Operations Management: Sustainability

and Supply Chain Management

Thirteenth Edition

Chapter 9
Layout Strategies

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Outline (1 of 2)
• Global Company Profile: McDonald's
• The Strategic Importance of Layout Decisions
• Types of Layout
• Office Layout
• Retail Layout
• Warehousing and Storage Layouts

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Outline (2 of 2)
• Fixed-Position Layout
• Process-Oriented Layout
• Focused Facilities
• Repetitive and Product-Oriented Layout

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Innovations at McDonald's (1 of 2)
• 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

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Innovations at McDonald's (2 of 2)
• Indoor seating (1950s)
• Drive-through window (1970s)
Six out of the
• Adding breakfast to the menu (1980s) seven are layout
decisions!
• Adding play areas (late 1980s)
• Redesign of the kitchens (1990s)
• Self-service kiosk (2004)
• Now three separate dining sections

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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

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Learning Objectives (1 of 2)
When you complete this chapter you should be able to:
9.1 Discuss important issues in office layout
9.2 Define the objectives of retail layout
9.3 Discuss modern warehouse management and terms
such as ASRS, cross-docking, and random stocking
9.4 Identify when fixed-position layouts are appropriate

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Learning Objectives (2 of 2)
When you complete this chapter you should be able to:
9.5 Explain how to achieve a good process-oriented facility
layout
9.6 Define work cell and the requirements of a work cell
9.7 Define product-oriented layout
9.8 Explain how to balance production flow in a repetitive or
product-oriented facility

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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

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

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Types of Layout (1 of 4)
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

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Types of Layout (2 of 4)
1. Office layout: Positions workers, their equipment, and
spaces/offices to provide for movement of information
2. Retail layout: Allocates display space and responds to
customer behavior
3. Warehouse layout: Addresses trade-offs between space
and material handling

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Types of Layout (3 of 4)
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)

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Types of Layout (4 of 4)
6. Work-cell layout: Arranges machinery and equipment to
focus on 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

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Layout Strategies (1 of 2)
Table 9.1 Layout Strategies

Blank OBJECTIVES EXAMPLES

Office Locate workers requiring Allstate Insurance
frequent contact close to one Microsoft Corp.
another

Retail Expose customer to high-margin Kroger’s Supermarket

items Walgreen’s
Bloomingdale’s

Warehouse (storage) Balance low-cost storage with Federal-Mogul’s

low-cost material handling warehouse
The Gap’s distribution
center

Project (fixed position) Move material to the limited Ingall Ship Building
storage areas around the site Corp.
Trump Plaza
Pittsburgh Airport

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Layout Strategies (2 of 2)
Table 9.1 Layout Strategies

Blank OBJECTIVES EXAMPLES

Job Shop (process Manage varied material flow Arnold Palmer
oriented) for each product Hospital
Hard Rock Cafe
Olive Garden

Work Cell (product Identify a product family, Hallmark Cards

families) build teams, cross-train team Wheeled Coach
members Ambulances

Repetitive/ Equalize the task time at Sony’s TV assembly

Continuous (product each workstation line
oriented) Toyota Scion

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

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Office Layout (1 of 2)
• Grouping of workers, their equipment, and spaces to
provide comfort, safety, and movement of information
• Movement of information is main distinction
• Typically in state of flux due to frequent technological
changes

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Relationship Chart
Figure 9.1

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Office Layout (2 of 2)
• Three physical and social
aspects
– Proximity
– Privacy
– Permission
• Two major trends
– Information technology
increases flexibility in layout
and employee location
– Dynamic needs for space
and services
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Retail Layout
• Objective is to maximize profitability per square foot of
floor space
• Sales and profitability vary directly with customer exposure

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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 department

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Store Layout
Figure 9.2

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Retail Layout Objective
• Maximize profitability per square foot of floor space
– Category Management – analysis of profitability of
merchandising plans for hundreds of categories
– Slotting – manufacturers pay slotting fees to retailers
to get the retailers to display (slot) their product

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Slotting
• Contributing factors
– Limited shelf space
– An increasing number of new products
– Better information about sales through POS data
collection
– Closer control of inventory
• Ethical issues
– Stifle new products
– Limit expansion

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Servicescapes
1. Ambient conditions - background characteristics such as lighting,
sound, smell, and temperature
2. Spatial layout and functionality - which involve customer circulation
path planning, aisle characteristics, and product grouping
3. Signs, symbols, and artifacts - characteristics of building design that
carry social significance

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Warehouse and Storage Layouts
• Objective is to find the optimum 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

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Warehousing and Storage Layouts
(1 of 2)

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

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Warehousing and Storage Layouts
(2 of 2)

• Warehouse density tends to vary

inversely with the number of
different items stored
• Automated Storage and Retrieval
Systems (ASRSs) can
significantly improve warehouse
productivity
• Dock location is a key design
element

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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

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Random Stocking
• Typically requires automatic identification systems (AISs)
and effective information systems
• Allows more efficient use of space
• Key tasks
1. Maintain list of “open” locations
2. Maintain accurate records
3. Sequence items to minimize travel, “pick” time
4. Combine picking orders
5. Assign classes of items to particular areas

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

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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

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Alternative Strategy
• 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

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Process-Oriented Layout (1 of 4)
• 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

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Process-Oriented Layout (2 of 4)
Figure 9.3

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Process-Oriented Layout (3 of 4)
• 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

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Process-Oriented Layout (4 of 4)
n n
Minimize cost =   X ij Cij
i 1 j 1

where n = total number of work centers or

departments
i, j = individual departments
Xij = number of loads moved from
department i to department j
Cij = cost to move a load between
department i and department j
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Process Layout Example (1 of 8)
Arrange six departments in a factory to minimize the material
handling costs. Each department is 20 20 feet and the
building is 60 feet long and 40 feet wide.
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

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Process Layout Example (2 of 8)
Figure 9.4

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Process Layout Example (3 of 8)
Figure 9.5

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Process Layout Example (4 of 8)
Figure 9.6
Interdepartmental Flow Graph

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Process Layout Example (5 of 8)
n n
Cost =   X ij Cij
i 1 j 1

Cost = $50  $200  $40  $30  $50  $10  $40  $100  $50
1 and 2 1 and 3 1 and 6 2 and 3 2 and 4 2 and 5 3 and 4 3 and 6 4 and 5
 $570

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Process Layout Example (6 of 8)
Figure 9.7
Revised Interdepartmental Flow Graph

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Process Layout Example (7 of 8)
n n
Cost =   X ij Cij
i 1 j 1

Cost = $50  $100  $20  $60  $50  $10  $40  $100  $50
1 and 2 1 and 3 1 and 6 2 and 3 2 and 4 2 and 5 3 and 4 3 and 6 4 and 5
 $480

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Process Layout Example (8 of 8)
Figure 9.8

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Computer Software (1 of 4)
•Graphical approach only works for small problems
• Computer programs are available to solve bigger problems
– Flowcharts
– Multi-story capability
– Storage and container placement
– Material volumes
– Time and cost analysis

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Computer Software (2 of 4)
• Proplanner flow path calculator
– Generate material flow diagrams
– Calculate material handling distances, times, costs
– Color-coded flow lines
– Helps identify excessive material handling

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Computer Software (3 of 4)
• Proplanner flow path calculator
– Generate material flow diagrams
– Calculate material handling distances, times, costs
– Color-coded flow lines
– Helps identify excessive material handling

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Computer Software (4 of 4)
• Three-dimensional visualization software allows managers
to view possible layouts and assess process, material
handling, efficiency, and safety issues

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Focused Facilities (1 of 3)
• A family of similar products with reasonably stable demand
• Match facilities to customer requirements and demand
• Reduces waste and capacity requirements

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Focused Facilities (2 of 3)
• Compute takt time
Total work time available
Takt time =
Units required to satisfy customer demand
With 7.5 working hours available per day, and a daily
demand of 600 units,
Takt time = (7.5 hours 60 minutes)/600 units
= 450 minutes/600 units
= .75 minutes or 45 seconds

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Focused Facilities (3 of 3)
• Compute takt time
Total work time available
Takt time =
Units required to satisfy customer demand
With 7.5 working hours available per day, and a daily
demand of 600 units,
Takt time = (7.5 hours 60 minutes)/600 units
= 450 minutes/600 units
= .75 minutes or 45 seconds

Takt time becomes the drumbeat of the

focused facility to which all facets of the
organization march
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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 design or volume changes

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Requirements of Work Cells
• Identification of families of products
• A high level of training, flexibility, and empowerment of
employees
• Self-contained, with its own equipment and resources
• Testing (poka-yoke) at each station in the cell

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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

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Improving Layouts Using Work Cells
(1 of 2)

Figure 9.9

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Improving Layouts Using Work Cells
(2 of 2)
Figure 9.10

U-shaped line may reduce employee movement and

space requirements while enhancing communication,
reducing the number of workers, and facilitating
inspection
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Focused Work Center and Focused
Factory
• Focused Work Center
– Cells may be organized as focused work centers –
plant within a plant
– 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

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Repetitive and Product-Oriented
Layout
Organized around products or families of similar high-
volume, low-variety products
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

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Product-Oriented Layouts (1 of 3)
• 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

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Product-Oriented Layouts (2 of 3)
• 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

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Product-Oriented Layouts (3 of 3)
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

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

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McDonald's Assembly Line

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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

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Wing Component Example (1 of 6)
Table 9.2 Precedence Data for Wing Component

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Wing Component Example (2 of 6)
Table 9.2 Precedence Data
for Wing Component 480 available mins
per day
40 units required

Figure 9.12

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Wing Component Example (3 of 6)
Table 9.2 Precedence Data Figure 9.12
for Wing Component

Production time available per day

Cycletime =
Units required per day
= 480 / 40
= 12 minutes per unit
n

Minimum number =
 Time for task i
i 1
of workstations Cycle time
480 available mins per day
= 65 /12
40 units required
= 5.42, or 6 stations
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Wing Component Example (4 of 6)
Table 9.3 Layout Heuristics That May Be Used to Assign
Tasks to Workstations in Assembly-Line Balancing

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Wing Component Example (5 of 6)
Figure 9.13

480 available mins per day

40 units required
Cycle time = 12 mins
Minimum workstations = 5.42 or 6
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Wing Component Example (6 of 6)
Table 9.2 Precedence Data for Wing Component
Figure 9.12

480 available mins per day

40 units required
Cycle time = 12 mins
Minimum workstations = 5.42 or 6

 Task times
Efficiency 
( Actual number of workstations ) x Largest cycle time
 65 minutes / 6 stations  x 12 minutes
 90.3%
Idle Time  6 stations   12 minutes  – 65 minutes  7 minutes
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