What layout strategy deals with low volume high variety production

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Layout Strategies

PowerPoint presentation to accompany

Heizer and Render

Operations Management, Eleventh Edition

Principles of Operations Management, Ninth Edition

PowerPoint slides by Jeff Heyl

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Outline

Global Company Profile:
McDonald’s

The Strategic Importance of Layout Decisions
Types of Layout
Office Layout
Retail Layout
Warehousing and Storage Layouts
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Outline - Continued

Fixed-Position Layout

Process-Oriented Layout

Work Cells

Repetitive and Product-Oriented Layout

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Learning Objectives

When you complete this chapter you should be able to:

Discuss important issues in office layout
Define the objectives of retail layout
Discuss modern warehouse management and terms such as ASRS, cross-docking, and random stocking
Identify when fixed-position layouts are appropriate
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When you complete this chapter you should be able to:

Learning Objectives

Explain how to achieve a good process-oriented facility layout
Define work cell and the requirements of a work cell
Define product-oriented layout
Explain how to balance production flow in a repetitive or product-oriented facility
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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
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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
Six out of the seven are layout decisions!

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McDonald’s New Layout

Seventh major innovation
Redesigning all 30,000 outlets around the world
Three separate dining areas
Linger zone with comfortable chairs and Wi-Fi connections
Grab and go zone with tall counters
Flexible zone for kids and families
Facility layout is a source of competitive advantage
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Strategic Importance of Layout Decisions

The objective of layout strategy is to develop an effective and efficient layout that will meet the firm’s competitive requirements

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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
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Types of Layout

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

Work cell layout: Arranges 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
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Layout Strategies

TABLE 9.1 Layout Strategies
OBJECTIVES EXAMPLES
Office Locate workers requiring frequent contact close to one another Allstate Insurance Microsoft Corp.
Retail Expose customer to high-margin items Kroger’s Supermarket Walgreen’s Bloomingdale’s
Warehouse (storage) Balance low-cost storage with low-cost material handling Federal-Mogul’s warehouse The Gap’s distribution center
Project (fixed position) Move material to the limited storage areas around the site Ingall Ship Building Corp. Trump Plaza Pittsburgh Airport
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Layout Strategies

TABLE 9.1 Layout Strategies
OBJECTIVES EXAMPLES
Job Shop (process oriented) Manage varied material flow for each product Arnold Palmer Hospital Hard Rock Cafe Olive Garden
Work Cell (product families) Identify a product family, build teams, cross train team members Hallmark Cards Wheeled Coach Ambulances
Repetitive/ Continuous (product oriented) Equalize the task time at each workstation Sony’s TV assembly line Toyota Scion
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Good Layouts Consider

Material handling equipment
Capacity and space requirements
Environment and aesthetics
Flows of information
Cost of moving between various work areas
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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
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Relationship Chart

Figure 9.1

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Office Layout

Three physical and social aspects

Proximity

Privacy

Permission

Two major trends

Information technology

Dynamic needs for space and services

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Supermarket Retail Layout

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

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Store Layout

Figure 9.2

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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
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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
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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
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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

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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
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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
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Random Stocking

Typically requires automatic identification systems (AISs) and effective information systems

Allows more efficient use of space

Key tasks

Maintain list of open locations

Maintain accurate records

Sequence items to minimize travel, pick time

Combine picking orders

Assign classes of items to particular areas

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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
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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
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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
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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
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Process-Oriented Layout

Figure 9.3

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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
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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

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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.

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50 100 0 0 20

30 50 10 0

20 0 100

50 0

0

Process Layout Example

Figure 9.4

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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)

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Process Layout Example

Interdepartmental Flow Graph

Figure 9.6

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Process Layout Example

Cost = $50 + $200 + $40
(1 and 2) (1 and 3) (1 and 6)

+ $30 + $50 + $10
(2 and 3) (2 and 4) (2 and 5)

+ $40 + $100 + $50
(3 and 4) (3 and 6) (4 and 5)

= $570

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Process Layout Example

Revised Interdepartmental Flow Graph

Figure 9.7

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Process Layout Example

Cost = $50 + $100 + $20
(1 and 2) (1 and 3) (1 and 6)

+ $60 + $50 + $10
(2 and 3) (2 and 4) (2 and 5)

+ $40 + $100 + $50
(3 and 4) (3 and 6) (4 and 5)

= $480