Operation Management Chapter 6
- 1. Alex Hill and Terry Hill
- 2. Choosing a location DECIDING WHERE TO LOCATE • Size of the INVESTMENT • The FIXED NATURE of the choice • The UNCERTAINTY of the future
- 3. The two tasks of deciding location and layout are distinct yet related. They are distinct in that location concerns where best to site a facility, whereas layout concerns how best to arrange the staff, processes and equipment within that facility. And they are related in that they form two parts of a key decision – how best to position facilities in order to perform the operations task and meet the needs of the business. Once chosen, many organizations NEVER CHANGE location
- 4. Choosing a location Levels of decision • CONTINENT or REGION • COUNTRY • AREA or CITY • SITE > KEY IDEA The number of LEVELS and FACTORS involved differ DECISION
- 5. Background factors influencing location decisions • The ORIGIN of existing location decisions • POLITICALLY based constraints • TECHNOLOGY developments • Market ACCESS or local PRESENCE in large consumer markets • CURRENCY value fluctuations
- 6. Factors affecting the choice of location • A well developed INFRASTRUCTURE • Proximity to MARKETS • Proximity to SUPPLIERS • Hospitable BUSINESS CLIMATE • Availability of STAFF • Quality of LIFE for employees • COSTS and INVESTMENTS • Favourable GOVERNMENT policies • Proximity to CUSTOMERS
- 7. Factors affecting the choice of site • FACILITIES for staff and customers • Building’s DESIGN • RENTAL costs and local taxes • SPACE • Proximity to SUPPORT SERVICES • Room for EXPANSION • Level of customer TRAFFIC • VISIBILITY to customers • Proximity to CUSTOMERS • Proximity to COMPETITORS
- 8. CASE 6.1 GROWTH AT SOFTWARE TECHNOLOGY PARKS OF INDIA 1.What are the REASONS for the rapid growth in Noida’s IT-based services? 2.What FACTORS have affected the choice of continent/region, country and area/city?
- 9. CASE 6.1 Questio n GROWTH AT SOFTWARE TECHNOLOGY PARKS OF INDIA Answer REASON S for growth FACTORS affecting decision • IT services EASY to source from abroad • Plentiful supply of English-speaking STAFF • Lower COSTS to provide service • Well-developed INFRASTRUCTURE • Hospital BUSINESS CLIMATE • Availability of STAFF • Quality of LIFE for employees • Favorable GOVERNMENT policies
- 10. CASE 6.3 HSBC RELOCATES CALL CENTRE OPERATIONS 1.How did it CHANGE its approach in the 1990s? 2.What were the ADVANTAGES and DISADVANTAGES of these changes?
- 11. CASE 6.3 Question Answer Changes Advantages Disadvantag es HSBC RELOCATES CALL CENTRE OPERATIONS • Moved IT services - 4,000 jobs moved • Lower COSTS • Used profits to REINVEST and grow sales • Large number of well educated, English speaking STAFF • Start-up COSTS • Initial RISK
- 12. Site location techniques •WEIGHTED factor • Centre of GRAVITY
- 13. Site location techniques In the location factor rating system, factors that are important in the location decision are identified. Each factor is weighted from 0 to 1.00 to prioritize the factor and reflect its importance. A subjective score is assigned (usually between 0 and 100) to each factor based on its attractiveness compared with other locations, and the weighted scores are summed. Decisions typically will not be made based solely on these ratings, but they provide a good way to organize and rank factors.
- 14. The center-of-gravity, or weight center, technique is a quantitative method for locating a facility such as a warehouse at the center of movement in a geographic area based on weight and distance. This method identifies a set of coordinates designating a central location on a map relative to all other locations.
- 15. Chosen a LOCATION Choose a LAYOUT Choosing a layout
- 16. Choosing a layout Factors influencing layout
- 17. Basic types of layout • FIXED position • PROCESS or FUNCTIONAL • SERVICE or PRODUCT The BASIC TYPES of layout are: • FIXED POSITION, • PROCESS or FUNCTIONAL and • SERVICE or PRODUCT
- 19. Service or product type, process and layout Dinner rush (1952) A Bug’s Life (1998) Car factory 1986) Government Bird Car
- 20. Service or product type, process and layout Film clip restaurant Film Title Director Dinner rush Clip Start Finish 00:58:58 Duration 00:03:07 What clip shows A group of chef who are trying make new food Key learning objective The characteristics of a: •Process or functional layout •Repeat –low volume service delivery system
- 21. Choosing a lSaeyrvoicuet or product type, process and layout Film clip Bird Film Title Director (year) A Bug’s Life John Lasseter and Andrew Stanton (1998) Clip Start Finish 00:47:00 00:51:22 What clip shows The bugs building a bird to protect their community Key learning objective The characteristics of a: •Fixed position layout •Project manufacturing process
- 22. Choosing a lSaeyrvoicuet or product type, process and layout Film clip Factory Film Title Director (year) Gung Ho Ron Howard (1986) Clip Start Finish 01:33:13 01:34:31 What clip shows Cars being manufactured on a production line Key learning objective The characteristics of a: •Product layout •Line manufacturing process
- 23. Choosing a lSaeyrvoicuet or product type, process and layout Question restaurant Bird Car Service or product Process Layout Repeat delivery system Project manufacturin g process Process or functional Fixed position Mass product Product Service shop Special product Made on-site Line manufacturi ng process
- 24. Critical reflections • The choice of location and layout significantly impacts COSTS and SALES • Therefore, they must clearly reflect the NEEDS of - CUSTOMER and MARKET (external) - BUSINESS (internal) • In particular, the CHOICE of location is: - DIFFICULT to change
- 25. Summar y• TASKS of deciding location and layout - Distinct, but related • Decisions need to be made at a number of LEVELS - Continent/region, country, area/city and site • Various FACTORS impact the choice of location - Exiting sites, proximity, political, economic, etc • Three basic TYPES of layout - Fixed position, process or functional, service or product
Editor's Notes
- #20: At this point you could use clips from 4 classic films to demonstrate the different types of process, layout and service or product type: Ikiru (Life), directed by Kurosawa (1952) – a group of women being served by a government department. A Bug’s Life, directed by Brad Bird (1998) – the bugs build a bird using a fixed position project process. Gung Ho, directed by Ron Howard (1986) – manufacturing a car using a line process. Le Mans, directed by Lee Katzin (1971) – putting tyres on a race car using a cellular layout. See the ‘Teaching OM through film’ lecturer notes and student handouts available on the website at www.palgrave.com