IM1023.C4.Layout Strategy

Chapter 4:
LAYOUT STRATEGY
Nguyễn Thị Hoàng Mai
nthmai@hcmut.edu.vn
LEARNING
OUTCOME L.O.1 - Demonstrate the concepts,
operations strategy and decisions.
2
IM1023-C4.Layout Strategy
1.The Strategic Importance of Layout Decisions
CONTENT
2.Types of Layout
3
Case study:
McDonald’s Looks for Competitive Advantage Through Layout
1. What are the seven major innovations

of McDonald’s?
2. Which innovations belong to layout
strategy?
4
1. The
Strategic
Importance of
Layout
Decisions
5
The Strategic Importance of Layout Decisions
• Layout decisions include the best placement of machines (in production settings),
offices and desks (in office settings), or service centers (in settings such as
hospitals or department stores).
• An effective layout facilitates the flow of materials, people, and information within
and between areas.
• Layout is one of the key decisions that determine the long-run efficiency of
operations.
• The objective of the layout strategy is to develop an effective and efficient layout
that will meet the firm’s competitive requirements
6
The Strategic Importance of Layout Decisions
Layout design must consider how to achieve the following:

• 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 (whatever the layout is now, it will need to change)
7
Office layout Retail layout Warehouse layout
2. Types of Fixed-position
layout
Process-oriented
layout
Work-cell layout
Layout
Product-oriented
layout
8
Office layout
• Positions workers, their equipment, and
spaces/offices to provide for the movement
of information.
• The main distinction of office layouts is the
importance placed on the flow of information.
• Two major trends:
• Technology (smartphones, scanners, the
Internet, laptop computers, and tablets)
increases flexibility in layout and
employee location
• Dynamic needs for space and services.
9
Retail layout
• Allocates display space and responds to customer behavior.
• Sales and profitability vary directly with customer exposure
• The main objective of retail layout is to maximize profitability per square foot of
floor space.
10
Warehouse layout
• Minimize total cost by addressing trade-offs
between space and material handling
• Utilize warehouse full volume while maintaining
low material-handling costs (material-handling
costs are all the costs related to the transaction:
incoming transport, storage, and outgoing transport of
the materials to be warehoused)
• Minimize the damage and spoilage of material

within the warehouse.
11
Fixed-position layout
• Addresses the layout requirements of
large, bulky projects such as ships and
buildings.
• The project remains in one place, and
workers and equipment come to that
one work area.
• Three complicating factors:
• limited space at virtually all sites.
• different materials are needed at
different stages of a project
• the volume of materials needed is
dynamic.
12
Process-oriented layout
• Deals with low-volume,

high-variety production
(also called “job shop,” or
intermittent production) in
which machines and
equipment are grouped.
• Support a product
differentiation strategy.
13
Process-oriented layout
• Advantages:
• flexibility in equipment and labor assignments
• Ease of maintenance
• Small batches production
• Disadvantages:
• orders take more time to move through the system because of difficult scheduling,
changing setups, unique material handling
• high labor skills requirement
• higher work-in-process inventories
14
Work-cell layout
• Arranges machinery and equipment to focus on the production of a single product
or group of related products.
• The requirements of work cells:
• dentification of families of products, often using group technology codes or
equivalents
• A high level of training, flexibility, and empowerment of employees
• Self-contained equipment and resources
• Testing (poka-yoke) at each station in the cell
15
Work-cell layout
16
Product-oriented layout
• Seeks the best personnel and machine utilization in repetitive or continuous
production: high-volume, low-variety products
17
Product-oriented layout
• Advantages:
• low variable cost per unit (due to high-volume, standardized products)
• low material-handling costs
• reduced work-in-process inventories
• easier training and supervision
• rapid throughput
• Disadvantages:
• high volume is required because of the large investment needed to establish
the process
• work stoppage at any one point can tie up the whole operation
• process flexibility in products and production rates.
18
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Thanks for your listening

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Chapter 4:

1. What are the seven major innovations

Layout design must consider how to achieve the following:

• Minimize the damage and spoilage of material

• Deals with low-volume,

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