1. Type author names here © Oxford University Press, 2012. All rights reserved. Operations Management Chapter 4 Locating, Designing and Managing Facilities Jones & Robinson

2. 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 within different 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

3. Jones & Robinson: Operations Management Access to raw materials Availability of energy supplies Provision of other utilities, such as water supply Nature of transportation networks Nature of communication links Availability of land or property Selecting Locations for Operations

4. Jones & Robinson: Operations Management Local labour markets. Access to markets or customers. Proximity to or distance from competitors. Business climate. Government policies. Other Location Selection Criteria

5. Jones & Robinson: Operations Management Make or buy decision – necessary for all firms to decide as this has a bearing on profitability. Outsourcing – the 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

6. Jones & Robinson: Operations Management Some potential disadvantages Financial costs Loss of control Increased risk – security of information – quality of product or service – supply risk – loss of expertise Outsourcing

7. Jones & Robinson: Operations Management Size of trading area – how far will customers travel to get to the operation? Market structure Demographics Travel patterns Access Visibility Many companies use a weighted factor technique based on the above criteria to select sites Specific Site Selection

8. Jones & Robinson: Operations Management Weighted factor technique. A business selects the most important criteria in relation to a site and then weights them according to their relative importance. Regression modelling. A more sophisticated approach based on statistics is undertaken on each site. Expert estimation. A technique based on previous experience and intuition. Location intelligence. This technique has emerged recently, combining geographic data such as aerial maps, demographics, and business information to facilitate site selection Specific Site Selection

9. Jones & Robinson: Operations Management Competitive clustering. This refers to operations that co-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 company co-locating lots of its operations together so that it creates market dominance. For example – ‘Lettuce Entertain You’, a restaurant chain that has 38 different restaurants - all in Chicago! Personal preferences. 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!

10. Jones & Robinson: Operations Management Fixed position layout Process layout Product layout Cell layout Process Layout Types in Operations

11. Jones & Robinson: Operations Management Fixed Position Layout Recipient of the processing is stationary and the resources, plant and people come to the service. motorway building shipbuilding construction site solicitor’s office open heart surgery high class restaurant.

12. Jones & Robinson: Operations Management 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

13. Jones & Robinson: Operations Management Process Layout Similar products or processes (or those with similar needs) are grouped together. The product (or Customer) travels between the resources. X-ray department in a hospital specialist machining or processing restaurant kitchen tinned or frozen food in a supermarket.

14. Jones & Robinson: Operations Management 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

15. Jones & Robinson: Operations Management Product Layout All operations follow the same sequence of processes. automobile assembly self-service cafeteria paper manufacturing television and domestic goods assembly

16. Jones & Robinson: Operations Management Product Layout Advantages High volumes give low costs Specialized equipment opportunity Disadvantages Work can be repetitive Inflexible process Flow easily disrupted

17. Jones & Robinson: Operations Management 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.

18. Jones & Robinson: Operations Management 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

19. Jones & Robinson: Operations Management Servicescape Bitner (1992) summarizes the different elements of a Servicescape 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 the elements to influence particular forms and sets of behaviour. e.g. retail clothing stores such as Karen Millen or Gap can each create very different kinds of displays and interiors depending on their market

20. Jones & Robinson: Operations Management Trends in Operations Design Production-lining service – organizing plant, equipment and employees in a product flow layout. Removes the barrier between back of house and front of house operations Decoupling back of house (BoH) from front of house (FoH) – removing some of the activities altogether, such as food preparation for local authority schools and hospitals These are best illustrated by the Servuction System

21. Jones & Robinson: Operations Management Servuction System

22. Jones & Robinson: Operations Management Self-Service – employees are removed from many FoH operations, such as supermarkets. This is covered further in Chapter 8 Co-Branding – more than one kind of operation within the same premises. Uses same BoH facility but different FoH staff. Example – Little Chef and Burger King share the same premises in the UK. Trends in Operations Design

23. Jones & Robinson: Operations Management 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