6 -location_and_layout

Alex Hill and Terry Hill

Lecture outline

• Choosing a LOCATION

• Choosing a LAYOUT

• Critical REFLECTIONS

• SUMMARY

•Size of the INVESTMENT•The FIXED NATURE of the choice•The UNCERTAINTY of the future

DECIDING WHERE TO LOCATE

Choosing a location

Once chosen, many organisations NEVER CHANGE location

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.

•CONTINENT or REGION•COUNTRY•AREA or CITY•SITE

Choosing a location

Levels of decision

> KEY IDEA

The number of LEVELS and FACTORS involved differ DECISION

•The ORIGIN of existing location decisions•POLITICALLY based constraints•TECHNOLOGY developments•Market ACCESS or local PRESENCE in large

consumer markets•CURRENCY value fluctuations

Background factors influencing location decisions

•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

Factors affecting the choice of location

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?

CASE 6.1

Question

Answer

REASONS for growth

FACTORS affecting decision

• Well-developed INFRASTRUCTURE• Hospital BUSINESS CLIMATE• Availability of STAFF• Quality of LIFE for employees• Lower VARIABLE COSTS• Favourable GOVERNMENT policies

• IT services EASY to source from abroad

• STPI FACILITATES the transfer• Plentiful supply of English-speaking

STAFF• Lower COSTS to provide service

GROWTH AT SOFTWARE TECHNOLOGY PARKS OF INDIA

•FACILITIES for staff and customers

•Building’s DESIGN•RENTAL costs and local taxes•SPACE•Proximity to SUPPORT SERVICES•Room for EXPANSION•Level of cutsomer TRAFFIC•VISIBILITY to customers•Proximity to CUSTOMERS•Proximity to COMPETITORS

Choosing a locationFactors affecting the choice of site

Choosing a locationFactors affecting the choice of site

CASE 6.2

GROWTH AT PLASTIC OMNIUM

1.How has PLANT LOCATION been central to its growth in the last 25 years?

Question Answer

GROWTH

Impact of LOCATION

• Over last 25 years GROWN:- From 4 factories in France- To 25 factories in 25 countries

CASE 6.2 GROWTH AT PLASTIC OMNIUM

• Decide to locate near CUSTOMER- BMW in Munich• Grew with CUSTOMER

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?

CASE 6.3

Question Answer

Changes

Advantages

Disadvantages

• Lower COSTS• Used profits to REINVEST and grow

sales• Large number of well educated,

English speaking STAFF

• Moved IT services OFFSHORE- 4,000 jobs moved

• Start-up COSTS• Initial RISK

HSBC RELOCATES CALL CENTRE OPERATIONS

Choosing a locationSite location techniques

•WEIGHTED factor•Centre of

GRAVITY

Choosing a locationSite location techniques

CASE 6.4

CREATING SPACE ON PASSENGER JETS

1.Why is ELBOW ROOM an increasingly important factor on passenger airlines?

2.Why is LEGROOM often easier to provide than elbow room?

Question Answer

ELBOW ROOM important

LEG ROOM easier

• Increasing LEG ROOM will remove:- 1 or 2 rows (4 to 12 seats)• Increasing ELBOW ROOM will remove:- 1 or 2 seats per room (30 to 60 seats)

• COMFORT is important for customers:- Leg room, elbow room and seat

cushioning• ELBOW room is shared with other

passengers

CASE 6.4 CREATING SPACE ON

PASSENGER JETS

Choose a LAYOUT

Chosen a LOCATION

Choosing a layout

Choosing a layoutFactors influencing layout

•Core TASK•Available SPACE•Making space for future

EXPANSION and layout changes•HEALTH and SAFETY

Choosing a layoutBasic types of layout

•FIXED position•PROCESS or

FUNCTIONAL•SERVICE or PRODUCT

> KEY IDEA

The BASIC TYPES of layout are:• FIXED POSITION,• PROCESS or FUNCTIONAL and• SERVICE or PRODUCT

Choosing a layoutBasic types of layout

CarBirdGovernment Pit stop

Choosing a layoutService or product type, process and layout

Ikiru(1952)

A Bug’s Life

(1998)

Le Mans

(1971)

GungHo

1986)

Film clip Government

FilmTitleDirector (year)

Ikiru (Living)Kurosawa (1952)

ClipStartFinish

00:58:58Duration 00:03:07

What clip showsA group of slaves who are served (unsuccessfully) by a government department

Key learning objective

The characteristics of a:•Process or functional layout•Repeat high-volume service delivery system


Film clip Bird


A Bug’s LifeJohn Lasseter and Andrew Stanton (1998)

ClipStartFinish

00:47:0000:51:22

What clip showsThe bugs building a bird to protect their community


The characteristics of a:•Fixed position layout•Project manufacturing process


Film clip Factory


Gung HoRon Howard (1986)

ClipStartFinish

01:33:1301:34:31

What clip shows Cars being manufactured on a production line


The characteristics of a:•Product layout•Line manufacturing process


Film clip Pit stop


Le MansLee H. Katzin (1971)

ClipStartFinish

00:47:4000:50:43

What clip showsThe pit crew decide to bring in the racing cars to put on new tyres that will drive better in the rain


The characteristics of a:•Cell layout•Repeat low-volume service delivery system


Low VOLUME High

Hig

hV

AR

IET

YLo

w


QuestionGovernme

ntBird Car Pit stop

Service or product

Process

Layout


Low VOLUME High

Hig

hV

AR

IET

YLo

w


Car

Bird

Government

Pit stop

QuestionGovernme

ntBird Car Pit stop

Service or product

Process

Layout

Repeathigh-volume delivery system

Project manufacturing process

Process or functional

Fixed position

Mass product

Product

Service shop

Special productMade on-site

Line manufacturing process

Repeat low-volume delivery system

Cell

Service shop


Choosing a layoutDetailed layout design

CASE 6.5

FUNCTIONS AT A TELECOMMUNICATIONS COMPANY CALL CENTRE

1.How did the ORIGINAL call centre result in delays?

2.How did the CELL-BASED redesign reduce delays?

3.What other ADVANTAGES could a cell-based structure offer this company?

CASE 6.5

Question Answer

Causes of delays

Cell reduced delays

Other advantages

• SERVICE based teams handle a customer• ELIMINATED hand offs

• Customers HANDED OFF between different departments

• BACKLOGS become more visible• Can introduce friendly COMPETITION between

teams• Common GOALS and TARGETS within cells• Identify and share BEST PRACTICE between

cells

FUNCTIONS AT A TELECOMMUNICATIONS COMPANY CALL CENTRE

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- LARGE and FIXED investment

Summary• 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

Revision questions

1 Organisations:

a) Frequently change location

b) Often never change location

c) Are not concerned about their location

Revision questions

2 The choice of location needs to reflect that:

a) It is a fixed and large investment

b) The uncertainty of the future

c) Both a) and b)

Revision questions

3 Choosing a location concerns decisions around:

a) Continent/region, country and area/city

b) Site

c) Both a) and b)

Revision questions

4 Factors affecting the choice of site include:

a) Proximity to customers, staff and suppliers

b) Proximity to competitors

c) Both a) and b)

Revision questions

5 The basic types of layout are:

a) Jobbing, batch and line

b) Non-repeat, repeat low volume and repeat high volume

c) Fixed position, process or functional and service or product

CASE FOR TUTORIALMcDONALD’S AND

McCAFE

6 -location_and_layout

Business

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