operation management chapter 6
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Alex Hill and Terry Hill
•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 organizations 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
•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
Factors affecting the choice of site
CASE 6.1
GROWTH AT SOFTWARE TECHNOLOGY PARKS OF INDIA1.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• Favorable GOVERNMENT policies
• IT services EASY to source from abroad• Plentiful supply of English-speaking
STAFF• Lower COSTS to provide service
GROWTH AT SOFTWARE TECHNOLOGY PARKS OF INDIA
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 6.3Question Answer
Changes
Advantages
Disadvantages
• Lower COSTS• Used profits to REINVEST and grow
sales• Large number of well educated,
English speaking STAFF
• Moved IT services- 4,000 jobs moved
• Start-up COSTS• Initial RISK
HSBC RELOCATES CALL CENTRE OPERATIONS
Site location techniques
•WEIGHTED factor•Centre of
GRAVITY
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.
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.
Choose a LAYOUT
Chosen a LOCATION
Choosing a layout
Choosing a layout
Factors influencing layout
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
CarBirdGovernment
Service or product type, process and layout
Dinner rush
(1952)
A Bug’s Life
(1998)
Car factory1986)
Film clip restaurant
FilmTitleDirector
Dinner rush
ClipStartFinish
00:58:58Duration 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
Service or product type, process and layout
Film clip Bird
FilmTitleDirector (year)
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
Key learning objective
The characteristics of a:•Fixed position layout•Project manufacturing process
Choosing a layoutService or product type, process and layout
Film clip Factory
FilmTitleDirector (year)
Gung HoRon Howard (1986)
ClipStartFinish
01:33:1301:34:31
What clip shows Cars being manufactured on a production line
Key learning objective
The characteristics of a:•Product layout•Line manufacturing process
Choosing a layoutService or product type, process and layout
Question restaurant Bird Car
Service or product
Process
Layout
Repeatdelivery system
Project manufacturing process
Process or functional Fixed position
Mass product
Product
Service shop
Special productMade on-site
Line manufacturing process
Choosing a layoutService or product type, process and layout
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
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
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