1. Location Strategy and Layout Strategy
19 July 2001

2. Introduction What – Location and Layout Decisions
Where – Important to company
Why – Costly to change

3. Why is Location Important?
Affects costs
Costs of inputs depend on region
Characteristics of labour force depend on region
Difficult to change once decision made
Objective: maximize benefits of location to the firm

4. Choosing a Country Government Culture and economics Market locations
Labour
Availability of Inputs
Exchange rate

5. Choosing a Community Corporate desires Attractiveness Labour Utilities
Environmental Regulations
Government Incentives
Proximity
Land and Construction Costs

6. Choosing a Site Size and Cost Air, rail, highway, waterway systems
Zoning restrictions
Nearness of services and suppliers
Environmental impact

7. Evaluating Location Alternatives
How do we choose between locations?

8. Factor Rating Develop list of factors Weight each factor
Develop scale for each factor
Score each location for each factor
Multiply score by weights
Sum points

9. Break-Even Analysis
Determine fixed and variable costs for each location
Plot costs vs volume
Select location with lowest total cost for expected production volume

10. Break-Even Analysis 200000 150000 Annual Cost 100000 50000 500 1000
Akron
150000
Chicago
Bowling Green
Akron lowest cost
Bowling Green lowest cost
Chicago lowest cost
Annual Cost
100000
50000
500
1000
1500
2000
2500
3000
Volume

11. Center of Gravity Method

12. Service Location Strategy
Maximize volume of business and revenue
Purchasing Power
Compatibility with demographics
Competition
Quality of Competition
Uniqueness of location
Physical qualities of facilities
Operating Policies
Quality of Management

13. What is Layout? Placement of machines Offices Service centers
Efficient flow of materials, people, information

14. Layout Achieves Higher utilization of space, equipment, people
Improved flow of information, materials, people
Improved morale and safe working conditions
Improved customer / client interaction
Flexibility

15. Good Layout Requires Material handling equipment
Capacity and space requirements
Environment and aesthetics
Flows of Information
Cost of moving between work areas

16. Fixed Position Layout Project remains in one place
Workers and equipment come to the work area
Limited space
At different stages, different materials needed
Volume of materials needed is dynamic

17. New Innovations Move some construction off-site
Modular construction – ie shipbuilding
Group technology – group components

18. Process-Oriented Layout
Low volume
High variety
Similar machines grouped together
Product moves from one department to another
Advantage: flexibility
Disadvantage: set-up and movement

19. Material Handling Costs
Arrange departments to minimize material handling

20. Work cells Temporary Product-oriented arrangement
Reduced work-in-process inventory
Less floor space
Reduced raw material and finished goods inventory
Reduced labour
More employee participation
Increased use of equipment
Reduced investment in machinery

21. Work cells require Identified families of products
Highly trained and flexible employees
Support to get up and running

22.  Focused Work Centre
Product oriented arrangement

23. Office Layout Moving information instead of materials
Work cell concept still valid
Technology allows increasing layout flexibility
Virtual companies – hoteling

24. Retail Layout Profitability related to customer exposure to products
High-draw items around periphery
Prominent locations for high-impulse and high-margin
Disperse “power items” around store
End-aisle locations have high exposure
Convey mission by position lead-off department

25. Warehouse and Storage Layout
Find optimum cost between material handling and storage space
Variety of items stored and number of items picked per order
Shipping and receiving areas

26. Cross-Docking Avoid placing in storage Ship what is received
Reduce distribution costs
Speed restocking
Requires tight scheduling
Requires accurate product information

27. Random Stocking
Locate stock wherever there is space

28. Customizing
Warehouse adds value to product by customizing it for customer
Modification
Repair
Labeling
Packaging

29. Repetitive Product-Oriented Layout
High volume
Low variety
Expensive!
Volume adequate for high equipment utilization
Product demand stable
Product standardized
Adequate supplies of raw materials

30. Product Layouts Fabrication line Assembly line
Time spent at each stage in the line must be balanced

31. Advantages Low variable cost per unit Low material handling cost
Reduced work-in-process inventory
Easier training and supervision
Rapid throughput

32. Disadvantages High investment – requires high volume
Work stoppage stops entire operation
Low flexibility

33. Assembly-Line Balancing
Cycle time = Production time available per day / units per day
Minimum Workstations = Sum of task times / Cycle time
Efficiency = Sum of task times / (actual workstations x assigned cycle time)