CHAPTER 8

OBTAINING AND LAYING OUT

OPERATING FACILITIES
 LEARNING OBJECTIVES

• Developing operating systems

• Choosing the right location
• Locating retails stores and manufacturing plants
• Planning physical facilities
• How to improve operations
 OPERATING SYSTEM
• Consists of inputs, process and outputs of a business
• Inputs: materials, people, money, information, machines and other productive
factors.
• Processes: convert these inputs into products customers want
• Output: the product produced and the satisfactions to employees and the public
• Operation or production: converting
• inputs into output for customers
 Operating System
Inputs Processes Outputs
 Elements Of
Operating System
1) System For Changing
a) Form
b) Place
c) Time
2) Sequence For Inputs > Outputs
3) Skills, Tools, Machines For Change
4) Instructions/Goods Identification
5) Time Frame For Completion

McGraw-Hill/Irwin
 How Operating Systems Works

The following activities or processes must be performed by all business regardless of their nature. These procedures includes marketing,
finance and operations. In manufacturing and similar plants operations is called production but in retail and service type firms the
activity called operations.
Operations/Production

“…converting inputs
into outputs for
customers.”
HOW TO BEGIN OPERATION

1. Choose the right location

2. Planning physical facilities
3. Deciding on a layout
4. Implementing your plans
 CHOOSE RIGHT LOCATION
•Company location is major factor in success or failure
•Ask this question
•Do i plan to have just one location or to grow regionally or nationwide
•Do i intend to concentrate on one product area or expand into several

This will help focus your research

FACTORS AFFECTING LOCATION
CHOICE
1. Access to a capable, well trained, stable workforce
2. Availability to adequate and affordable supplies and
services
3. Availability, type, use and cost transportation
4. Taxes and government regulation
5. Availability and cost electricity, gas, water, sewerage and
other utilities
1. Retailers: sell goods to the ultimate customers
2. Producers: convert materials into products in
considerable volume for others to sell to ultimate
customers
3. Service companies: which provide a service for customers
have some characteristics of both retailer and producers
 Retailer Location
Factors- Specific
 Trade Area
 Population Trends
 Purchasing Power
 Trade Potential
 Competition
 Shopping Centers
Janis Christie/Getty Images
 Producer Location
Factors- Specific
Market Location
Vendor Location
Labor Availability
Transportation
Utilities
Government/Taxes
Schools/Recreation
Site Selection Rating Sheet
 TYPES OF STORES
• Convenience goods: products that customers buy often, routinely, quickly
and in any store that carries them (eg grocery, detergent and etc)
• Shopping good stores: goods that customers buy infrequently after shopping
at only a few stores (automobile, furniture)
• Specialty goods: bought infrequently often at exclusive outlets after special
effort by the customer to drive to the store (precious jewellery, quality
dresses, Ferrari car)
• Seasonal stores: target customers for specific seasons or events. Some are
open year round and some are only open seasonal (Mood Republic)
 TYPES OF LOCATION
1. Downtown location: attract business oriented activities as government, financial businesses and head offices of large firms are
usually located in downtown area (eg PKNS)
2. Advantages:
1. Lower rents
2. Better public transportation
3. Proximity to where people work
3. Disadvantages:
1. Limited shopping hours
2. Higher crime rates
3. Poor or inadequate traffic and parking
4. Deterioration of downtown areas
 TYPES OF LOCATION
1. Freestanding stores: various locations are usually best for customers who have brand or company
loyalty
2. Advantages
1. Low costs
2. Good parking
3. Independent hours and operations
4. Restricted competition in these location

3. Disadvantages
1. To attract more customers must consider advertising
2. Acquiring suitable building and land might be difficult
 TYPES OF LOCATION
1. Shopping centres or mall : vary in size and are designed to draw traffic according to the planned nature of the stores to be
included in them
1. Anchor stores: those that generate heavy traffic in a shopping centre (parkson, giant)
2. advantages:
1. Specialized activities to bring in traffic
2. Merchant association activities
3. Parking, utilities and combined advertising
3. Disadvantages:
1. Cost, restriction imposed by the centre’s theme
2. Operation regulations
3. Changes in the centre of owners and managers that bring policy changes
 Calculating Total Rent

Source For Determining Average Cost Per Square

Foot In Your City-
http://www.inc.com/keyword/realestate
 Planning Physical Facilities Steps

1. Determine Product to be sold and volume in which it is produced

2. Identify Operations & Activities required to get the customers
3. Determine Space Needs
4. Decide On Best Layout of facilities
5. Implement Your Plans
 Determine Product to be sold and volume
in which it is produced
• Facility should be planned not only for products to produced now but also
for changes anticipated in the foreseeable future
• Projections for 5 years are normal and industry standards for the space
required for planned sales or production volume can be a good start in
planning
 Identify Operations & Activities required
to get the customers
• The activities include:
• Purchasing materials and parts for production or goods to sell
• Performing operations needed to produce the product
• Carrying out support activities
 Determine Space Needs

• Telecommuting: use of modern communication media such as telephoned,

fax machine, computers modems, scanner to work from an office, home or
any location
 Decide On Best Layout of facilities
• The objective in layout planning is to obtain the best placement of furniture
and fixtures, tools, machines and equipment, storage and materials handling,
service activities such as cleaning and maintenance
• Types of layout:
• Product layout: the facilities laid out according to the sequence of operations to be
performed
• Process layout: groups the facilities doing the same type of work
Layout Example
 DETERMINING THE GENERAL
LAYOUT
• Determining the general layout by grouping machines, products or departments
• Help to establish the general arrangement of the plant, store or office before spending
much time on details.
• Each service should be placed conveniently near the units that use it.
• Entrance location are important in the layout of retails and service
• Determining final layout
• The final layout must be planned in detail so examine each operation to ensure easy
performance of the work
Product and process layout comparison of
cafeterias
 Implement Your Plans
• Should test your plans to see if they are sound
• One way to do this employees, customers or other knowledgeable people review the plans
and make suggestions
• Construction of a new building requires consideration of the type and method of
construction, arrangement for vehicular movement and parking, provision for public
transportation if available and landscaping
 Improving Operations
• State Problem
• Clearly stating the problem
• Ask question such is the cost of the work too high? Is the quality of the service low? Is the service to customers delayed
• Collect/Record Information
• The step consists of collecting information for the what, how, where, who, why, and when of the work to be done
• Develop/Analyze Alternatives
• Questions that might be used in improving work performance
• Who performs the activity, what is it and whre is it being done
• Why is the activity being performed
• Can the activity be performed in a better way
• Can it be combined with another activity
• Can the work sequence be changed to reduce the vloume of work
• Can it be simplified
 Improving Operations
• Select/Install/Follow Up
• Using your objectives such as lower cost better service as a guide, pick the method that best suits your goals.
• Installing this new method includes setting up physical equipment, gaining acceptance and training workder
• Test the method to see that it works and follow up to see that workers are familiar with it and are following procedures
• Set/Use Performance Standards
• Performance can be set by
• Estimates by people experienced in the work
• Time studies using a watch or other timing device
• Synthesis of the elemental times obtained from published tables
• Small business usually use estimates of experienced people