Operations Management Layout Strategies Outline Global Company Profile

Operations Management Layout Strategies

Outline þ Global Company Profile: Mc. Donald’s þ The Strategic Importance of Layout Decisions þ Types of Layout þ Office Layout

Outline – Continued þ Retail Layout þ Servicescapes þ Warehousing and Storage Layouts þ Cross-Docking þ Random Docking þ Customizing þ Fixed-Position Layout

Outline – Continued þ Process-Oriented Layout þ Computer Software for Process. Oriented Layouts þ Work Cells þ Requirements of Work Cells þ Staffing and Balancing Work Cells þ The Focused Work Center and the Focused Factory

Outline – Continued þ Repetitive and Product-Oriented Layout þ Assembly-Line Balancing

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

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

Innovations at Mc. Donald’s þ Indoor seating (1950 s) þ Drive-through window (1970 s) þ Adding breakfast to the menu (1980 s) þ Adding play areas (late 1980 s) þ Redesign of the kitchens (1990 s) þ Self-service kiosk (2004) þ Now three separate dining sections

Innovations at Mc. Donald’s þ Indoor seating (1950 s) þ Drive-through window (1970 s) Six out of the þ Adding breakfast to the menu seven are (1980 s) layout þ Adding play areas (late 1980 s) decisions! þ Redesign of the kitchens (1990 s) þ Self-service kiosk (2004) þ Now three separate dining sections

Mc. Donald’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

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

Layout Design Considerations þ Higher utilization of space, equipment, and people þ Improved flow of information, materials, or people þ Improved employee morale and safer working conditions þ Improved customer/client interaction þ Flexibility

Types of Layout 1. Office layout 2. Retail layout 3. Warehouse layout 4. Fixed-position layout 5. Process-oriented layout 6. Work-cell layout 7. Product-oriented layout

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 tradeoffs between space and material handling

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)

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

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

Layout Strategies Office Retail Warehouse (storage) Examples Allstate Insurance Microsoft Corp. Locate workers requiring frequent contact close to one another Kroger’s Supermarket Federal-Mogul’s warehouse Walgreen’s The Gap’s distribution center Bloomingdale’s Problems/Issues Expose customer to Balance low-cost high-margin items storage with lowcost material handling

Layout Strategies Project (fixed position) Job Shop (process oriented) Examples Ingall Ship Building Corp. Trump Plaza Arnold Palmer Hospital Hard Rock Café Olive Garden Pittsburgh Airport Problems/Issues Move material to the Manage varied material limited storage areas flow for each product around the site

Layout Strategies Work Cells (product families) Repetitive/ Continuous (product oriented) Examples Hallmark Cards Wheeled Coach Standard Aero Problems/Issues Identify a product family, build teams, cross train team members Sony’s TV assembly line Toyota Scion Equalize the task time at each workstation

Office Layout þ Grouping of workers, their equipment, and spaces to provide comfort, safety, and movement of information þ Movement of information is main distinction þ Typically in state of flux due to frequent technological changes

Relationship Chart

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

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

Store Layout

Retail Slotting þ Manufacturers pay fees to retailers to get the retailers to display (slot) their product þ Contributing factors þ Limited shelf space þ An increasing number of new products þ Better information about sales through POS data collection þ Closer control of inventory

Retail Store Shelf Space Planogram Shampoo Conditioner Shampoo Conditioner 2 ft. Shampoo Shampoo þ Computerized tool for shelfspace management þ Generated from store’s scanner data on sales þ Often supplied by manufacturer 5 facings

Servicescapes þ Ambient conditions - background characteristics such as lighting, sound, smell, and temperature þ Spatial layout and functionality - which involve customer circulation path planning, aisle characteristics, and product grouping þ Signs, symbols, and artifacts - characteristics of building design that carry social significance

Warehousing and Storage Layouts þ Objective is to optimize trade-offs between handling costs and costs associated with warehouse space þ Maximize the total “cube” of the warehouse – utilize its full volume while maintaining low material handling costs

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

Warehousing and Storage Layouts þ Warehouse density tends to vary inversely with the number of different items stored þ Automated Storage and Retrieval Systems (ASRSs) can significantly improve warehouse productivity by an estimated 500% þ Dock location is a key design element

Cross-Docking þ Materials are moved directly from receiving to shipping and are not placed in storage in the warehouse þ Requires tight scheduling and accurate shipments, bar code or RFID identification used for advanced shipment notification as materials are unloaded

Random Stocking þ Typically requires automatic identification systems (AISs) and effective information systems þ Random assignment of stocking locations allows more efficient use of space þ 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

Customizing þ Value-added activities performed at the warehouse þ Enable low cost and rapid response strategies þ Assembly of components þ Loading software þ Repairs þ Customized labeling and packaging

Warehouse Layout Traditional Layout Customization Storage racks Conveyor Staging Shipping and receiving docks Office

Warehouse Layout Cross-Docking Layout Office Shipping and receiving docks

Fixed-Position Layout þ Product remains in one place þ Workers and equipment come to site þ Complicating factors þ Limited space at site þ Different materials required at different stages of the project þ Volume of materials needed is dynamic

Alternative Strategy þ As much of the project as possible is completed off-site in a productoriented facility þ This can significantly improve efficiency but is only possible when multiple similar units need to be created

Process-Oriented Layout þ Like machines and equipment are grouped together þ Flexible and capable of handling a wide variety of products or services þ Scheduling can be difficult and setup, material handling, and labor costs can be high

Process-Oriented Layout ER triage room Patient A - broken leg Emergency room admissions Patient B - erratic heart pacemaker Surgery Laboratories Radiology ER Beds Pharmacy Billing/exit

Layout at Arnold Palmer Hospital Pie-shaped rooms Central break and medical supply rooms Local linen supply Central nurses station Local nursing pod

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

Process-Oriented Layout n n Minimize cost = ∑ ∑ Xij Cij i=1 j=1 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 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. 1. Construct a “from-to matrix” 2. Determine the space requirements 3. Develop an initial schematic diagram 4. Determine the cost of this layout 5. Try to improve the layout 6. Prepare a detailed plan

Process Layout Example Number of loads per week Department Assembly Painting (1) (2) Assembly (1) Painting (2) Machine Shop (3) Receiving (4) Shipping (5) Testing (6) 50 Machine Receiving Shop (3) (4) Shipping (5) Testing (6) 100 0 0 20 30 50 10 0 20 0 100 50 0 0

Process Layout Example Area 1 Area 2 Area 3 Assembly Department (1) Painting Department (2) Machine Shop Department (3) 40’ Receiving Department (4) Shipping Department (5) Testing Department (6) Area 4 Area 5 60’ Area 6

Process Layout Example Interdepartmental Flow Graph 100 1 50 20 50 4 50 2 10 30 3 20 100 5 6

Process Layout Example n n Cost = ∑ ∑ Xij Cij i=1 j=1 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

Process Layout Example Revised Interdepartmental Flow Graph 30 50 2 1 10 20 50 4 50 5 100 3 100 50 6

Process Layout Example n n Cost = ∑ ∑ Xij Cij i=1 j=1 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

Process Layout Example Area 1 Area 2 Area 3 Painting Department (2) Assembly Department (1) Machine Shop Department (3) 40’ Receiving Department (4) Shipping Department (5) Testing Department (6) Area 4 Area 5 60’ Area 6

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

CRAFT Example 1 PATTERN 2 3 4 5 6 1 D D B B B 2 D D B B D D 3 D D D E E E D D D 4 C C D E E F F D 5 A A A F E E E D 6 A A A F F F 1 PATTERN 2 3 4 5 6 1 A A B B 2 A A B 3 D D 4 C C D 5 F F 6 E E TOTAL COST 20, 100 EST. COST REDUCTION ITERATION 0 (a) . 00 TOTAL COST 14, 390 EST. COST REDUCTION ITERATION 3 (b) 70.

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

Work Cells þ Reorganizes people and machines into groups to focus on single products or product groups þ Group technology identifies products that have similar characteristics for particular cells þ Volume must justify cells þ Cells can be reconfigured as designs or volume changes

Advantages of Work Cells Reduced work-in-process inventory Less floor space required Reduced raw material and finished goods inventory Reduced direct labor Heightened sense of employee participation Increased use of equipment and machinery Reduced investment in machinery and equipment

Improving Layouts Using Work Cells Current layout - workers in small closed areas. Cannot increase output without a third worker and third set of equipment. Improved layout - cross-trained workers can assist each other. May be able to add a third worker as additional output is needed.

Improving Layouts Using Work Cells Current layout - straight lines make it hard to balance tasks because work may not be divided evenly Improved layout - in U shape, workers have better access. Four cross-trained workers were reduced. U-shaped line may reduce employee movement and space requirements while enhancing communication, reducing the number of workers, and facilitating inspection

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

Staffing and Balancing Work Cells Determine the takt time Total work time available Takt time = Units required Determine the number of operators required Total operation time required Workers required = Takt time

Staffing Work Cells Example Standard time required 600 Mirrors per day required Mirror production scheduled for 8 hours per day From a work balance chart 60 total operation time 50 = 140 seconds 40 30 20 10 0 Assemble Paint Test Label Pack for shipment Operations

Staffing Work Cells Example 600 Mirrors per day required Mirror production scheduled for 8 hours per day From a work balance chart total operation time = 140 seconds Takt time = (8 hrs x 60 mins) / 600 units =. 8 mins = 48 seconds Total operation time required Workers required = Takt time = 140 / 48 = 2. 91

Work Balance Charts Used for evaluating operation times in work cells Can help identify bottleneck operations Flexible, cross-trained employees can help address labor bottlenecks Machine bottlenecks may require other approaches

Focused Work Center and Focused Factory þ Focused Work Center þ Identify a large family of similar products that have a large and stable demand þ Moves production from a general-purpose, process-oriented facility to a large work cell þ Focused Factory þ A focused work cell in a separate facility þ May be focused by product line, layout, quality, new product introduction, flexibility, or other requirements

Focused Work Center and Focused Factory Work Cell A work cell is a temporary productoriented arrangement of machines and personnel in what is ordinarily a processoriented facility. Focused Work Center Focused Factory A focused work center is A focused factory is a a permanent productpermanent facility to oriented arrangement produce a product or of machines and component in a personnel in what is product-oriented ordinarily a processfacility. Many focused oriented facility. factories currently being built were originally part of a process-oriented facility. Example: A job shop Example: Pipe bracket with machinery and manufacturing at a personnel rearranged shipyard. to produce 300 unique control panels. Example: A plant to produce window mechanism for automobiles.

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

Product-Oriented Layouts þ Fabrication line þ Builds components on a series of machines þ Machine-paced þ Require mechanical or engineering changes to balance þ Assembly line þ Puts fabricated parts together at a series of workstations þ Paced by work tasks þ 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 Advantages 1. 2. 3. 4. 5. Low variable cost per unit Low material handling costs Reduced work-in-process inventories Easier training and supervision 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

Mc. Donald’s Assembly Line

Disassembly Lines Disassembly is being considered in new product designs “Green” issues and recycling standards are important consideration Automotive disassembly is the 16 th largest industry in the US

Assembly-Line Balancing þ Objective is to minimize the imbalance between machines or personnel while meeting required output þ 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

Wing Component Example Performance Task Must Follow Time Task Listed Task (minutes) Below A 10 — B 11 A C 5 B D 4 B E 12 A F 3 C, D G 7 F H 11 E I 3 G, H Total time 66 This means that tasks B and E cannot be done until task A has been completed

Wing Component Example Performance Task Must Follow Time Task Listed Task (minutes) Below A 10 — B 11 A C 5 B D 4 B E 12 A F 3 C, D G 7 F 10 H 11 E A I 3 G, H Total time 66 5 11 B 12 E C 4 D 3 7 F G 3 11 H I

Wing Component Example 480 available Performance Task Must Follow mins per day Time Task Listed 40 units required Task (minutes) Below A 10 — B 11 A Production time C 5 B available per day Cycle D 4 B time = Units required per day E 12 A = 480 / 40 5 F 3 C, D = 12 minutes per unit C G 7 F 10 11 3 7 n H 11 E for task. Fi A ∑ Time B G Minimum I 3 G, H 4 i=1 3 number of = Cycle Dtime Total time 66 workstations I 12 11 = 66 / 12 E H = 5. 5 or 6 stations

Wing. Line-Balancing Component Example Heuristics 1. Longest task time Choose the available 480 task available Performance Task Must Follow with the longest task time mins per day Time Task Listed 40 task units required Task 2. Most (minutes) following tasks. Below Choose the available number of= 12 mins A 10 —with the largest. Cycle time B 11 Afollowing tasks. Minimum = 5. 5 or 6 C 3. Ranked 5 positional BChoose the available workstations task for D Bwhich the sum of following weight 4 E 12 Atask times is the longest 5 F 3 C, D the available C task G 4. Shortest 7 task time FChoose 10 shortest 11 3 7 with the task time H 11 E A B G F I 5. Least number 3 G, H 4 of Choose the available task 3 with the least number of Totalfollowing time 66 tasks D I 12 11 following tasks E H

Wing Component Example 480 available Performance Task Must Follow mins per day Time Task Listed 40 units required Task (minutes) Below A 10 — Cycle time = 12 mins B 11 A Minimum Station 5 = 5. 5 or 6 C 52 B workstations C B D 4 11 3 7 E 10 12 A B G F A 3 C, D F 4 3 G 7 F D E Station 3 H 11 I I 3 G, H 12 11 Station 6 Stationtime 66 Total E H 1 Station 4 Station 5

Wing Component Example 480 available Performance Task Must Follow mins per day Time Task Listed 40 units required Task (minutes) Below A 10 — Cycle time = 12 mins B 11 A Minimum = 5. 5 or 6 C 5 B workstations D 4 B E 12 A F 3 C, D ∑ Task times G 7 F Efficiency = (Actual number of. Eworkstations) x (Largest cycle time) H 11 I 3 G, H = 66 minutes / (6 stations) x (12 minutes) Total time 66 = 91. 7%