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OperationsManagement

LocationStrategies

Chapter8OperationsManagement

Locatio1LearningObjectivesWhenyoucompletethischapter,youshouldbeableto:IdentifyorDefine:

ObjectiveoflocationstrategyInternationallocationissuesClusteringGeographicInformationSystemsDescribeorexplain:ThreemethodsofsolvingthelocationproblemFactor-ratingmethodLocationalbreakevenanalysisCenter-of-gravitymethodDescribethefactorsaffectinglocationdecisionsLearningObjectivesWhenyouco2FederalExpressStresses“hub”conceptAdvantages:enablesservicetomorelocationswithfeweraircraftenablesmatchingofaircraftflightswithpackageloadsreducesmishandlinganddelayintransitbecausethereistotalcontrolofpackagesfrompickuptodeliveryFederalExpressStresses“hub”3ObjectiveofLocationStrategyMaximizethebenefitoflocationtothefirmObjectiveofLocationStrategy4IndustrialLocationDecisionsCostfocusRevenuevarieslittle

betweenlocationsLocationisamajor

costfactorAffectsshipping&

productioncosts(e.g.,labor)Costsvarygreatlybetween

locations©1995CorelCorp.IndustrialLocationDecisionsC5ServiceLocationDecisionsRevenuefocusCostsvarylittlebetweenmarketareasLocationisamajor

revenuefactorAffectsamountof

customercontactAffectsvolumeof

businessServiceLocationDecisionsReve6InGeneral-LocationDecisionsLong-termdecisionsDifficulttoreverseAffectfixed&variablecostsTransportationcostAsmuchas25%ofproductpriceOthercosts:Taxes,wages,rentetc.Objective:Maximizebenefitoflocationtofirm=CostorRevenue=$’s!foreitherManufacturingorservice.InGeneral-LocationDecision7LocationDecisionSequenceCountry©1995CorelCorp.Region/Community©1995CorelCorp.Site©1995CorelCorp.LocationDecisionSequenceCoun8FactorsThatAffectLocationDecisionsFactorsThatAffectLocationD9FactorsAffectingCountryGovernmentrules,attitudes,politicalrisk,incentivesCulture&economyMarketlocationLaboravailability,attitudes,productivity,andcostAvailabilityofsupplies,communications,energyExchangeratesandcurrencyrisksFactorsAffectingCountryGover10RegionLocationDecisionsCorporatedesiresAttractivenessofregion(culture,taxes,climate,etc.)Labor,availability,costs,attitudestowardsunionsCostsandavailabilityofutilitiesEnvironmentalregulationsofstateandtownGovernmentincentivesProximitytorawmaterials&customersLand/constructioncosts©1995CorelCorp.RegionLocationDecisionsCorpo11FactorsAffectingSiteSitesizeandcostAir,rail,highway,andwaterwaysystemsZoningrestrictionsNearnessofservices/suppliesneededEnvironmentalimpactissues©1995CorelCorp.FactorsAffectingSiteSitesiz12LocationDecisionExampleBMWdecidedtobuilditsfirstmajormanufacturingplantoutsideGermanyinSpartanburg,SouthCarolina.©1995CorelCorp.LocationDecisionExampleBMWd13CountryDecisionFactorsMarketlocationU.S.isworld’slargestluxurycarmarketGrowing(babyboomers)LaborLowermanufacturinglaborcosts$17/hr.(U.S.)vs.$27(Germany)Higherlaborproductivity11holidays(U.S.)vs.

31(Germany)OtherLowershippingcost($2,500/carless)Newplant&equipmentwouldincreaseproductivity(lowercost/car$2,000-3000)LawsofU.S.A.CountryDecisionFactorsMarket14TransportationModelFindsamounttobeshippedfromseveral

sourcestoseveraldestinationsUsedprimarilyforindustriallocationsTypeoflinearprogrammingmodelObjective:Minimizetotalproduction

&shippingcostsConstraintsProductioncapacityatsource(factory)DemandrequirementatdestinationTransportationModelFindsamou15ComponentsofVolumeandRevenueforaServiceFirm1.

Purchasingpowerofcustomerdrawingarea2.Serviceandimagecompatibilitywithdemographicsof thecustomerdrawingarea3.Competitioninthearea4.Qualityofthecompetition5.Uniquenessofthefirm’sandcompetitor’slocations6.Physicalqualitiesoffacilitiesandneighboring businesses7.Operatingpoliciesofthefirm8.QualityofmanagementComponentsofVolumeandReven16LocationStrategies–Servicevs.IndustrialService/Retail/Professional

RevenueFocusVolume/revenueDrawingarea,purchasingpowerCompetition;advertising/pricingPhysicalqualityParking/access;security/lighting;appearance/imageCostdeterminantsRentManagementcaliberOperationspolicies(hours,wagerates)Goods-ProducingLocationCostFocusTangiblecostsTransportationcostofrawmaterialsShipmentcostoffinishedgoodsEnergyandutilitycost;labor;rawmaterial;taxes,etc.IntangibleandfuturecostsAttitudetowardunionQualityoflifeEducationexpendituresbystateQualityofstateandlocalgovernmentLocationStrategies–Service17MajorMethodsofSolvingLocationProblemsWeightedmethodswhich:AssignweightsandpointstovariousfactorsDeterminetangiblecostsInvestigateintangiblecostsCenterofGravityMethodFindbestdistributioncenterlocationLocationbreakevenmethodsSpecialcaseofbreakevenanalysisTransportationmethodAspecializedlinearprogrammingmethodMajorMethodsofSolvingLocat18TelemarketingandInternetIndustriesRequireneitherface-to-facecontactwithcustomers(oremployees)normovementofmaterialPresentsawholenewperspectiveonthelocationproblemTelemarketingandInternetInd19GeographicInformationSystemsNewtooltohelpinlocationanalysisEnablescombinationofmanyparametersGeographicInformationSystems20FinalThoughtTheideallocationformanycompaniesinthefuturewillbeafloatingfactoryshipthatwillgofromporttoport,fromcountryto

country–wherevercost

perunitislowest.FinalThoughtTheideallocatio21OperationsManagement

LayoutStrategy

Chapter9OperationsManagement

Layout22LearningObjectivesWhenyoucompletethischapter,youshouldbeableto:IdentifyorDefine:

Fixed-positionlayoutProcess-orientedlayoutWorkcellsFocusedworkcenterOfficelayoutRetaillayoutWarehouselayoutProduct-orientedlayoutAssembly-linefactoryLearningObjectivesWhenyouco23LearningObjectivesWhenyoucompletethischapter,youshouldbeableto:Describeorexplain:HowtoachieveagoodlayoutfortheprocessfacilityHowtobalanceproductionflowinarepetitiveorproduct-orientedfacilityLearningObjectivesWhenyouco24McDonald’s-NewKitchenLayoutNofoodpreparedaheadexceptpattyEliminationofsomesteps,shorteningofothersNewbuntoastingmachine(11secondsvs30seconds)Repositioningcondimentcontainers(onemotion,nottwo)SandwichesassembledinorderProductionlevelscontrolledbycomputerDiscardonlymeatwhensandwichesdonotsellfastenoughSavingsof$100,000,000peryearinfoodcostsMcDonald’s-NewKitchenLayou25InnovationatMcDonald’sIndoorseating(1950’s)Drive-throughwindow(1970s)Addingbreakfasttothemenu(1980s)Addingplayareas(1990s)(threeoutofthefourarelayoutdecisions)InnovationatMcDonald’sIndoor26ObjectivesoftheLayoutStrategyDevelopaneconomicallayoutwhichwillmeettherequirementsof:productdesignandvolume(productstrategy)processequipmentandcapacity(processstrategy)qualityofworklife(humanresourcestrategy)buildingandsiteconstraints(locationstrategy)ObjectivesoftheLayoutStrat27TypesofLayoutsFixed-positionlayout–ProductdoesnotmoveProcess-orientedlayout–ProductlowvolumespecializedOfficelayout–PeopleInformationLayoutRetaillayout–CustomerpreferenceandaccessLayoutWarehouselayout–Materialhandling&spaceProduct-orientedlayout–ProductLayoutisformaxefficiencyhighvolumeTypesofLayoutsFixed-position28WhatisFacilityLayout?Locationorarrangementofeverythingwithin&aroundbuildingsObjectivesaretomaximizeCustomersatisfactionUtilizationofspace,equipment,&peopleEfficientflowofinformation,material,&peopleEmployeemorale&safetyWhatisFacilityLayout?Locat29StrategicImportanceofLayoutProperlayoutenables:Higherutilizationofspace,equipment,andpeopleImprovedflowofinformation,materials,orpeopleImprovedemployeemoraleandsaferworkingconditionsImprovedcustomer/clientinteractionFlexibilityStrategicImportanceofLayout30LayoutStrategiesProject(fixed-position)JobShop(Process-oriented)OfficeRetailWarehouse(storage)Repetitive/Continuous(product-oriented)ExamplesPittsburghAirportRelatedIssuestosolveIngalShipBuildingCorp.TrumpPlazaShouldiceHospitalOliveGardenAllstateInsuranceMicrosoftKroger’sSupermarketWalgreensBloomingdalesFederal-Mogul’sWarehouseTheGap’sdistributioncenterSony’sTVAssemblyLineDodgeCaravansMinivansMovematerialtothelimitedstorageareasaroundthesiteManagevariedmaterialflowforeachproductLocateworkersrequiringfrequentcontactclosetoeachotherExposecustomertohigh-marginitemsBalancelow-coststoragewithlow-costmaterialhandlingEqualizethetasktimeateachworkstationLayoutStrategiesProject(fixed31RequirementsofaGoodLayoutanunderstandingofcapacityandspacerequirementsselectionofappropriatematerialhandlingequipmentdecisionsregardingenvironmentandaestheticsidentificationandunderstandingoftherequirementsforinformationflowidentificationofthecostofmovingbetweenthevariousworkareasRequirementsofaGoodLayouta32ConstraintsonLayoutObjectivesProductdesign&volumeProcessequipment&capacityQualityofworklifeBuildingandsiteConstraintsonLayoutObjectiv33AreasofConcerninLayoutStrategyLayoutStrategyMaterialFlowCommunicationWorkCellSafetyMaterialAttributesWarehousingServiceAreasAreasofConcerninLayoutStr34OperationsManagement

HumanResourcesand

JobDesign

Chapter10OperationsManagement

Human35LearningObjectivesWhenyoucompletethischapter,youshouldbeableto:IdentifyorDefine:

JobdesignJobspecializationJobexpansionToolsofmethodsanalysisErgonomicsLaborstandardsAndonLearningObjectivesWhenyouco36LearningObjectives-ContinuedWhenyoucompletethischapter,youshouldbeableto:Describeorexplain:

RequirementsofgoodjobdesignThevisualworkplaceLearningObjectives-Continue37SouthwestAirlinesProfitablefor26yearswhileUnited,Northwest,andU.S.Airlostbillions.Strategy:HumanresourcesCultureofcaringforpeopleinthetotalityoftheirlives,notjustatwork.SpendsmoretorecruitandtrainthananyotherairlineSouthwestAirlinesProfitablef38SouthwestAirlinesEmpoweredemployeesWageshigherthanindustryaverageStockoptionsforsomeemployeesEmployeestreatedlikecustomersEverybodyunderstandswhateverybodyelse’sproblemsareNogimmicks!SouthwestAirlinesEmpoweredem39PeopleandWorkSystemAspectsJobDesignLaborStandardsPeopleandWorkSystemAspects40ProductivityinRelationtoAnnualTurnoverRateProductivityinRelationtoAn41JobDesignSpecifyingthetasksthatmakeup

ajobforanindividualorgroupInvolvesdeterminingWhatistobedone(i.e.,responses)Howitistobedone(i.e.,toolsetc.)Whyitistobedone(i.e.,purpose)ResultsinjobdescriptionShowsnatureofjobintask-relatedbehaviorsJobDesignSpecifyingthetasks42ComponentsofJobDesignJobspecializationJobexpansion–enrichment-enlargementPsychologicalcomponentsSelf-directedteamsMotivationandincentivesystemsErgonomicsandworkmethodsPraise?ComponentsofJobDesignJobsp43JobExpansionProcessofaddingmorevarietytojobsIntendedtoreduceboredomassociatedwithlaborspecializationMethodsJobenlargementJobenrichmentJobrotationEmployeeempowermentJobExpansionProcessofadding44JobRotationGeriatrics©1995CorelCorp.Pediatrics©1995CorelCorp.Maternity©1995

CorelCorp.JobRotationGeriatrics©1995C45EmployeeEmpowermentEmployeeEmpowermentControlDecision-MakingPlanningEmployeeEmpowermentEmployeeE46PsychologicalComponentsofJobDesignIndividualshavevalues,attitudes,

andemotionsthataffectjobresultsExample:Workisasocialexperience

thataffectsbelongingneedsEffectiveworkerbehaviorcomesmostlyfromwithintheindividualScientificmanagementarguedforexternalfinancialrewardsFirstexaminedin‘Hawthornestudies’PsychologicalComponentsofJo47Self-DirectedTeamsGroupofempoweredindividualsworkingtogetherforacommongoalMaybeorganizedforshort-termor

long-termobjectivesReasonsforeffectivenessProvideemployeeempowermentProvidecorejobcharacteristicsMeetpsychologicalneeds(e.g.,belonging)Self-DirectedTeamsGroupofem48MotivationWorkerperformancedependsonMotivationAbilityWorkenvironmentMotivationisthesetofforcesthatcompelbehaviorMoneymayserveasapsychological&financialmotivatorMotivationWorkerperformanced49MotivationandMoneyTaylor’sscientificmanagement(1911)WorkersaremotivatedmainlybymoneySuggestedpiece-ratesystemMaslow’stheory(1943)Peoplearemotivatedbyhierarchyofneeds,whichincludesmoneyHerzberg(1959)MoneyeitherdissatisfiesorisneutralinitseffectMotivationandMoneyTaylor’ss50Maslow’sHierarchyofNeedsSelf-ActualizationUseofabilitiesSelf-fulfillmentSocialGroupInteractionJobStatusSafety

PhysicalSafetyJobSecurityPhysiology

FoodShelterEgo

SelfRespectMaslow’sHierarchyofNee

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