or distance from competitors.

Business climate.

Governmentpolicies.

Other Location Selection Criteria


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Make or buy decisionnecessary for all firmsto decide as this has a bearing on profitability.

Outsourcingthe 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

Outsourcing


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Some potential disadvantages

Financial costs

Loss of control

Increased risksecurity of information

quality of product or service

supply risk

loss of expertise

Outsourcing


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Size of trading areahow far will customers

travel to get to the operation?

Market structure

Demographics

Travel patterns

Access

VisibilityMany companies use a weighted factor technique

based on the above criteria to select sites

Specific Site Selection



Weighted factor technique. A business selects themost important criteria in relation to a site and thenweights them according to their relative importance.

Regression modelling.A more sophisticated

approach based on statistics is undertaken on eachsite.

Expert estimation.A technique based on previousexperience and intuition.

Location intelligence. This technique has emergedrecently, combining geographic data such as aerialmaps, demographics, and business information tofacilitate site selection

Specific Site Selection



Competitive clustering. This refers to operations thatco-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 companyco-locating lots of its operations together so that it creates

market dominance.

For exampleLettuce 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

Bucking the Trend!



Fixed position layout

Process layout

Product layout

Cell layout

Process Layout Types in Operations



Fixed Position Layout

Recipient of the processing is stationaryand the resources, plant and peoplecome to the service.

motorway building shipbuilding

construction site

solicitors office

open heart surgery

high class restaurant.



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



Process Layout

Similar products or processes (or thosewith similar needs) are grouped together.The product (or Customer) travels betweenthe resources.

X-ray department in a hospital

specialist machining or processing

restaurant kitchen

tinned or frozen food in a supermarket.


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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


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Product Layout

All operations follow the same sequence

of processes.

automobile assembly

self-service cafeteria

paper manufacturing

television and domestic goodsassembly


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Product Layout

Advantages

High volumes give low costs

Specialized equipment opportunity

Disadvantages

Work can be repetitive

Inflexible process

Flow easily disrupted


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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.


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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


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Servicescape

Bitner (1992) summarizes the different elements of aServicescape 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 theelements to influence particular forms and sets ofbehaviour.

e.g. retail clothing stores such as Karen Millen or Gapcan each create very different kinds of displays andinteriors depending on their market


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Trends in Operations Design

Production-lining serviceorganizing plant,equipment and employees in a product flow layout.Removes the barrier between back of house andfront of house operations

Decoupling back of house (BoH) from front ofhouse (FoH)removing some of the activitiesaltogether, such as food preparation for local

authority schools and hospitals

These are best illustrated by the Servuction System


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Servuction System


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Self-Serviceemployees are removed frommany FoH operations, such as supermarkets.This is covered further in Chapter 8

Co-Brandingmore than one kind ofoperation within the same premises. Usessame BoH facility but different FoH staff.

ExampleLittle Chef and Burger King sharethe same premises in the UK.

Trends in Operations Design


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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

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