Operations Management - Layout Strategies

Global Company Profile: McDonald’s

• Layout strategies.

Course Outline

• Strategic Importance of Layout Decisions
• Types of Layout
  • Office Layout
  • Retail Layout
  • Warehouse and Storage Layouts
  • Fixed-Position Layout
  • Process-Oriented Layout
  • Work Cells
  • Repetitive and Product-Oriented Layout

Learning Objectives

1. Discuss important issues in office layout.
2. Define the objectives of retail layout.
3. Discuss modern warehouse management and terms such as ASRS, cross-docking, and random stocking.
4. Identify when fixed-position layouts are appropriate.
5. Explain how to achieve a good process-oriented facility layout.
6. Define work cell and the requirements of a work cell.
7. Define product-oriented layout.
8. Explain how to balance production flow in a repetitive or product-oriented facility.

Innovations at McDonald’s

• Indoor seating (1950s)
• Drive-through window (1970s)
• Adding breakfast to the menu (1980s)
• Adding play areas (late 1980s)
• Redesign of the kitchens (1990s)
• Self-service kiosk (2004)
• Now three separate dining sections
• Six out of the seven innovations are layout decisions!

McDonald’s New Layout

• Seventh major innovation
• Redesigning all 30,000 outlets around the world
• Three separate dining areas:
  • Linger zone with comfortable chairs and Wi-Fi connections
  • Grab and go zone with tall counters
  • Flexible zone for kids and families
• Facility layout is a source of competitive advantage

What is Facility Layout

• Location or arrangement of everything within & around buildings
• Objectives are to maximize:
  • Customer satisfaction
  • Utilization of space, equipment, & people
  • Efficient flow of information, material, & people
  • Employee morale & safety

Strategic Importance of Layout Decisions

• The objective of layout strategy is to develop an effective and efficient layout that will meet the firm’s competitive requirements

Layout Design Considerations

• Higher utilization of space, equipment, and people
• Improved flow of information, materials, or people
• Improved employee morale and safer working conditions
• Improved customer/client interaction
• Flexibility

Types of Layout

1. Office layout
2. Retail layout
3. Warehouse layout
4. Fixed-position layout
5. Process-oriented layout
6. Work-cell layout
7. Product-oriented layout

Types of Layout Explained

1. Office layout: Positions workers, their equipment, and spaces/offices to provide for movement of information
2. Retail layout: Allocates shelf space and responds to customer behavior
3. Warehouse layout: Addresses trade-offs between space and material handling
4. Fixed-position layout: Addresses the layout requirements of large, bulky projects such as ships and buildings
5. Process-oriented layout: Deals with low-volume, high-variety production (also called job shop or intermittent production)
6. Work cell layout: Arranges machinery and equipment to focus on the production of a single product or group of related products
7. Product-oriented layout: Seeks the best personnel and machine utilizations in repetitive or continuous production

Layout Strategies - Table 9.1

• Office: Locate workers requiring frequent contact close to one another (e.g., Allstate Insurance, Microsoft Corp.)
• Retail: Expose customers to high-margin items (e.g., Kroger’s Supermarket, Walgreen’s, Bloomingdale’s)
• Warehouse (storage): Balance low-cost storage with low-cost material handling (e.g., Federal-Mogul’s warehouse, The Gap’s distribution center)
• Project (fixed position): Move material to the limited storage areas around the site (e.g., Ingall Ship Building Corp., Trump Plaza, Pittsburgh Airport)
• Job Shop (process oriented): Manage varied material flow for each product (e.g., Arnold Palmer Hospital, Hard Rock Cafe, Olive Garden)
• Work Cell (product families): Identify a product family, build teams, cross-train team members (e.g., Hallmark Cards, Wheeled Coach Ambulances)
• Repetitive/Continuous (product oriented): Equalize the task time at each workstation (e.g., Sony’s TV assembly line, Toyota Scion)

Good Layouts Consider

• Material handling equipment
• Capacity and space requirements
• Environment and aesthetics
• Flows of information
• Cost of moving between various work areas

Office Layout

• Grouping of workers, their equipment, and spaces to provide comfort, safety, and movement of information
• Movement of information is the main distinction
• Typically in a state of flux due to frequent technological changes

Relationship Chart

• Closeness Values:
  • A: Absolutely necessary
  • E: Especially important
  • I: Important
  • O: Ordinary
  • U: Unimportant
  • X: Not desirable

Office Layout - Three physical and social aspects

• Proximity
  • Refers to how physically close people or workspaces are to each other.
  • Influences collaboration, communication, and workflow efficiency.
  • Closer proximity can enhance teamwork but may reduce privacy.
• Privacy
  • The ability of individuals to work without unwanted observation or interference.
  • Important for tasks requiring focus, confidentiality, or deep work.
  • There's often a trade-off between privacy and collaboration.
• Permission
  • Relates to the cultural and social norms that govern how space is used.
  • Who has the authority to access or modify a space, or how freely people feel they can move and interact.
  • Influences the flexibility and openness of the work environment

Office Layout - Two Major Trends

1. Information Technology:
   • Technology (like cloud computing, mobile devices, and collaboration tools) reduces the need for constant physical proximity.
   • It enables remote work, virtual collaboration, and real-time data sharing.
   • Changes the traditional layout of office space by reducing dependence on fixed workstations.
2. Dynamic Needs for Space and Services:
   • Modern organizations require flexible and adaptable spaces due to changing team sizes, project needs, and work styles.
   • Services (e.g., IT support, meeting rooms, collaboration tools) must also be scalable and responsive.
   • Space planning needs to accommodate both individual work and group collaboration dynamically.

Retail Layout

• Objective is to maximize profitability per square foot of floor space
• Sales and profitability vary directly with customer exposure

Five Helpful Ideas for Supermarket Layout

1. Locate high-draw items around the periphery of the store
2. Use prominent locations for high-impulse and high-margin items
3. Distribute power items to both sides of an aisle and disperse them to increase viewing of other items
4. Use end-aisle locations
5. Convey mission of store through careful positioning of lead-off departments

Retail Slotting

• Manufacturers pay fees to retailers to display (slot) their product
• Contributing factors:
  • Limited shelf space
  • An increasing number of new products
  • Better information about sales through POS data collection
  • Closer control of inventory

Servicescapes

1. Ambient conditions
   • Background characteristics such as lighting, sound, smell, and temperature
2. Spatial layout and functionality
   • Customer circulation path planning, aisle characteristics, and product grouping
3. Signs, symbols, and artifacts
   • Characteristics of building design that carry social significance

Warehousing and Storage Layouts

• Objective is to optimize trade-offs between handling costs and costs associated with warehouse space
• Maximize the total “cube” of the warehouse – utilize its full volume while maintaining low material handling costs

Material Handling Costs

• All costs associated with the transaction:
  • Incoming transport
  • Storage
  • Finding and moving material
  • Outgoing transport
  • Equipment, people, material, supervision, insurance, depreciation
• Minimize damage and spoilage

Warehousing and Storage Layouts

• Warehouse density tends to vary inversely with the number of different items stored
• Automated Storage and Retrieval Systems (ASRSs) can significantly improve warehouse productivity by an estimated 500%
• Dock location is a key design element

Cross-Docking

• Materials are moved directly from receiving to shipping and are not placed in storage in the warehouse
• Requires tight scheduling and accurate shipments, bar code or RFID identification used for advanced shipment notification as materials are unloaded

Random Stocking

• Typically requires automatic identification systems (AISs) and effective information systems
• Allows more efficient use of space
  • Maintain a list of “open” locations
  • Maintain accurate records of existing inventory and its locations
  • Sequence items on orders to minimize travel time required to pick orders
  • Combine orders to reduce picking time
  • Assign certain items or classes of items, such as high usage items, to particular warehouse areas so that distance traveled is minimized

Customizing

• Value-added activities performed at the warehouse
• Enable low cost and rapid response strategies
  • Assembly of components
  • Loading software
  • Repairs
  • Customized labeling and packaging

Fixed-Position Layout

• Product remains in one place
• Workers and equipment come to site
• Complicating factors:
  • Limited space at site
  • Different materials required at different stages of the project
  • Volume of materials needed is dynamic

Alternative Strategy for Fixed-Position Layout

• As much of the project as possible is completed off-site in a product-oriented facility
• This can significantly improve efficiency but is only possible when multiple similar units need to be created

Process-Oriented Layout

• Like machines and equipment are grouped together
• Flexible and capable of handling a wide variety of products or services
• Scheduling can be difficult and setup, material handling, and labor costs can be high
• Department areas having similar processes located in close proximity, e.g., All x-ray machines in the same area
• Used with process-focused processes

Process-Oriented Layout - Example

• Example: Hospital Layout
  • Departments: Surgery, Radiology, ER triage room, ER Beds, Pharmacy, Emergency room admissions, Billing/exit, Laboratories
  • Patient A - broken leg
  • Patient B - erratic heart pacemaker

Process-Oriented Layout - Objective

• Arrange work centers so as to minimize the costs of material handling
• Basic cost elements are
  • Number of loads (or people) moving between centers
  • Distance loads (or people) move between centers

Process-Oriented Layout - Formula

• Minimize cost = $\sum<em>{i=1}^{n} \sum</em>{j=1}^{n} X<em>{ij}C</em>{ij}$
  • where:
  • n = total number of work centers or departments
  • i, j = individual departments
  • $X_{ij}$ = number of loads moved from department i to department j
  • $C_{ij}$ = cost to move a load between department i and department j

Process Layout Example - Steps

1. Construct a “from-to matrix”
2. Determine the space requirements
3. Develop an initial schematic diagram
4. Determine the cost of this layout
5. Try to improve the layout
6. Prepare a detailed plan

• Example: Arrange six departments in a factory to minimize the material handling costs. Each department is 20 x 20 feet and the building is 60 feet long and 40 feet wide.

Process Layout Example - From-To Matrix

• Shows the number of loads per week moving between departments.

Process Layout Example - Area Layout

• Shows the initial arrangement of departments in the factory.

Process Layout Example - Cost Calculation

• Walters Company assumes that a forklift carries all interdepartmental loads. The cost of moving one load between adjacent departments is estimated to be $1. Moving a load between non-adjacent departments costs $2.

Process Layout Example - Interdepartmental Flow Graph

• Shows the flow of materials between departments.

Process Layout Example - Cost Calculation

• Cost = $50 + $200 + $40 (1 and 2) (1 and 3) (1 and 6) + $30 + $50 + $10 (2 and 3) (2 and 4) (2 and 5) + $40 + $100 + $50 (3 and 4) (3 and 6) (4 and 5) = $570
• Cost = $\sum<em>{i=1}^{n} \sum</em>{j=1}^{n} X<em>{ij}C</em>{ij}$

Process Layout Example - Revised Interdepartmental Flow Graph

• Shows the revised flow of materials between departments after layout improvement.

Process Layout Example - Cost Calculation (Revised)

• Cost = $50 + $100 + $20 (1 and 2) (1 and 3) (1 and 6) + $60 + $50 + $10 (2 and 3) (2 and 4) (2 and 5) + $40 + $100 + $50 (3 and 4) (3 and 6) (4 and 5) = $480
• Cost = $\sum<em>{i=1}^{n} \sum</em>{j=1}^{n} X<em>{ij}C</em>{ij}$

Computer Software for Process Layout

• Graphical approach only works for small problems
• Computer programs are available to solve bigger problems
  • CRAFT
  • ALDEP
  • CORELAP
  • Factory Flow
  • Proplanner

Computer Software - Proplanner analysis

• Example: Distance traveled reduced by 38%

Computer Software - Three dimensional visualization

• Three dimensional visualization software allows managers to view possible layouts and assess process, material handling, efficiency, and safety issues

Work Cells

• Reorganizes people and machines into groups to focus on single products or product groups
• Group technology identifies products that have similar characteristics for particular cells
• Volume must justify cells
• Cells can be reconfigured as designs or volume changes

Advantages of Work Cells

1. Reduced work-in-process inventory
2. Less floor space required
3. Reduced raw material and finished goods inventories
4. Reduced direct labor cost
5. Heightened sense of employee participation
6. Increased equipment and machinery utilization
7. Reduced investment in machinery and equipment

Work Cell Advantages

Requirements of Work Cells

• Identification of families of products
• A high level of training, flexibility and empowerment of employees
• Being self-contained, with its own equipment and resources
• Test (poka-yoke) at each station in the cell

Improving Layouts Using Work Cells

• Current layout - workers in small closed areas
• Improved layout - cross-trained workers can assist each other. May be able to add a third worker as additional output is needed

Improving Layouts Using Work Cells - U-shaped line

• Current layout - straight lines make it hard to balance tasks because work may not be divided evenly
• Improved layout - in U shape, workers have better access. Four cross-trained workers were reduced
• U-shaped line may reduce employee movement and space requirements while enhancing communication, reducing the number of workers, and facilitating inspection

Staffing and Balancing Work Cells

• Determine the takt time
  • Takt time = $\frac{Total \ work \ time \ available}{Units \ required}$
• Determine the number of operators required
  • Workers required = $\frac{Total \ operation \ time \ required}{Takt \ time}$

Staffing Work Cells - Example

• 600 Mirrors per day required
• Mirror production scheduled for 8 hours per day
• From a work balance chart total operation time = 140 seconds

Takt time example calculation

• Takt time = (8 hrs x 60 mins) / 600 units = 0.8 min = 48 seconds
• Workers required = Total operation time required / Takt time = 140 / 48 = 2.92

Work Balance Charts

• Used for evaluating operation times in work cells
• Can help identify bottleneck operations
• Flexible, cross-trained employees can help address labor bottlenecks
• Machine bottlenecks may require other approaches

Focused Work Center and Focused Factory

• Focused Work Center
  • Identify a large family of similar products that have a large and stable demand
  • Moves production from a general-purpose, process-oriented facility to a large work cell
• Focused Factory
  • A focused work cell in a separate facility
  • May be focused by product line, layout, quality, new product introduction, flexibility, or other requirements

Repetitive and Product-Oriented Layout - Conditions for use

1. Volume is adequate for high equipment utilization
2. Product demand is stable enough to justify high investment in specialized equipment
3. Product is standardized or approaching a phase of life cycle that justifies investment
4. Supplies of raw materials and components are adequate and of uniform quality

• Organized around products or families of similar high-volume, low-variety products

Product-Oriented Layouts

• Fabrication line
  • Builds components on a series of machines
  • Machine-paced
  • Require mechanical or engineering changes to balance
• Assembly line
  • Puts fabricated parts together at a series of workstations
  • Paced by work tasks
  • Balanced by moving tasks
• Both types of lines must be balanced so that the time to perform the work at each station is the same

Product Layout - Advantages

1. Low variable cost per unit
2. Low material handling costs
3. Reduced work-in-process inventories
4. Easier training and supervision
5. Rapid throughput

Product Layout - Disadvantages

1. High volume is required
2. Work stoppage at any point ties up the whole operation
3. Lack of flexibility in product or production rates

Product-Oriented Layout - Requirements

• Standardized product
• High production volume
• Stable production quantities
• Uniform quality of raw materials & components

Product-Oriented Layout - Assumptions

• Volume is adequate for high equipment utilization
• Product demand is stable enough to justify high investment in specialized equipment
• Product is standardized or approaching a phase of its life cycle that justifies investment in specialized equipment
• Supplies of raw materials and components are adequate and of uniform quality to ensure they will work with specialized equipment

McDonald's Assembly Line - Example

• Tasks: Order, Bun toasting, Assembly with condiments, Wrapping of patty, Order picked up immediately to keep it fresh, Customer service (order and payment)
• Details about each station

An Assembly Line Layout

• Component conveyor
• Workstations
• Units produced

Assembly-Line Balancing

• Objective is to minimize the imbalance between machines or personnel while meeting required output
• Starts with the precedence relationships
  • Determine cycle time
  • Calculate theoretical minimum number of workstations
  • Balance the line by assigning specific tasks to workstations

Line Balancing

• Line Balancing is the process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements.
• Design Product Layouts - Line Balancing

Cycle Time

• Cycle time is the maximum time allowed at each workstation to complete its set of tasks on a unit.
• Cycle Time = $\frac{Production \ time \ available \ per \ day}{Units \ required \ per \ day}$

Determine Maximum Output

• Output capacity = $\frac{Operating \ time \ per \ day}{Cycle \ Time} = \frac{O}{CT}$
• O = operating time per day
• D = Desired output rate
• CT = cycle time

Determine the Minimum Number of Workstations Required

• $\frac{\sum_{i=1}^{n} Time \ for \ task \ i}{Cycle \ time}$

Assembly Line Balancing - The General Procedure

1. Determine cycle time by taking the demand (or production rate) per day and dividing it into the productive time available per day
2. Calculate the theoretical minimum number of work stations by dividing total task time by cycle time
3. Perform the line balance and assign specific assembly tasks to each work station

Assembly Line Balancing - Steps

1. Determine tasks (operations)
2. Determine sequence
3. Draw precedence diagram
4. Estimate task times
5. Calculate cycle time
6. Calculate number of work stations
7. Assign tasks
8. Calculate efficiency

Layout Heuristics for Assigning Tasks in Assembly Line Balancing

• Longest task time - choose task with longest operation time
• Most following tasks - choose task with largest number of following tasks
• Ranked positional weight - choose task where the sum of the times for each following task is longest
• Shortest task time - choose task with shortest operation time
• Least number of following tasks - choose task with fewest subsequent tasks

Line Balancing - Green Grass, Inc.

• Big Broadcaster - Example company

Line Balancing Example 8.3 - Task

• Green Grass, Inc., a manufacturer of lawn & garden equipment, is designing an assembly line to produce a new fertilizer spreader, the Big Broadcaster. Using the following information, construct a precedence diagram for the Big Broadcaster.

Line Balancing Example - Data

Line Balancing - Example Task Break Down

• Desired output rate = 2400/week
• Plant operates 40 hours/week
• r = 2400/40 = 60 units/hour
• c = 1/60 = 1 minute/unit = 60 seconds/unit/ OR C = $\frac{40 hrs * 60 min * 60 s}{2400}=60 \frac{sec}{units}$
• $\frac{Total}{TM} = \frac{244 seconds}{60 seconds} = 4.067$ or 5 stations

Questions

• A company is setting up line to produce 192 units per eight-hour shift. The following table identifies the work elements, times and immediate predecessors.
  

• Boeing determines that there are 480 productive minutes of work available per day. The production schedule requires that 40 units of the wing component be completed as output from assembly line each day. Total task time = 65 mins. It now wants to group the tasks into workstations.
• Compute the cycle time and minimum number of workstations

Example - Precedence Data for Wing Component

Wing Component Example - Solution

• Cycle time = $\frac{Production \ time \ available \ per \ day}{Units \ required \ per \ day} = \frac{480}{40} = 12$ minutes per unit
• Minimum number of workstations = $\frac{\sum Time \ for \ task \ i }{Cycle \ tine}= \frac{65}{12} =5.42$, or 6 stations

Wing Component Example - Efficiency Calculation

• Efficiency $\frac{\sum Task \ times}{(Actual \ number \ of \ workstations) x (Largest \ cycle \ time)}=$ $\frac{65 minutes}{ (6 stations) x (12 minutes)}= 90.3\%$