School of Business

Program: MBA 2nd Semester

Course Code: D1PK205T
Course Name: Operations & Supply Chain Management

Operations & Supply Chain Management

 Course Code: MBDS 5032
Course Name: Operations & Supply Chain Management

UNIT 1
Introduction to Operations and supply chain Management 7 lecture hours

• Definition and basic concepts of operations management

• Operations and Supply Chain Management Processes

• Manufacturing Processes

• Classification of Services.

• The Goods–Services Continuum,

• Product Design and development for manufacturing and service industry

• Process design & Analysis

• Service Processes

• Productivity

• Facility layout

• Plant location methods. Service Facilities Location.

 Course Code: MBDS 5032
Course Name: Operations & Supply Chain Management

Case Study: Birmingham International Airport

Birmingham International Airport (BIA) is a bustling hub of activity, with 20 flights arriving and departing every
weekday evening at the Eurohub Terminal. Meanwhile, the Main Terminal, adjacent to Eurohub, is also bustling with
activity. The overnight freight operation at the original airport site is just beginning, with staff preparing for the first
aircraft from Europe or the United States.

BIA employs around 7000 staff from 150 organizations, each dedicated to ensuring the smooth operation of the
airport. Operations Director Richard Heard oversees about 600 of them, responsible for both the airfield and terminal
operations.

With a focus on customer service and security, the airport manages the terminal buildings and facilities, coordinating
the efforts of airlines, handling agents, retailers, and cargo handlers. The airport is growing rapidly, anticipating 10
million passengers by 2005.
 Course Code: MBDS 5032
Course Name: Operations & Supply Chain Management

The operational planning team ensures efficient allocation of infrastructure to airlines, but challenges arise, such as
delays or diversions. Terminal duty managers are responsible for addressing these day-to-day operational issues.

Despite the challenges, BIA aims to be the best regional airport in Europe, continuously seeking ways to improve and
make a positive impact on passengers, airlines, and the local economy.

Questions

1. Identify some of the micro-operations to be found at the airport. For each one:

(a) Identify the transforming and transformed resources.

(b) State which is the predominant transformed resource.

(c) Describe the output of each micro-operation and say who you think its customers are.

2. Summarise the job of the operations director. What are the main issues/problem she faces in managing the airport?
Cases in Operations Management by R Johnston
Operations Management:
An Overview

Operations management involves overseeing the production of goods and

services. It focuses on efficient processes and resource utilization. This field
plays a crucial role in organizational success.
Basic Concepts of Operations Management
Management
Efficiency Quality Control Inventory Management

Optimizing resources to achieve Ensuring products meet Overseeing stock levels and
achieve maximum output. specified standards. supply chain logistics.
TRANSFORMATION PROCESS
 Manufacturing Processes

Manufacturing is the transformation of raw

materials or parts into finished goods using tools,
human labour, machinery, and chemical processing.

Manufacturing is a profitable part of the business

chain, allowing businesses to sell finished products
at a higher cost than the value of the raw materials
used.
 Process Selection

▪ Process selection is based on five considerations

▪ Type of process; range from intermittent to continuous
▪ Degree of vertical integration
▪ Flexibility of resources
▪ Mix between capital & human resources
▪ Degree of customer contact

▪ Process types can be:

▪Project Process
▪Batch Process
© 2005 Wiley

▪Line Process
▪Continuous Process
 Types of Processes
▪ Intermittent operations:
▪ Capable of producing a large variety of product designs in relatively
low volumes e.g. Job Shop Manufacturing, Batch Manufacturing.
▪ Continuous operations:
▪ Capable of producing one (or a few) standardized designs in very
high volumes
 Types of Manufacturing Processes:
• Continuous flow manufacturing - A system used for high-volume,
volume, standardized production.
• Batch production - Manufacturing a specific quantity of a product in
a single production run.
• Job shop production - Custom-made products manufactured in small quantities.
• Mass customization - A hybrid system that combines elements of
mass production and customization.
• Flexible manufacturing system - A system capable of producing a
producing a variety of products with minimal setup time.
• Lean manufacturing - A system that focuses on eliminating waste
and maximizing value for customers.
• Just-in-time manufacturing - A system that produces products only
when they are needed, reducing inventory and waste.
Continuum of Process Types

© 2005 Wiley
Product Strategies and Process
Choice

© 2005 Wiley
 Process Technologies
▪ Automation
▪ Automated Material Handling:
▪ Automated guided vehicles (AGV)
▪ Automated storage & retrieval systems (AS/RS)
▪ Computer-Aided Design (CAD) software
▪ Robotics & Numerically-Controlled (NC) equipment
▪ Flexible Manufacturing Systems (FMS)
▪ Computer-Integrated Manufacturing (CIM)
Functions of Operations Management
Management
Planning Coordination
Strategizing for optimal resource Ensuring smooth workflow and task
allocation. synchronization.

Control
Monitoring processes and quality standards.
Elements of Operations Management

Efficiency Productivity Quality

Optimizing resource utilization. Maximizing output with available Maintaining high standards of
available resources. of products or services.
Challenges in Operations Management

1 2 3
Resource Allocation Technology Integration Supply Chain Optimization
Current Priorities in Operations
Management
Sustainability
Implementing environmentally friendly practices.

Automation
Integrating advanced technology for efficiency.

Innovation
Constantly seeking improved processes and strategies.
Importance of Operations
Management
Operations management is the backbone of organizational success, ensuring
success, ensuring the smooth functioning of production and service delivery.
service delivery. Efficient operations management leads to customer
customer satisfaction and sustainable business growth.
 Discussion Questions

1. What is your understanding of operations management, and how does it

differ from other management disciplines?
2. Explain the relationship between operations management and the overall
strategic goals of an organization?
3. Categorize the operations of a manufacturing company versus a service-
oriented company?
4. Provide examples of companies that excel in each of these areas and explain
what makes their operations successful?
Service Operations
Service operations encompass the intricate management of processes and
resources to deliver intangible services to customers. This multifaceted
domain involves activities like service design, delivery, and customer
relationship management. It centers on creating value through interactions
and experiences rather than physical products, setting service operations
apart from manufacturing operations.
 • Services are intangible activities or benefits
that one party provides to another,
Services- essentially any act or performance that one
Definition party can offer to another that is essentially
intangible and does not result in the
ownership of anything.
 • Intangibility
Service • Inseparability
Characteristics • Variability, and
• Perishability
 Classification of Services
Service delivery
Nature of the act Target market
process
• People processing • Consumer • Professional
• Possession services services
processing • Business services • Self-service
• Mental stimulus • Nonprofit • Automated
processing services services
• Information
processing
The Goods-service Continuum
• According to the goods-services continuum, products may possess
either tangible characteristics, such as salt, or intangible
characteristics, like teaching. Nevertheless, some products
simultaneously offer both goods and services, as exemplified by
Aeroplan travel.
• The placement of a product on the continuum allows marketers to
identify potential opportunities. At the tangible (pure goods) end
of the continuum, products are positioned that bear no relation to
services. At the intangible (pure services) end, services are
positioned that have no connection to physical products.
• The central segment of the continuum comprises products that
exhibit combined characteristics of both goods and services. For
instance, goods like air-conditioners not only exist as products but
also necessitate services such as installation and delivery.
 The Goods/Services Continuum

1-28
 Service Systems
Service systems refer to the interconnected network of
people, organizations, processes, and technologies that
collaborate to deliver value to customers through
services.
Key components of service systems
• Service Consumers: The recipients of services who seek to fulfill a particular need or desire.
• Service Processes: The series of activities and interactions that occur to create and deliver a
service.
• Customer Interaction Direct engagement with clients to fulfills needs.
• Service Technology: Tools, systems, and platforms that enable the efficient delivery of
services.
• Service Environment: The physical or virtual context in which services are delivered.
• Service Design and Innovation: The process of designing, developing, and improving
1-29 services to better meet the needs and preferences of customers.
 Comparison of Service Processes

1-30
 Manufacturers vs Service Organizations

• Services: • Manufacturers:
 Intangible product • Tangible product
 Product cannot • Product is inventoried
be inventoried • Low customer contact
 High customer • Longer response time
contact • Capital intensive
 Short response time
 Labor intensive

1-31
 Similarities for Service/Manufacturers

 Both use technology

 Both have quality, productivity, & response issues

 Both must forecast demand

 Both can have capacity, layout, and location issues

 Both have customers, suppliers, scheduling and staffing issues

1-32
 Product & Service Design
▪ The process of deciding on the unique characteristics of a
company’s product & service offerings
▪ Serves to define a company’s customer base, image,
competition and future growth
 Product and Service Design

▪ Major factors in design strategy

▪ Cost
▪ Quality
▪ Time-to-market
▪ Customer satisfaction
▪ Competitive advantage

Product and service design – or redesign – should be

closely tied to an organization’s strategy

4-34
 Product or Service Design Activities
1. Translate customer wants and needs
into product and service requirements
2. Refine existing products and services
3. Develop new products and services
4. Formulate quality goals
5. Formulate cost targets
6. Construct and test prototypes
7. Document specifications

4-35
 Reasons for Product or Service
Design

▪ Economic
▪ Social and demographic
▪ Political, liability, or legal
▪ Competitive
▪ Cost or availability
▪ Technological

4-36
 Objectives of Product and
Service Design
▪ Main focus
▪ Customer satisfaction
▪ Understand what the customer wants
▪ Secondary focus
▪ Function of product/service
▪ Cost/profit
▪ Quality
▪ Appearance
▪ Ease of production/assembly
▪ Ease of maintenance/service

4-37
 Designing For Operations
▪ Taking into account the capabilities of
the organization in designing goods
and services.
▪ Failure to take this into account can:
▪ Reduce productivity
▪ Reduce quality
▪ Increase costs

4-38
 Other Issues in Product and
Service Design
▪ Product/service life cycles
▪ How much standardization
▪ Mass customization
▪ Product/service reliability
▪ Robust design
▪ Degree of newness
▪ Cultural differences

4-39
 Life Cycles of Products or Services
Figure 4.1

Saturation

Maturity
Demand

Decline
Growth

Introduction

Time

4-40
 Product Design

▪ Product Life Cycles

▪ Robust Design
▪ Concurrent Engineering
▪ Computer-Aided Design
▪ Modular Design

4-41
 Product design

▪ Design for manufacturing (DFM)

▪ Design for assembly (DFA)
▪ Design for recycling (DFR)
▪ Remanufacturing
▪ Design for disassembly (DFD)
▪ Robust design

4-42
 Service Design

▪ Service is an act
▪ Service delivery system
▪ Facilities
▪ Processes
▪ Skills
▪ Many services are bundled with products

4-43
 Service Design

▪ Service design involves

▪ The physical resources needed
▪ The goods that are purchased or consumed
by the customer
▪ Explicit services
▪ Implicit services

4-44
 Service Design
▪ Service
▪ Something that is done to or for a customer
▪ Service delivery system
▪ The facilities, processes, and skills needed to
provide a service
▪ Product bundle
▪ The combination of goods and services
provided to a customer
▪ Service package
▪ The physical resources needed to perform
the service
4-45
 Differences Between Product
and Service Design
▪ Tangible – intangible
▪ Services created and delivered at the same
time
▪ Services cannot be inventoried
▪ Services highly visible to customers
▪ Services have low barrier to entry
▪ Location important to service
▪ Range of service systems
▪ Demand variability
4-46
 Phases in Service Design

1.Conceptualize
2.Identify service package components
3.Determine performance specifications
4.Translate performance specifications
into design specifications
5.Translate design specifications into
delivery specifications

4-47
Characteristics of Well Designed
Service Systems
1. Consistent with the organization mission
2. User friendly
3. Robust
4. Easy to sustain
5. Cost effective
6. Value to customers
7. Effective linkages between back operations
8. Single unifying theme
9. Ensure reliability and high quality

4-48
 Challenges of Service Design

1. Variable requirements
2. Difficult to describe
3. High customer contact
4. Service – customer encounter

4-49
Video: Product Design

4-50
Video: Service Design

4-51
 The Need for Layout Design (Cont.)

Changes in
environmental Changes in volume of
or other legal output or mix of
requirements products

Morale problems
Changes in methods
or equipment
 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
 Innovations at McDonald’s

► Indoor seating (1950s)

► Drive-through window Six
(1970s)
out of the
► seven(1980s)
Adding breakfast to the menu are
layout
► Adding play areas (late 1980s)
decisions!
► Redesign of the kitchens (1990s)
► Self-service kiosk (2004)
► Now three separate dining sections
57

Basic Layout Types

• Product Layout
– Layout that uses standardized processing operations to
achieve smooth, rapid, high-volume flow
• Auto plants, cafeterias
• Process Layout
– Layout that can handle varied processing requirements
• Tool and die shops, university departments
• Fixed Position Layout
– Layout in which the product or project remains stationary,
and workers, materials, and equipment are moved as needed
• Building projects, disabled patients at hospitals

• Combination Layouts or Hybrid layouts combinations of

these above types like Cellular manufacturing, Group
technology, Flexible Manufacturing Systems
 Product Layouts
▪ Product layout: Layout that uses standardized processing
operations to achieve smooth, fast, high-volume flow

▪ Made possible by highly standardized goods or services that allow

highly standardized, repetitive processing

▪ The work is divided into a series of standardized tasks, permitting

specialization of equipment and division of labor

▪ The large volumes handled by these systems usually make it

economical to invest substantial sums of money in equipment and
in job design.
 Production/Assembly Line

Raw
Station Station Station Station Finished
materials item
1 2 3 4
or customer

Materials Materials Materials Materials

and/or and/or and/or and/or
labor labor labor labor

Used for Repetitive or Continuous Processing

Example: automobile assembly lines, cafeteria serving line
 Advantages of Product Layouts

▪ High rate of output

▪ Low unit cost
▪ Labor specialization
▪ Low material handling cost
▪ High utilization of labor and equipment
▪ Established routing and scheduling
▪ Routine accounting, purchasing and inventory
control
 Disadvantages of Product Layouts

▪ Creates boring, repetitive jobs

▪ Poorly skilled workers may not maintain
equipment or quality of output
▪ Fairly inflexible to changes in volume
▪ Highly inclined to shutdowns
▪ Needs preventive maintenance
▪ Individual incentive plans are impractical
 Process Layouts
▪ Process layouts: Layouts that can handle various
processing requirements
▪ The layouts feature departments or other functional
groupings in which similar kinds of activities are
performed
▪ Examples: Machine shops usually have separate
departments for milling, grinding, drilling, and so on
▪ Different products may present quite different
processing requirements and sequences of
operations
 Process Layout
Milling

Assembly
& Test Grinding

Drilling Plating

Process Layout - work travels to dedicated process centers

Comparison of Process and Product Layout
 Disadvantages of Process Layouts

▪ In-process inventory costs can be high

▪ Challenging routing and scheduling
▪ Equipment utilization rates are low
▪ Material handling slow and inefficient
▪ Complexities often reduce span of supervision
▪ Special attention for each product or customer
▪ Accounting, inventory control and purchasing are
more involved
 Fixed-Position Layouts
▪ Fixed-Position Layout: Layout in which the
product or project remains stationary, and
workers, materials, and equipment are moved
as needed
Examples:
▪ Large construction projects (buildings, power plants,
dams)
▪ Shipbuilding, production of large aircraft
▪ Rockets used to launch space missions
 Combination Layouts
▪ The three basic layout types may be altered to
satisfy the needs of a particular situation
▪ Examples:
▪ Supermarket layouts: primarily process layout, have
fixed-path material-handling devices as well (roller-
type conveyors and belt-type conveyors)
▪ Hospitals: process layout, fixed-position layout as well
(patient care)
▪ Off-line reworking (customized processing) of faulty
parts in a product layout
 Cellular Layouts
 Cellular Production
◦ Layout in which machines are grouped into a cell that
can process items that have similar processing
requirements
 Group Technology
◦ The grouping into part families of items with similar
design or manufacturing characteristics
✓Design characteristics: size, shape and function.
✓Manufacturing or processing characteristics: type
and sequence of operations required.
 Service Layouts
▪ Warehouse and storage layouts
Issue: Frequency of orders
▪ Retail layouts
Issue: Traffic patterns and traffic flows
▪ Office layouts
Issue: Information transfer, openness

69
 Design Product Layouts: Line
Balancing
Line balancing is the process of assigning tasks to workstations
in such a way that the workstations have approximately the same
processing time requirements. This results in the minimized idle time
along the line and high utilization of labor and equipment.

4 tasks 2 tasks

Worker 1 Worker 2

Each task takes 1 minutes, how to balance?

Cycle time is the maximum time allowed at each workstation

to complete its set of tasks on a single unit
What is the cycle time for the system above?

70
Designing Process
Layouts
 The main issue in design of process layouts concerns the
relative positioning of the departments involved.

 Departments must be assigned to locations.

 The problem is to develop a reasonably good layout; some

combinations will be more desirable than others.
 Some departments may benefit from adjacent locations
• Sharing expensive tools or equipments.

 Some departments should be separated

• A lab with delicate equipment should not be located near a

department that has equipment with strong vibrations.

• Sand blasting department and painting department.

• Flammable materials near a furnace.

 One advantage of process layouts: satisfy a variety of processing
requirements

 Customers or materials in these systems require different

operations and different sequences of operations

 One of the major objectives in process layout is to minimize

transportation cost, distance, or time

 This is usually accomplished by locating departments with relatively

high interdepartmental work flow as close together as possible
Process Selection Facility Layout

© 2005 Wiley
Productivity
Efficiency and Transformation Resource Optimization

Productivity in operations management reflects Improving productivity involves optimizing the

the efficiency with which inputs are transformed the use of labor, capital, and resources to
into outputs. It acts as a key indicator of streamline operations. This optimization helps
operational efficiency and performance, helps in achieving higher levels of output with
measuring the ratio of output to input. By with the same level of resources, ultimately
enhancing productivity, organizations can increasing the profitability and competitiveness
achieve more with fewer resources, leading to competitiveness of the organization.
cost savings and improved competitiveness.
PRODUCTIVITY COMPUTATION
 Practice Quiz
• True/False
• General, Job-Shop systems have a lower unit
cost than continuous systems do because
continuous systems use costly specialized
equipment.

• In cellular manufacturing, machines and

equipment are grouped by type (e.g., all
grinders are grouped into a cell).
Answer: False
Answer: False

79
 Practice Questions

1. Layout planning is required because of:

• Efficient operations
• Accidents or safety hazards
• New products or services
• Morale problems
• A) I and II
• B) II and IV
• C) I and III
• D) II, III, and IV
• E) I, II, III, and IV
Answer: D
80
 Practice Questions
2. Which type of processing system tends to produce the
most product variety?
• A) Assembly
• B) Job-Shop
• C) Batch
• D) Continuous
• E) Project
•Answer: B

81
Plant Location Methods
Optimal Location Selection
Plant location decisions involve evaluating factors such as market proximity,
proximity, transportation costs, labor availability, and regulatory environment to
environment to determine the best fit for the organization's needs.

Methodological Evaluation
Various location evaluation methods, such as factor rating and load-distance
analysis, are employed to assess potential manufacturing or service facility
locations.
 Facility or Plant Location
A plant should be located at a place where inhabitants are interested in it’s
success, the product can be sold profitably and production cost is
minimum – DR. Vishweshwarya.

A plant location is often result of compromise among

conflicting social, economic and geographical conditions –
Lansburg.
 Location Decisions

 Long-term decisions
 Decisions made infrequently
 Decision greatly affects both fixed and
variable costs
 Once committed to a location, many
resource and cost issues are difficult to
change
 Factors Affecting Location Decisions

• Raw Material Supply. • Environmental Impact, And

Effluent Disposal.
• Transport Facilities.
• Local Community Considerations.
• Availability Of Utilities: Water,
Fuel, Power. • Climate.

• Availability Of Suitable Land. • Political Strategic Considerations

 Evaluating location alternatives
• Location Cost-Volume-Profit Analysis:

– The Cost-Volume-Profit (CVP) Analysis can be represented either

mathematically or graphically. It involves three steps:

1) For each location alternative, determine the fixed and variable costs, 2)For
all locations, plot the total-cost lines on the same graph, and

3) Use the lines to determine which alternatives will have the highest and
lowest total costs for expected levels of output.
 Location Cost-Volume-Profit Analysis:

Additionally, there are four assumptions one must keep in mind when
using this method:
Fixed costs are constant.
• Variable costs are linear.
• Required level of output can be closely estimated.
• There is only one product involved.
Total cost = FC = v(Q)
• where FC=Fixed Cost, v=Variable Cost per Unit,
Q=Number of Units
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Locational Cost–Volume Analysis –

Solved Problem
• Esmail Mohebbi, owner of European Ignitions Manufacturing, needs to expand
his capacity. He is considering three locations—Athens, Brussels, and Lisbon—
for a new plant. The company wishes to find the most economical location for
an expected volume of 2,000 units per year.
• Mohebbi conducts locational cost–volume analysis. To do so, he determines
that fixed costs per year at the sites are $30,000, $60,000, and $110,000,
respectively; and variable costs are $75 per unit, $45 per unit, and $25 per unit,
respectively. The expected selling price of each ignition system produced is
$120.
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Locational Cost–Volume Analysis

For Athens:

Total cost = 30,000 + 75(2,000) = 180,000

For Brussels: Total cost = 60,000 + 45(2,000) = 150,000

For Lisbon: Total cost = 110,000 +25(2,000) = 160,000

With an expected volume of 2,000 units per year, Brussels provides the lowest
cost location. The expected profit is:

Total revenue - Total cost = 120(2,000) - 150,000 = 90,000 per year

 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Locational Cost–Volume Analysis

The crossover point for Athens and Brussels is:
30,000 + 75(x) = 60,000 + 45(x)
30(x) = 30,000
x = 1,000

and the crossover point for Brussels and Lisbon is:

60,000 + 45(x) = 110,000 + 25(x)
20(x) = 50,000
x = 2,500

locational cost–volume analysis can be sensitive to input data. For example, for a
volume of less than 1,000, Athens would be preferred. For a volume greater than
2,500, Lisbon would yield the greatest profit.
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Locational Cost–Volume Analysis

 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

The Factor-Rating Method

The factor-rating method has six steps:

1. Develop a list of relevant factors called key success factors.

2. Assign a weight to each factor to reflect its relative importance in the
company’s objectives.
3. Develop a scale for each factor (for example, 1 to 10 or 1 to 100 points).
4. Have management score each location for each factor, using the scale in Step
3.
5. Multiply the score by the weights for each factor and total the score for each
location.
6. Make a recommendation based on the maximum point score, considering the
results of other quantitative approaches as well.
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

The Factor-Rating Method- Solved problem

Five Flags over Florida, a U.S. chain of 10 family-oriented theme parks, has
decided to expand overseas by opening its first park in Europe. It wishes to select
between France and Denmark.
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

The Factor-Rating Method

SOLUTION
• Center of Gravity Method:
– This technique is used in determining the location of a facility which
will either reduce travel time or lower shipping costs. Distribution
cost is seen as a linear function of the distance and quantity shipped.
The Center of Gravity Method involves the use of a visual map and
a coordinate system; the coordinate points being treated as the set of
numerical values when calculating averages. If the quantities
shipped to each location are equal , the center of gravity is found by
taking the averages of the x and y coordinates; if the quantities
shipped to each location are different , a weighted average must be
applied (the weights being the quantities shipped).
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Center-of-Gravity Method

x i = x -coordinate of location i

y i = y -coordinate of location i

Q i = Quantity of goods moved to or from location i

 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Center-of-Gravity Method- Solved problem

The Metropolis Public Library plans to expand with its first major branch library in the city’s
growing north side. The branch will serve six census tracts. The table shows coordinates of
each tract and the population within it. Using the center-of-gravity method, what should be
the coordinate location of the branch library?
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Center-of-Gravity Method
Center-of-Gravity Method- Solved problem
Solution
Solution
 Load-distance method
• Suppose that a new warehouse is to be located to serve Delhi.
It will receive inbound shipments from several suppliers,
including one in Ghaziabad. If the new warehouse were
located at Gurgaon, what would be the distance between the
two facilities? If shipments travel by truck, the distance
depends on the highway system and the specific route taken.
• Computer software is available for calculating the actual
mileage between any two locations in the same county.
• However, for load-distance method, a rough calculation that is
either Euclidean or rectilinear distance measure may be
used. Euclidean distance is the straight-line distance, or
shortest possible path, between two points.
Disadvantages of Poor Location Decision
• Following are the disadvantages of selecting a poor
location of the facility:
– The maintenance of the plant is a constant addition to
the cost.
– Purchase of land and construction of infrastructure is
an expensive affair.
– Difficulty in marketing and transportation of the
products.
– Dissatisfaction among employees and workers.
– Abnormal wastage and delays in the processes.
 Examples
Sugar Mills
• Companies construct Sugar mills close to the Sugarcane
farms. Consequently, there is a reduction in the
transportation time and carriage inwards.
Tea Factories
• The tea plants need moist soil for their growth. In India,
Assam, West Bengal and Karnataka are some of the major
tea-producing states.
• Hence, most Tea Factories are located in these states due to
their climatic conditions.
Crude Oil Companies
• The United Arab Emirates is the largest exporter of crude oil.
Abu Dhabi National Oil Company (ADNOC), situated in UAE,
is a leading company in this sector.
 Hands on workshop
• Read the case “Modi Mangoes: Managing an uncertain future”
https://www.emerald.com/insight/content/doi/10.1108/EEMCS-06-2022-
0208/full/html
Methodology
• Read Case study using above link. It is shared on Whatsup group also
• In class discuss in small groups of 5-6 students.
• Each group will determine a suitable location using different methods.
• Calculate the suitable location by using methods in previous classes.
• Discuss the strengths and weaknesses of each method of location
determination.
 Case study overview
• The case study revolves around how to forecast and harvest
demand for the seasonal fruit (in this case, mangoes) to meet
customer demand.
• On the basis of these parameters, deciding proper
procurement location, workforce, and distribution to obtain
the optimal results.
Case study overview
 Hands on workshop
Assignment questions
Q1. Identify the factors and their relative importance for mango procurement.
Q2. Compare the performance of each district based on the evaluation criteria.
Q3. Which district should Mahendra select for the procurement of mangoes?
Q4. How will Mahendra plan the workforce to procure 1,000 MT mangoes in the
upcoming season? How many regular, over-time and part-time workers will be
required each week?
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

Additional Assignments
Subway, with more than 25,000 outlets in the U.S., is planning for a new restaurant in Buffalo, New York. Three
locations are being considered. The following table gives the factors for each site.

a) At which site should Subway open the new restaurant?

b) b) If the weights for Space and Traffic density are reversed, how would this affect the decision?
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

NUMERICALS
A location analysis for Cook Controls, a small manufacturer of parts for high-technology cable systems, has been narrowed
down to four locations. Cook will need to train assemblers, testers, and robotics maintainers in local training centers. Lori
Cook, the president, has asked each potential site to offer training programs, tax breaks, and other industrial incentives. The
critical factors, their weights, and the ratings for each location are shown in the following table. High scores represent
favorable values.

a) Compute the composite (weighted average) rating for each location.

b) Which site would you choose?
c) Would you reach the same conclusion if the weights for operating cost and labor cost were reversed? Recompute as
necessary and explain
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

NUMERICALS
Peter Billington Stereo, Inc., supplies car radios to auto manufacturers and is going to open a new plant. The
company is undecided between Detroit and Dallas as the site. The fixed costs in Dallas are lower due to cheaper land
costs, but the variable costs in Dallas are higher because shipping distances would increase. Given the following costs:

a) Perform an analysis of the volume over which each location is preferable.

b) How does your answer change if Dallas’s fixed costs increase by 10%?
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

NUMERICALS
Peggy Lane Corp., a producer of machine tools, wants to move to a larger site. Two alternative locations have been
identified: Bonham and McKinney. Bonham would have fixed costs of $800,000 per year and variable costs of
$14,000 per standard unit produced. McKinney would have annual fixed costs of $920,000 and variable costs of
$13,000 per standard unit. The finished items sell for $29,000 each.

a) At what volume of output would the two locations have the same profit?

b) For what range of output would Bonham be superior (have higher profits)?

c) For what range would McKinney be superior?

 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

NUMERICALS
The following table gives the map coordinates and the shipping loads for a set of cities that we wish to connect
through a central hub.

a) Near which map coordinates should the hub be located?

b) If the shipments from city A triple, how does this change the coordinates?
 School of Business

Course Code: ………….. Course Name: Operations and Supply chain management

NUMERICALS
Todd’s Direct, a major TV sales chain headquartered in New Orleans, is about to open its first outlet in Mobile,
Alabama, and wants to select a site that will place the new outlet in the center of Mobile’s population base. Todd
examines the seven census tracts in Mobile, plots the coordinates of the center of each from a map, and looks up the
population base in each to use as a weighting. The information gathered appears in the following table.

a) At what center-of-gravity coordinates should the new store be located?

b) Census tracts 103 and 105 are each projected to grow by 20% in the next year. How will this influence the new
store’s coordinates?
 Service Location Strategy

• While the focus in industrial-sector location analysis

is on minimizing cost, the focus in the service sector
is on maximizing revenue.

• This is because manufacturing firms find that

costs tend to vary substantially among locations,
while service firms find that location often has more
impact on revenue than cost.

• There are eight major determinants of volume and

revenue for the service firm:
 Service Location Strategy
1. Purchasing power of the 5. Uniqueness of the firm’s and
customer-drawing area competitors’ locations

2. Service and image compatibility 6. Physical qualities of

with demographics of the customer- facilities and neighboring
drawing area businesses

3. Competition in the area 7. Operating policies of the firm

4. Quality of the competition 8. Quality of management

Strategic Contribution of Operations
Management
Efficiency and Quality Continuous Improvement

Operations management plays a strategic role It encompasses decisions related to

in improving efficiency, quality, and product/service design, process design, and
responsiveness to customer needs, thereby supply chain management, facilitating
contributing to a competitive advantage in the continuous improvement initiatives to enhance
market. enhance customer value.
Impact of Service Operations
1 Customer Satisfaction 2 Operational Efficiency
Efficient service operations result in Optimized service operations not only
satisfied customers through effective only improve customer satisfaction but
effective resource utilization, but also enhance operational
contributing to positive brand efficiency, leading to cost savings and
perception and loyalty. and improved competitiveness.
Supply Chain Management Impact
Efficient Resource Utilization Seamless Information Flow
Optimized supply chain management An effective supply chain facilitates the
ensures efficient resource utilization, seamless flow of goods and information,
helping organizations achieve cost contributing to operational efficiency and
savings and improved productivity. customer satisfaction.
Quality Management in Operations

Rigorous Quality Control Continuous Improvement

Quality management in operations involves Continuous improvement initiatives in quality
rigorous quality control processes to ensure quality management contribute to operational
customer satisfaction and enhance brand operational efficiency and sustained customer
reputation. customer loyalty.
 Discussion Questions

1. What factors should be considered when selecting a location for a

manufacturing plant or service facility?
2. Discuss some common methods used for plant location analysis and their
respective advantages and disadvantages?
3. What are some of the current challenges facing operations management,
and how are companies addressing them?
4. Discuss some emerging trends or priorities in operations management, such
as sustainability or digitalization, and their implications for businesses?
124

References
• Operations Management. Heizer, Barry Render, Chuck Munson and Amit Sachan.
Pearson Education. 12th Edition
• Supply chain Management (2019). Sunil Chopra & Peter Meindl. Pearson
Education. 7th Edition
• https://www.scmglobe.com/online-guide/case-studies/
• https://trans.info/en/7-mini-case-studies-successful-supply-chain-cost-reduction-
and-management-174252
• https://www.linkedin.com/pulse/role-ai-supply-chain-management-iyyappan-s-cii-
scmpro