Process And Layout Strategies

Material for session Three of the Operations Management Course at the MBA IV at HIBA in Damascus

1. 7 – 1
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Operations
Management
Session 3 – Session 3 –
Process and Layout Process and Layout
StrategiesStrategies

2. 7 – 2
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
OutlineOutline
Global Company Profile: Dell Global Company Profile: Dell
Computer Corp.Computer Corp.
Four Process StrategiesFour Process Strategies
Process FocusProcess Focus
Repetitive FocusRepetitive Focus
Product FocusProduct Focus
Mass Customization FocusMass Customization Focus
Comparison of Process ChoicesComparison of Process Choices

3. 7 – 3
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Process Analysis and DesignProcess Analysis and Design
Flow DiagramsFlow Diagrams
Time-Function MappingTime-Function Mapping
Value-Stream MappingValue-Stream Mapping
Process ChartsProcess Charts
Service BlueprintingService Blueprinting

4. 7 – 4
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Service Process DesignService Process Design
Customer Interaction and Process Customer Interaction and Process
DesignDesign
More Opportunities to Improve Service More Opportunities to Improve Service
ProcessesProcesses
Selection of Equipment and Selection of Equipment and
TechnologyTechnology

5. 7 – 5
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Production TechnologyProduction Technology
Machine TechnologyMachine Technology
Automatic Identification Systems (AISs) Automatic Identification Systems (AISs)
and RFIDand RFID
Process ControlProcess Control
Vision SystemsVision Systems
RobotsRobots

6. 7 – 6
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Production Technology (cont.)Production Technology (cont.)
Automated Storage and Retrieval Automated Storage and Retrieval
Systems (ASRSs)Systems (ASRSs)
Automated Guided Vehicles (AGVs)Automated Guided Vehicles (AGVs)
Flexible Manufacturing Systems (FMSs)Flexible Manufacturing Systems (FMSs)
Computer-Integrated Manufacturing Computer-Integrated Manufacturing
(CIM)(CIM)

7. 7 – 7
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Technology in ServicesTechnology in Services
Process Redesign Process Redesign
Ethics and Environmentally Ethics and Environmentally
Friendly ProcessesFriendly Processes

8. 7 – 8
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Learning ObjectivesLearning Objectives
When you complete this chapter you When you complete this chapter you
should be able to:should be able to:
1.1.Describe four production processesDescribe four production processes
2.2.Compute crossover points for different Compute crossover points for different
processesprocesses
3.3.Use the tools of process analysisUse the tools of process analysis
4.4.Describe customer interaction in Describe customer interaction in
process designprocess design
5.5.Identify recent advances in production Identify recent advances in production
technologytechnology

9. 7 – 9
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Dell Computer CompanyDell Computer Company
Mass customization provides a competitive Mass customization provides a competitive
advantageadvantage
Sell custom-built PCs directly to consumerSell custom-built PCs directly to consumer
Lean production processes and good product Lean production processes and good product
design allow responsivenessdesign allow responsiveness
Integrate the Web into every aspect of its Integrate the Web into every aspect of its
businessbusiness
Focus research on software designed to make Focus research on software designed to make
installation and configuration of its PCs fast installation and configuration of its PCs fast
and simpleand simple

10. 7 – 10
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process, Volume, and VarietyProcess, Volume, and Variety
Process Focus
projects, job shops
(machine, print,
carpentry)
Standard Register
Repetitive
(autos, motorcycles)
Harley-Davidson
Product Focus
(commercial
baked goods,
steel, glass)
Nucor Steel
High VarietyHigh Variety
one or few units one or few units
per run, high per run, high
varietyvariety
(allows (allows
customization)customization)
Changes in Changes in
ModulesModules
modest runs, modest runs,
standardized standardized
modulesmodules
Changes in Changes in
Attributes (such Attributes (such
as grade, as grade,
quality, size, quality, size,
thickness, etc.) thickness, etc.)
long runs onlylong runs only
Mass Customization
(difficult to achieve, but
huge rewards)
Dell Computer
Poor Strategy Poor Strategy
(Both fixed and (Both fixed and
variable costs are variable costs are
high)high)
Low Low
VolumeVolume
Repetitive Repetitive
ProcessProcess
High High
VolumeVolume
VolumeVolume
Figure 7.1Figure 7.1

11. 7 – 11
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process StrategiesProcess Strategies
How to produce a product or provide a How to produce a product or provide a
service thatservice that
Meets or exceeds customer Meets or exceeds customer
requirementsrequirements
Meets cost and managerial goalsMeets cost and managerial goals
Has long term effects onHas long term effects on
Efficiency and production flexibilityEfficiency and production flexibility
Costs and qualityCosts and quality

12. 7 – 12
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process StrategiesProcess Strategies
Four basic strategiesFour basic strategies
Process focusProcess focus
Repetitive focusRepetitive focus
Product focusProduct focus
Mass customizationMass customization
Within these basic strategies there are Within these basic strategies there are
many ways they may be implementedmany ways they may be implemented

13. 7 – 13
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process FocusProcess Focus
Facilities are organized around specific Facilities are organized around specific
activities or processesactivities or processes
General purpose equipment and skilled General purpose equipment and skilled
personnelpersonnel
High degree of product flexibilityHigh degree of product flexibility
Typically high costs and low equipment Typically high costs and low equipment
utilizationutilization
Product flows may vary considerably Product flows may vary considerably
making planning and scheduling a making planning and scheduling a
challengechallenge

14. 7 – 14
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process FocusProcess Focus
Many Many
inputsinputs
Many Many
variety variety
of of
outputsoutputs
Job ShopJob Shop
Many departments and
many routings

15. 7 – 15
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Accounting
Process Flow DiagramProcess Flow Diagram
Information flowInformation flow
Material flowMaterial flow
Figure 7.2Figure 7.2
COLLATING
DEPT
GLUING, BINDING,
STAPLING, LABELING
POLYWRAP DEPT
SHIPPING
Customer
PRINTING DEPT
PREPRESS DEPT
Vendors
Receiving
Warehouse
Purchasing
Customer
Customer sales
representative

16. 7 – 16
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Repetitive FocusRepetitive Focus
Facilities often organized as assembly Facilities often organized as assembly
lineslines
Characterized by modules with parts Characterized by modules with parts
and assemblies made previouslyand assemblies made previously
Modules may be combined for many Modules may be combined for many
output optionsoutput options
Less flexibility than process-focused Less flexibility than process-focused
facilities but more efficientfacilities but more efficient

17. 7 – 17
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Repetitive FocusRepetitive Focus
Raw Raw
materials materials
and and
module module
inputsinputs
Modules Modules
combined combined
for many for many
output output
optionsoptions
Few Few
modulesmodules
Automobile Assembly LineAutomobile Assembly Line

18. 7 – 18
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process Flow DiagramProcess Flow Diagram
THE ASSEMBLY LINETHE ASSEMBLY LINE
TESTING
28 tests
Oil tank work cell
Shocks and forks
Handlebars
Fender work cell
Air cleaners
Fluids and mufflers
Fuel tank work cell
Wheel work cell
Roller testing
Incoming parts
From Milwaukee From Milwaukee
on a JIT arrival on a JIT arrival
scheduleschedule
Engines and
transmissions
Frame tube
bending
Frame-building
work cells
Frame
machining
Hot-paint
frame painting
Crating
Figure 7.3Figure 7.3

19. 7 – 19
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Product FocusProduct Focus
Facilities are organized by productFacilities are organized by product
High volume but low variety of High volume but low variety of
productsproducts
Long, continuous production runs Long, continuous production runs
enable efficient processesenable efficient processes
Typically high fixed cost but low Typically high fixed cost but low
variable costvariable cost
Generally less skilled laborGenerally less skilled labor

20. 7 – 20
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Product FocusProduct Focus
Few Few
inputsinputs
Output Output
variations variations
in size, in size,
shape, and shape, and
packagingpackaging
Continuous Work FlowContinuous Work Flow

21. 7 – 21
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Product FocusProduct Focus
Nucor Steel PlantNucor Steel Plant
Continuous caster Continuous caster
Continuous cast steel Continuous cast steel
sheared into 24-ton slabssheared into 24-ton slabs
Hot tunnel furnace - 300 ftHot tunnel furnace - 300 ft
Hot mill for finishing, cooling, and coilingHot mill for finishing, cooling, and coiling
DD
EE
FF
GG
HH
II
Scrap Scrap
steelsteel
Ladle of molten steelLadle of molten steel
Electric Electric
furnacefurnace
AA
BB
CC

22. 7 – 22
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Mass CustomizationMass Customization
The rapid, low-cost production of The rapid, low-cost production of
goods and service to satisfy goods and service to satisfy
increasingly unique customer desiresincreasingly unique customer desires
Combines the Combines the
flexibility of a flexibility of a
process focus process focus
with the efficiency with the efficiency
of a product focusof a product focus

23. 7 – 23
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Mass CustomizationMass Customization
Vehicle modelsVehicle models 140140 286286
Vehicle typesVehicle types 1818 1,2121,212
Bicycle typesBicycle types 88 1919
Software titlesSoftware titles 00 400,000400,000
Web sitesWeb sites 00 98,116,99398,116,993
Movie releasesMovie releases 267267 458458
New book titlesNew book titles 40,53040,530 77,44677,446
Houston TV channelsHouston TV channels 55 185185
Breakfast cerealsBreakfast cereals 160160 340340
Items (SKUs) in Items (SKUs) in 14,00014,000 150,000150,000
supermarketssupermarkets
LCD TVsLCD TVs 00 102102
Number of ChoicesNumber of Choices
ItemItem 1970s1970s 2121
stst
Century Century
Table 7.1Table 7.1

24. 7 – 24
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Mass CustomizationMass Customization
Mass Customization
Effective Effective
scheduling scheduling
techniquestechniques
Rapid Rapid
throughput throughput
techniquestechniques
Repetitive FocusRepetitive Focus
Flexible peopleFlexible people
and equipmentand equipment
Process-FocusedProcess-Focused
High variety, low volumeHigh variety, low volume
Low utilization (5% to 25%)Low utilization (5% to 25%)
General-purpose equipmentGeneral-purpose equipment
Product-FocusedProduct-Focused
Low variety, high volumeLow variety, high volume
High utilization (70% to 90%)High utilization (70% to 90%)
Specialized equipmentSpecialized equipment
Figure 7.5Figure 7.5
Modular techniquesModular techniques
Supportive Supportive
supply supply
chainschains

25. 7 – 25
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Comparison of ProcessesComparison of Processes
Process FocusProcess Focus
(Low volume, (Low volume,
high variety)high variety)
Repetitive Repetitive
FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume,
low-variety)low-variety)
Mass Mass
CustomizationCustomization
(High-volume, (High-volume,
high-variety)high-variety)
Small quantity, Small quantity,
large variety of large variety of
productsproducts
Long runs, Long runs,
standardized standardized
product made product made
from modulesfrom modules
Large quantity, Large quantity,
small variety of small variety of
productsproducts
Large quantity, Large quantity,
large variety of large variety of
productsproducts
General General
purpose purpose
equipmentequipment
Special Special
equipment aids equipment aids
in use of in use of
assembly lineassembly line
Special Special
purpose purpose
equipmentequipment
Rapid Rapid
changeover on changeover on
flexible flexible
equipmentequipment
Table 7.2Table 7.2

26. 7 – 26
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Comparison of ProcessesComparison of Processes
Process FocusProcess Focus
(Low volume, (Low volume,
high variety)high variety)
Repetitive Repetitive
FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume,
low-variety)low-variety)
Mass Mass
CustomizationCustomization
(High-volume, (High-volume,
high-variety)high-variety)
Operators are Operators are
broadly skilledbroadly skilled
Employees are Employees are
modestly modestly
trainedtrained
Operators are Operators are
less broadly less broadly
skilledskilled
Flexible Flexible
operators are operators are
trained for the trained for the
necessary necessary
customizationcustomization
Many job Many job
instructions as instructions as
each job each job
changeschanges
Repetition Repetition
reduces reduces
training and training and
changes in job changes in job
instructionsinstructions
Few work Few work
orders and job orders and job
instructions instructions
because jobs because jobs
standardizedstandardized
Custom orders Custom orders
require many require many
job instructionsjob instructions
Table 7.2Table 7.2

27. 7 – 27
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Comparison of ProcessesComparison of Processes
Process FocusProcess Focus
(Low volume, (Low volume,
high variety)high variety)
Repetitive Repetitive
FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume,
low-variety)low-variety)
Mass Mass
CustomizationCustomization
(High-volume, (High-volume,
high-variety)high-variety)
Raw material Raw material
inventories inventories
highhigh
JIT JIT
procurement procurement
techniques techniques
usedused
Raw material Raw material
inventories are inventories are
lowlow
Raw material Raw material
inventories are inventories are
lowlow
Work-in-Work-in-
process is highprocess is high
JIT inventory JIT inventory
techniques techniques
usedused
Work-in-Work-in-
process process
inventory is lowinventory is low
Work-in-Work-in-
process process
inventory driven inventory driven
down by JIT, down by JIT,
lean productionlean production
Table 7.2Table 7.2

28. 7 – 28
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Comparison of ProcessesComparison of Processes
Process FocusProcess Focus
(Low volume, (Low volume,
high variety)high variety)
Repetitive Repetitive
FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume,
low-variety)low-variety)
Mass Mass
CustomizationCustomization
(High-volume, (High-volume,
high-variety)high-variety)
Units move Units move
slowly through slowly through
the plantthe plant
Movement is Movement is
measured in measured in
hours and dayshours and days
Swift Swift
movement of movement of
unit through the unit through the
facility is typicalfacility is typical
Goods move Goods move
swiftly through swiftly through
the facilitythe facility
Finished goods Finished goods
made to ordermade to order
Finished goods Finished goods
made to made to
frequent frequent
forecastforecast
Finished goods Finished goods
made to made to
forecast and forecast and
storedstored
Finished goods Finished goods
often build-to-often build-to-
order (BTO)order (BTO)
Table 7.2Table 7.2

29. 7 – 29
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Comparison of ProcessesComparison of Processes
Process FocusProcess Focus
(Low volume, (Low volume,
high variety)high variety)
Repetitive Repetitive
FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume,
low-variety)low-variety)
Mass Mass
CustomizationCustomization
(High-volume, (High-volume,
high-variety)high-variety)
Scheduling is Scheduling is
complex, complex,
trade-offs trade-offs
between between
inventory, inventory,
availability, availability,
customer customer
serviceservice
Scheduling Scheduling
based on based on
building building
various models various models
from a variety from a variety
of modules to of modules to
forecastsforecasts
Relatively Relatively
simple simple
scheduling, scheduling,
establishing establishing
output rate to output rate to
meet forecastsmeet forecasts
Sophisticated Sophisticated
scheduling scheduling
required to required to
accommodate accommodate
custom orderscustom orders
Table 7.2Table 7.2

30. 7 – 30
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Comparison of ProcessesComparison of Processes
Process FocusProcess Focus
(Low volume, (Low volume,
high variety)high variety)
Repetitive Repetitive
FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume,
low-variety)low-variety)
Mass Mass
CustomizationCustomization
(High-volume, (High-volume,
high-variety)high-variety)
Fixed costs Fixed costs
low, variable low, variable
costs highcosts high
Fixed costs Fixed costs
dependent on dependent on
flexibility of the flexibility of the
facilityfacility
Fixed costs Fixed costs
high, variable high, variable
costs lowcosts low
Fixed costs Fixed costs
high, variable high, variable
costs must be costs must be
lowlow
Costing Costing
estimated estimated
before job, before job,
known only known only
after the jobafter the job
Costs usually Costs usually
known due to known due to
extensive extensive
experienceexperience
High fixed costs High fixed costs
mean costs mean costs
dependent on dependent on
utilization of utilization of
capacitycapacity
High fixed costs High fixed costs
and dynamic and dynamic
variable costs variable costs
make costing a make costing a
challengechallenge
Table 7.2Table 7.2

31. 7 – 31
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process Analysis ToolsProcess Analysis Tools
Flowcharts provide a view of the big Flowcharts provide a view of the big
picturepicture
Time-function mapping adds rigor Time-function mapping adds rigor
and a time elementand a time element
Value-stream analysis extends to Value-stream analysis extends to
customers and supplierscustomers and suppliers
Process charts show detailProcess charts show detail
Service blueprint focuses on Service blueprint focuses on
customer interactioncustomer interaction

32. 7 – 32
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Improving Service Improving Service
ProductivityProductivity
StrategyStrategy TechniqueTechnique ExampleExample
SeparationSeparation Structure service so Structure service so
customers must go customers must go
where service is offeredwhere service is offered
Bank customers go to a Bank customers go to a
manager to open a new manager to open a new
account, to loan officers account, to loan officers
for loans, and to tellers for loans, and to tellers
for depositsfor deposits
Self-serviceSelf-service Self-service so Self-service so
customers examine, customers examine,
compare, and evaluate compare, and evaluate
at their own paceat their own pace
Supermarkets and Supermarkets and
department stores, department stores,
Internet orderingInternet ordering
Table 7.3Table 7.3

33. 7 – 33
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
StrategyStrategy TechniqueTechnique ExampleExample
PostponementPostponement Customizing at deliveryCustomizing at deliveryCustomizing vans at Customizing vans at
delivery rather than at delivery rather than at
productionproduction
FocusFocus Restricting the offeringsRestricting the offeringsLimited-menu Limited-menu
restaurantrestaurant
ModulesModules Modular selection of Modular selection of
service, modular service, modular
productionproduction
Investment and Investment and
insurance selection, insurance selection,
prepackaged food prepackaged food
modules in restaurantsmodules in restaurants
Improving Service Improving Service
ProductivityProductivity
Table 7.3Table 7.3

34. 7 – 34
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
StrategyStrategy TechniqueTechnique ExampleExample
AutomationAutomation Separating services that Separating services that
may lend themselves to may lend themselves to
automationautomation
Automatic teller Automatic teller
machinesmachines
SchedulingScheduling Precise personnel Precise personnel
schedulingscheduling
Scheduling ticket counter Scheduling ticket counter
personnel at 15-minute personnel at 15-minute
intervals at airlinesintervals at airlines
TrainingTraining Clarifying the service Clarifying the service
options, explaining how options, explaining how
to avoid problemsto avoid problems
Investment counselor, Investment counselor,
funeral directors, after-funeral directors, after-
sale maintenance sale maintenance
personnelpersonnel
Improving Service Improving Service
ProductivityProductivity
Table 7.3Table 7.3

35. 7 – 35
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Improving Service Improving Service
ProcessesProcesses
LayoutLayout
Product exposure, customer Product exposure, customer
education, product enhancementeducation, product enhancement
Human ResourcesHuman Resources
Recruiting and trainingRecruiting and training
Impact of flexibilityImpact of flexibility

36. 7 – 36
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Production TechnologyProduction Technology
Machine technologyMachine technology
Automatic identification Automatic identification
systems (AISs)systems (AISs)
Process controlProcess control
Vision systemVision system
RobotRobot
Automated storage and retrieval systems (ASRSs)Automated storage and retrieval systems (ASRSs)
Automated guided vehicles (AGVs)Automated guided vehicles (AGVs)
Flexible manufacturing systems (FMSs)Flexible manufacturing systems (FMSs)
Computer-integrated manufacturing (CIM)Computer-integrated manufacturing (CIM)

37. 7 – 37
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Technology in ServicesTechnology in Services
Service IndustryService Industry ExampleExample
Financial ServicesFinancial ServicesDebit cards, electronic funds transfer, ATMs, Debit cards, electronic funds transfer, ATMs,
Internet stock tradingInternet stock trading
EducationEducation Electronic bulletin boards, on-line journals, Electronic bulletin boards, on-line journals,
WebCT and BlackboardWebCT and Blackboard
Utilities and Utilities and
governmentgovernment
Automated one-man garbage trucks, optical Automated one-man garbage trucks, optical
mail and bomb scanners, flood warning mail and bomb scanners, flood warning
systemssystems
Restaurants and Restaurants and
foodsfoods
Wireless orders from waiters to kitchen, robot Wireless orders from waiters to kitchen, robot
butchering, transponders on cars that track butchering, transponders on cars that track
sales at drive-throughssales at drive-throughs
CommunicationsCommunicationsElectronic publishing, interactive TVElectronic publishing, interactive TV
Table 7.4Table 7.4

38. 7 – 38
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Technology in ServicesTechnology in Services
Service IndustryService Industry ExampleExample
HotelsHotels Electronic check-in/check-out, electronic Electronic check-in/check-out, electronic
key/lock systemkey/lock system
Wholesale/retail Wholesale/retail
tradetrade
ATM-like kiosks, point-of-sale (POS) terminals, ATM-like kiosks, point-of-sale (POS) terminals,
e-commerce, electronic communication e-commerce, electronic communication
between store and supplier, bar coded databetween store and supplier, bar coded data
TransportationTransportationAutomatic toll booths, satellite-directed Automatic toll booths, satellite-directed
navigation systemsnavigation systems
Health careHealth care Online patient-monitoring, online medical Online patient-monitoring, online medical
information systems, robotic surgeryinformation systems, robotic surgery
AirlinesAirlines Ticketless travel, scheduling, Internet Ticketless travel, scheduling, Internet
purchasespurchases
Table 7.4Table 7.4

39. 7 – 39
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Process RedesignProcess Redesign
The fundamental rethinking of business The fundamental rethinking of business
processes to bring about dramatic processes to bring about dramatic
improvements in performanceimprovements in performance
Relies on reevaluating the purpose of the Relies on reevaluating the purpose of the
process and questioning both the purpose process and questioning both the purpose
and the underlying assumptionsand the underlying assumptions
Requires reexamination of the basic process Requires reexamination of the basic process
and its objectivesand its objectives
Focuses on activities that cross functional Focuses on activities that cross functional
lineslines
Any process is a candidate for redesignAny process is a candidate for redesign

40. 7 – 40
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Ethics and Environmentally Ethics and Environmentally
Friendly ProcessesFriendly Processes
Encourage recyclingEncourage recycling
Efficient use of resourcesEfficient use of resources
Reduction of waste by-productsReduction of waste by-products
Use less harmful ingredientsUse less harmful ingredients
Use less energyUse less energy
Reduce the negative impact on the Reduce the negative impact on the
environmentenvironment

41. 7 – 41
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Operations
Management
Layout StrategiesLayout Strategies

42. 7 – 42
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
OutlineOutline
Global Company Profile: Global Company Profile:
McDonald’sMcDonald’s
The Strategic Importance of The Strategic Importance of
Layout DecisionsLayout Decisions
Types of LayoutTypes of Layout
Office LayoutOffice Layout

43. 7 – 43
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Retail LayoutRetail Layout
ServicescapesServicescapes
Warehousing and Storage LayoutsWarehousing and Storage Layouts
Cross-DockingCross-Docking
Random DockingRandom Docking
CustomizingCustomizing
Fixed-Position LayoutFixed-Position Layout

44. 7 – 44
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Process-Oriented LayoutProcess-Oriented Layout
Computer Software for Process-Computer Software for Process-
Oriented LayoutsOriented Layouts
Work CellsWork Cells
Requirements of Work CellsRequirements of Work Cells
Staffing and Balancing Work CellsStaffing and Balancing Work Cells
The Focused Work Center and the The Focused Work Center and the
Focused FactoryFocused Factory

45. 7 – 45
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Outline – ContinuedOutline – Continued
Repetitive and Product-Oriented Repetitive and Product-Oriented
LayoutLayout
Assembly-Line BalancingAssembly-Line Balancing

46. 7 – 46
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Learning ObjectivesLearning Objectives
When you complete this chapter you When you complete this chapter you
should be able to:should be able to:
1.1.Identify the different types of layout and its Identify the different types of layout and its
usesuses
2.2.Understand layout relevance for strategyUnderstand layout relevance for strategy

47. 7 – 47
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Innovations at McDonald’sInnovations at McDonald’s
Indoor seating (1950s)Indoor seating (1950s)
Drive-through window (1970s)Drive-through window (1970s)
Adding breakfast to the menu (1980s)Adding breakfast to the menu (1980s)
Adding play areas (late 1980s)Adding play areas (late 1980s)
Redesign of the kitchens (1990s)Redesign of the kitchens (1990s)
Self-service kiosk (2004)Self-service kiosk (2004)
Now three separate dining sectionsNow three separate dining sections

48. 7 – 48
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Innovations at McDonald’sInnovations at McDonald’s
Indoor seating (1950s)Indoor seating (1950s)
Drive-through window (1970s)Drive-through window (1970s)
Adding breakfast to the menu (1980s)Adding breakfast to the menu (1980s)
Adding play areas (late 1980s)Adding play areas (late 1980s)
Redesign of the kitchens (1990s)Redesign of the kitchens (1990s)
Self-service kiosk (2004)Self-service kiosk (2004)
Now three separate dining sectionsNow three separate dining sections
Six out of the Six out of the
seven are layout seven are layout
decisions!decisions!

49. 7 – 49
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
McDonald’s New LayoutMcDonald’s New Layout
Seventh major innovation Seventh major innovation
Redesigning all 30,000 outlets around Redesigning all 30,000 outlets around
the worldthe world
Three separate dining areasThree separate dining areas
Linger zone with comfortable chairs and Linger zone with comfortable chairs and
Wi-Fi connectionsWi-Fi connections
Grab and go zone with tall countersGrab and go zone with tall counters
Flexible zone for kids and familiesFlexible zone for kids and families
Facility layout is a source of Facility layout is a source of
competitive advantagecompetitive advantage

50. 7 – 50
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Strategic Importance of Strategic Importance of
Layout DecisionsLayout Decisions
The objective of layout strategy is to The objective of layout strategy is to
develop a cost-effective layout that develop a cost-effective layout that
will meet a firm’s competitive needswill meet a firm’s competitive needs

51. 7 – 51
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Layout Design Layout Design
ConsiderationsConsiderations
Higher utilization of space, equipment, and Higher utilization of space, equipment, and
peoplepeople
Improved flow of information, materials, or Improved flow of information, materials, or
peoplepeople
Improved employee morale and safer Improved employee morale and safer
working conditionsworking conditions
Improved customer/client interactionImproved customer/client interaction
FlexibilityFlexibility

52. 7 – 52
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Types of LayoutTypes of Layout
1.1.Office layout Office layout
2.2.Retail layout Retail layout
3.3.Warehouse layoutWarehouse layout
4.4.Fixed-position layoutFixed-position layout
5.5.Process-oriented layoutProcess-oriented layout
6.6.Work-cell layout Work-cell layout
7.7.Product-oriented layoutProduct-oriented layout

53. 7 – 53
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Types of LayoutTypes of Layout
1.1.Office layout: Positions workers, their Office layout: Positions workers, their
equipment, and spaces/offices to equipment, and spaces/offices to
provide for movement of informationprovide for movement of information
2.2.Retail layout: Allocates shelf space Retail layout: Allocates shelf space
and responds to customer behavior and responds to customer behavior
3.3.Warehouse layout: Addresses trade-Warehouse layout: Addresses trade-
offs between space and material offs between space and material
handlinghandling

54. 7 – 54
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Types of LayoutTypes of Layout
1.1.Fixed-position layout: Addresses the Fixed-position layout: Addresses the
layout requirements of large, bulky layout requirements of large, bulky
projects such as ships and buildingsprojects such as ships and buildings
2.2.Process-oriented layout: Deals with Process-oriented layout: Deals with
low-volume, high-variety production low-volume, high-variety production
(also called job shop or intermittent (also called job shop or intermittent
production)production)

55. 7 – 55
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Types of LayoutTypes of Layout
1.1.Work cell layout: Arranges machinery Work cell layout: Arranges machinery
and equipment to focus on production and equipment to focus on production
of a single product or group of related of a single product or group of related
productsproducts
2.2.Product-oriented layout: Seeks the Product-oriented layout: Seeks the
best personnel and machine best personnel and machine
utilizations in repetitive or continuous utilizations in repetitive or continuous
productionproduction

56. 7 – 56
Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Good Layouts ConsiderGood Layouts Consider
1.1.Material handling equipmentMaterial handling equipment
2.2.Capacity and space requirementsCapacity and space requirements
3.3.Environment and aestheticsEnvironment and aesthetics
4.4.Flows of informationFlows of information
5.5.Cost of moving between various Cost of moving between various
work areaswork areas

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Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Layout StrategiesLayout Strategies
Table 9.1Table 9.1
OfficeOffice RetailRetail
Warehouse Warehouse
(storage)(storage)
ExamplesExamples
Allstate InsuranceAllstate Insurance
Microsoft Corp.Microsoft Corp.
Kroger’sKroger’s
Supermarket Supermarket
Walgreen’sWalgreen’s
Bloomingdale’sBloomingdale’s
Federal-Mogul’sFederal-Mogul’s
warehouse warehouse
The Gap’sThe Gap’s
distribution center distribution center
Problems/IssuesProblems/Issues
Locate workers Locate workers
requiring frequent requiring frequent
contact close to one contact close to one
anotheranother
Expose customer to Expose customer to
high-margin itemshigh-margin items
Balance low-cost Balance low-cost
storage with low-cost storage with low-cost
material handlingmaterial handling

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Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Layout StrategiesLayout Strategies
Table 9.1Table 9.1
Project Project
(fixed position)(fixed position)
Job Shop Job Shop
(process oriented)(process oriented)
ExamplesExamples
Ingall Ship BuildingIngall Ship Building
Corp. Corp.
Trump PlazaTrump Plaza
Pittsburgh AirportPittsburgh Airport
Arnold Palmer HospitalArnold Palmer Hospital
Hard Rock CaféHard Rock Café
Olive GardenOlive Garden
Problems/IssuesProblems/Issues
Move material to the Move material to the
limited storage areas limited storage areas
around the sitearound the site
Manage varied material Manage varied material
flow for each productflow for each product

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Departament d’Economia de l’Empresa /
Department of Business Economics & Administration
Layout StrategiesLayout Strategies
Table 9.1Table 9.1
Work Cells Work Cells
(product families)(product families)
Repetitive/ Continuous Repetitive/ Continuous
(product oriented)(product oriented)
ExamplesExamples
Hallmark CardsHallmark Cards
Wheeled CoachWheeled Coach
Standard AeroStandard Aero
Sony’s TV assemblySony’s TV assembly
line line
Toyota ScionToyota Scion
Problems/IssuesProblems/Issues
Identify a product family, Identify a product family,
build teams, cross train build teams, cross train
team membersteam members
Equalize the task time at Equalize the task time at
each workstationeach workstation