Principles of Operations

Management: Sustainability and

Supply Chain Management
Twelfth Edition, Global Edition

Chapter 9
Layout Strategies

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

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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

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Innovations at McDonald’s (continued)
• 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
Six out of the seven are layout decisions!

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McDonald’s New Layout
• Seventh major innovation
• Redesigning all 30,000 outlets around the world
• Facility layout is a source of competitive advantage

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McDonald’s New Layout
(continued)

• 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

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Learning Objectives
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 ASR S, cross-docking, and random stocking
9.4 Identify when fixed-position layouts are appropriate

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Learning Objectives (continued)
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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Digital World and Technology
• Infrared technology and computer vision can provide
insight about how facilities are used.
• Can be used to determine and track occupancy and
seating preference
• Assists management in modifying layouts and providing
appropriate staffing

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Types of Layout
1. Office layout: Positions workers, their equipment, and spaces/offices to
facilitate collaboration

2. Retail layout: Allocates display space and responds to customer behavior

3. Warehouse layout: Addresses trade-offs between space and material

handling

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)

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
Table 9.1 Layout Strategies
Blank

OBJECTIVES EXAMPLES
Office Balance physical and social Allstate Insurance
proximity, privacy, and Microsoft Corp.
permission

Retail Maximize profitability per square Kroger’s Supermarket

foot of floor space or linear foot Walgreen’s
of shelf space 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 and from the Ingall Ship Building
limited storage areas around the Corp.
site Trump Plaza
Pittsburgh Airport

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Layout Strategies (continued)
Table 9.1 Layout Strategies

Blank

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

Work Cell (product Identify a product family, build Hallmark Cards

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

Repetitive/ Continuous Equalize the task time at each Sony’s T V assembly

(product oriented) workstation line
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
• Grouping of workers, their equipment, and spaces to
provide comfort, safety, and movement of information
• Typically in state of flux due to frequent technological
changes

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Office Layout (continued)
• Three physical and social aspects
– Proximity
– Privacy
– Permission
• Two major trends
– Information technology increases flexibility in layout
and employee location (accelerated by the COVID-19
pandemic)
– Dynamic needs for space and services (even before
the pandemic)

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Retail Layout
• Objective is to maximize profitability per square
foot of floor space or linear foot of shelf 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 9.1

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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 PO S 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
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
(continued)

• Warehouse density tends to vary

inversely with the number of
different items stored
• Automated Storage and Retrieval
Systems (A SRS s) 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
RFI D identification used for
advanced shipment notification
as materials are unloaded

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Random Stocking
• Typically requires automatic identification systems (AI Ss)
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
can be particularly
advantageous 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 9.2

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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

X ij = 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 9.3

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Process Layout Example
(3 of 8) Figure 9.4

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Process Layout Example (4 of 8)
Figure 9.5
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

1 and 2  1 and 3  1 and 6  2 and 3  2 and 4 
+ $10 + $40 + $100 + $50
2 and 5  3 and 4  3 and 6  4 and 5 
= $570

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Process Layout Example (6 of 8)
Figure 9.6
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

1 and 2  1 and 3  1 and 6  2 and 3  2 and 4 
+ $10 + $40 + $100 + $50
2 and 5  3 and 4  3 and 6  4 and 5 
= $480

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Process Layout Example
(8 of 8) Figure 9.7

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Muther’s Grid
• Useful when quantitative data are not readily available or
when subjective or behavioral location issues are to be
considered
• Relationships between departments can be prioritized
based on multiple factors

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Muther’s Grid (continued)
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 2)
• 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 2)
• 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
Figure 9.9

Improved layout—cross-
Current layout—workers are
trained workers can assist
in small individual areas.
each other. May be able to
add a third worker as added
output is needed.
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Improving Layouts Using
Work Cells (continued) Figure 9.10

Improved layout—in U shape,

Current layout—straight lines make workers have better access. Four
it hard to balance tasks because cross-trained workers were
work may not be divided evenly. reduced to three.
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 2)
• 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 (2 of 2)
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
Figure 9.11

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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 480 available mins per day
for Wing Component 40 units required
TASK MUST
ASSEMBLY TIME
TASK FOLLOW TASK
(MINUTES)
LISTED BELOW Figure 9.12
A 10 ——

B 11 A

C 5 B

D 4 B

E 11 A

F 3 C, D

G 7 F

H 11 E

I 3 G, H

Blank

Total time 65 Blank

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Wing Component Example (3 of 6)
Table 9.2 Precedence Data Figure 9.12
for Wing Component
TASK MUST
ASSEMBLY TIME
TASK FOLLOW TASK
(MINUTES)
LISTED BELOW
A 10 ——
B 11 A
C 5 B
D 4 B
Production time available per day
E 11 A Cycletime =
Units required per day
F 3 C, D
= 480 / 40
G 7 F
= 12 minutes per unit
H 11 E
n
I 3 G, H
Blank

Total time 65 Blank

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 Figure 9.13
(5 of 6)

480 available mins per day Cycle time = 12 mins

40 units required 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
TASK MUST FOLLOW
ASSEMBLY TIME
TASK TASK
(MINUTES)
LISTED BELOW
A 10 ——
B 11 A
C 5 B
D 4 B
E 11 A
F 3 C, D 480 available mins per day
G 7 F 40 units required
H 11 E Cycle time = 12 mins
I 3 G, H
Minimum workstations = 5.42 or 6
Blank

Total time 65 Blank

 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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