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Oxford University Press, 2012. All rights reserved.

Operations Management
Chapter 4
Locating, Designing and
Managing Facilities
Jones & Robinson
Jones & Robinson: Operations Management
Explain how firms select locations for their facilities
Explain outsourcing
Review site selection criteria for different organizations
Describe the layout of work and equipment within
different types of operations processes
Explain what is meant by the Servicescape and the
effect this has on customers
Explore trends in operations design

Learning Objectives
Jones & Robinson: Operations Management
Access to raw materials

Availability of energy supplies

Provision of other utilities, such as water supply

Nature of transportation networks

Nature of communication links

Availability of land or property

Selecting Locations for Operations
Jones & Robinson: Operations Management
Local labour markets.

Access to markets or customers.

Proximity to or distance from competitors.

Business climate.

Government policies.



Other Location Selection Criteria
Jones & Robinson: Operations Management
Make or buy decision necessary for all firms
to decide as this has a bearing on profitability.
Outsourcing the shifting of production or a
service from in-house to another supplier
Reduced operating costs
Restructuring opportunities
Allows focus on core activities
Access to better capability for the outsourced
product or service

Outsourcing
Jones & Robinson: Operations Management
Some potential disadvantages
Financial costs
Loss of control
Increased risk security of information
quality of product or service
supply risk
loss of expertise



Outsourcing
Jones & Robinson: Operations Management
Size of trading area how far will customers
travel to get to the operation?
Market structure
Demographics
Travel patterns
Access
Visibility
Many companies use a weighted factor technique
based on the above criteria to select sites


Specific Site Selection
Jones & Robinson: Operations Management
Weighted factor technique. A business selects the
most important criteria in relation to a site and then
weights them according to their relative importance.
Regression modelling. A more sophisticated
approach based on statistics is undertaken on each
site.
Expert estimation. A technique based on previous
experience and intuition.
Location intelligence. This technique has emerged
recently, combining geographic data such as aerial
maps, demographics, and business information to
facilitate site selection




Specific Site Selection
Jones & Robinson: Operations Management
Competitive clustering. This refers to operations that
co-locate next to each other so deliberately site their
operation next to one or more competitors. e.g. high
street shops
Saturation marketing. This refers to a single company
co-locating lots of its operations together so that it creates
market dominance.
For example Lettuce Entertain You, a restaurant
chain that has 38 different restaurants - all in Chicago!
Personal preferences. Sometimes a location is selected
for no other reason than founder or owner wants to locate
there. e.g. The Oban Chocolate Company

Bucking the Trend!
Jones & Robinson: Operations Management
Fixed position layout

Process layout

Product layout

Cell layout


Process Layout Types in Operations
Jones & Robinson: Operations Management
Fixed Position Layout
Recipient of the processing is stationary
and the resources, plant and people
come to the service.
motorway building
shipbuilding
construction site
solicitors office
open heart surgery
high class restaurant.
Jones & Robinson: Operations Management
Fixed Position Layout
Advantages
High product flexibility
Product or customer remain in one place
High variety of tasks

Disadvantages
High unit cost
May be difficult to schedule tasks
Limited space may be a problem
Jones & Robinson: Operations Management
Process Layout
Similar products or processes (or those
with similar needs) are grouped together.
The product (or Customer) travels between
the resources.
X-ray department in a hospital
specialist machining or processing
restaurant kitchen
tinned or frozen food in a supermarket.
Jones & Robinson: Operations Management
Process Layout


Advantages
High product mix flexibility
Not liable to be disrupted
Easy to control

Disadvantages
Complex flow process
May generate high work in process (WIP)
inventory
Low utilization of equipment
Jones & Robinson: Operations Management
Product Layout
All operations follow the same sequence
of processes.

automobile assembly
self-service cafeteria
paper manufacturing
television and domestic goods
assembly
Jones & Robinson: Operations Management
Product Layout
Advantages
High volumes give low costs
Specialized equipment opportunity

Disadvantages
Work can be repetitive
Inflexible process
Flow easily disrupted
Jones & Robinson: Operations Management
Cell Layout
Self contained areas which contain all of
the processes to complete a particular
operation or service.

maternity unit in a hospital
lunch products in a supermarket
sports shop within a department store
final machining, testing and packing in
a factory.
Jones & Robinson: Operations Management
Cell Layout
Advantages
Fast throughput process
Group work adds to motivation
Often used in lean operations

Disadvantages
Need extra equipment
Low utilization of some equipment
Costly to reorganize

Jones & Robinson: Operations Management
Servicescape
Bitner (1992) summarizes the different elements of a
Servicescape into three composite dimensions namely:
ambient conditions - such as temperature and lighting
spatial layout and functionality
signs, symbols, and artefacts

Different operations use different combinations of the
elements to influence particular forms and sets of
behaviour.
e.g. retail clothing stores such as Karen Millen or Gap
can each create very different kinds of displays and
interiors depending on their market
Jones & Robinson: Operations Management
Trends in Operations Design
Production-lining service organizing plant,
equipment and employees in a product flow layout.
Removes the barrier between back of house and
front of house operations

Decoupling back of house (BoH) from front of
house (FoH) removing some of the activities
altogether, such as food preparation for local
authority schools and hospitals

These are best illustrated by the Servuction System
Jones & Robinson: Operations Management
Servuction System
Jones & Robinson: Operations Management
Self-Service employees are removed from
many FoH operations, such as supermarkets.
This is covered further in Chapter 8

Co-Branding more than one kind of
operation within the same premises. Uses
same BoH facility but different FoH staff.
Example Little Chef and Burger King share
the same premises in the UK.

Trends in Operations Design
Jones & Robinson: Operations Management
Facilities Management
Includes:
property strategy
space management
communications infrastructure
building maintenance and cleaning
energy and utilities monitoring
waste management and recycling
security and reception services
contract services management