1. ISM 270 Service Engineering and Management Lecture 5: Facility Location, Project Management

2. Announcements  Homework 3 on web tomorrow  Project 1 due next week  Project 2 starting next week

3. The Supporting Facility Creating the Right Environment

4. Chapter 8 Learning Objectives  Discuss the impact of the “servicescape” on the behavior of customers and employees.  Describe the critical facility design features.  Draw a process flow diagram.  Identify the bottleneck operation in a product layout and rebalance for increased capacity.  Use operations sequence analysis to minimize flow-distance in a process layout.  Recommend facility design features to remove anxiety of disorientation.

5. Servicescapes Servicescapes Designing Physical Surroundings to Affect Employee and Customer Behavior Designing Physical Surroundings to Affect Employee and Customer Behavior  Ambient Conditions: background characteristics such as noise level, music, lighting, temperature, and scent.  Spatial Layout and Functionality: reception area, circulation paths of employees and customers, and focal points.  Signs, Symbols, and Artifacts: selection, orientation, location, and size of objects.

6. Typology of Servicescapes

7. Facility Design Considerations  Nature and Objectives of Service Organization  Land Availability and Space Requirements  Flexibility  Security  Aesthetic Factors  The Community and Environment

8. Process Analysis Terminology  Cycle Time is the average time between completions of successive units.  Bottleneck is the factor that limits production usually the slowest operation.  Capacity is a measure of output per unit time when fully busy.  Capacity Utilization is a measure of how much output is actually achieved.  Throughput Time is the time to complete a process from time of arrival to time of exit.

9. Process Analysis Terminology (cont.)  Rush Order Flow Time is the time to go through the system without any queue time.  Direct Labor Content is the actual amount of work time consumed.  Total Direct Labor Content is the sum of all the operations times.  Direct Labor Utilization is a measure of the percentage of time that workers are actually contributing value to the service.

10. Process Flow Diagram of Mortgage Services Property Survey CT=90 min. Credit Report CT=45 min. Title Search CT=30 min. Unapproved Mortgages Approved Mortgages Completed Applications Mortgage Applications Final Approval CT=15 min. Yes No. Operation and cycle time Decision Wait Flow of customers/goods/information

11. Product Layout Work Allocation Problem Automobile Driver’s License Office Review Payment Violations Eye Test Photograph Issue Review Payment Violations Eye Test Photograph IssueIn 1 240 15 2 120 30 3 60 4 90 40 5 180 20 6 120 30 Activity Number(s) Capacity per hour Cycle Time in seconds Out

12. Automobile Driver’s License Office (Improved Layout) 1,4 65 55 3 60 3 60 1,4 65 55 6 120 30 5 180 20 2 120 30 In Out

13. Process Layout Relative Location Problem  Ocean World Theme Park Daily Flows 10 0 6 60 75 0 6020 43 6 6 1 7 010 15 2 8 3 10 15 8820 630 15030 8104012 6 8 530 10 A B C D E F A B C D E F A B C D E F Net flow Flow matrix Triangularized matrix Description of attractions: A=killer whale, B=sea lions, C=dolphins, D=water skiing, E=aquarium, F=water rides.

14. Ocean World Theme Park (Proposed Layout) (a) Initial layout (b) Move C close to A Pair Flow distances Pair Flow distances Pair Flow distances Pair Flow distances AC 30 * 2 = 60 CD 20 * 2 =40 AC 30 * 2 = 60 CD 20 * 2 =40 AF 6 * 2 = 12 CF 8 * 2 =16 AF 6 * 2 = 12 CF 8 * 2 =16 DC 20 * 2 = 40 DF 6 * 2 = 12 DC 20 * 2 = 40 DF 6 * 2 = 12 DF 6 * 2 = 12 AF 6 * 2 = 12 DF 6 * 2 = 12 AF 6 * 2 = 12 Total 124 CE 8 * 2 = 16 Total 124 CE 8 * 2 = 16 Total 96 Total 96 (c ) Exchange A and C (d) Exchange B and E and move F Pair Flow distances Pair Flow distances Pair Flow distances Pair Flow distances AE 15 * 2 = 30 AB 15 * 2 =30 AE 15 * 2 = 30 AB 15 * 2 =30 CF 8 * 2 = 16 AD 0 * 2 = 0 CF 8 * 2 = 16 AD 0 * 2 = 0 AF 6 * 2 = 12 FB 8 * 2 = 16 AF 6 * 2 = 12 FB 8 * 2 = 16 AD 0 * 2 = 0 FD 6 * 2 = 12 AD 0 * 2 = 0 FD 6 * 2 = 12 DF 6 * 2 = 12 Total 58 DF 6 * 2 = 12 Total 58 Total 70 Total 70 ABC DEF A C D B EF C A D B FE AF CE DB

15. Environmental Orientation Considerations  Need for spatial cues to orient visitors  Formula facilities draw on previous experience  Entrance atrium allows visitors to gain a quick orientation and observe others for behavioral cues  Orientation aids and signage such as “You Are Here” maps reduce anxiety

16. Service Facility Location

17. Learning Objectives   Discuss how different customer service criteria affect facility location.   Locate a single facility using the cross-median approach.   Use the Huff model to evaluate the economic feasibility of a retail service location.  Locate multiple facilities using the set covering model.   Discuss nontraditional location strategies.

18. Service Facility Location Planning  Competitive positioning: prime location can be barrier to entry.  Demand management: diverse set of market generators.  Flexibility: plan for future economic changes and portfolio effect.  Expansion strategy: contiguous, regional followed by “fill-in,” or concentrated.

19. Geographic Representation Location on a Plane Y Destination j Yj Euclidean Origin i Metropolitan 0 Xi X j Yi X

20. Effect of Optimization Criteria 1. Maximize Utilization ( City C: elderly find distance a barrier ) 2. Minimize Distance per Capita ( City B: centrally located ) 3. Minimize Distance per Visit ( City A: many frequent users ) City A City B City C -10 -5 5 10 15 -15 -10 -5 5 10 15 20 25 3 2 1 * * *

21. Estimation of Geographic Demand   Define the Target Market (Families receiving AFDC)   Select a Unit of Area (Census track, ZIP code)   Estimate Geographic Demand (Regression analysis)   Map Geographic Demand (3D visual depiction)

22. Single Facility Location Using Cross Median Approach 1 (W 1 =7) 2 (W 2 =1) 3 (W 3 =3) 4 (W 4 =5)

23. Single Facility Location Using Cross Median Approach 1 (W 1 =7) 2 (W 2 =1) 3 (W 3 =3) 4 (W 4 =5) Solution is line segment y=2, x=2,3

24. Huff Retail Location Model First, a gravity analogy is used to estimate attractiveness of store j for customers in area i. A ij = Attraction to store j for customers in area i S j = Size of the store (e.g. square feet) T ij = Travel time from area i to store j lambda = Parameter reflecting propensity to travel

25. Huff Retail Location Model Second, to account for competitors we calculate the probability that customers from area i will visit a particular store j.

26. Huff Retail Location Model Third, annual customer expenditures for item k at store j can now be calculated. P ij = Probability customers from area i travel to store j C i = Number of customers in area i (e.g. census track) B ik = Annual budget for product k for customers in area i m = Number of customer areas in the market region

27. Huff Retail Location Model Fourth, market share of product k purchased at store j can now be calculated.

28. Site Selection Considerations 1. Access: 4. Parking: Convenient to freeway exit and Adequate off-street parking entrance ramps 5. Expansion: Served by public transportation Room for expansion 2. Visibility: 6. Environment: Set back from street Immediate surroundings Surrounding clutter should complement the Sign placement service 3. Traffic: 7. Competition: Traffic volume on street that may Location of competitors Indicate potential impulse buying 8. Government: Traffic congestion that could be a Zoning restrictions hindrance (e.g.., fire stations) Taxes

29. Breaking the Rules   Competitive Clustering (Among Competitors) (e.g. Auto Dealers, Motels)   Saturation Marketing (Same Firm) (e.g. An Bon Pain, Ice Cream Vendors)   Marketing Intermediaries (e.g. Credit Cards, HMO)   Substitute Electronic Media for Travel (e.g. telecommuting, e-Commerce)   Impact of the Internet on Service Location (e.g. Amazon.com, eBay, FedEx)

30. Strategic Location Considerations Front Office Back Office ExternalCustomer(consumer) Is travel out to customer or customer travel to site? Can electronic media substitute for physical travel? Is location a barrier to entry? Is service performed on person or property? Is co-location necessary? How is communication accomplished? InternalCustomer(employee) Availability of labor? Are self-service kiosks an alternative? Are economies of scale possible? Can employees work from home? Is offshoring an option?

31. Discussion  How do the rules change when service encounter is offered over web?

32. Managing Service Projects

33. Learning Objectives  Describe the nature of project management.  Illustrate the use of a Gantt chart.  Construct a project network.  Perform critical path analysis on a project network.  Allocate limited resources to a project.  Crash activities to reduce the project completion time.  Analyze a project with uncertain activity times.  Use the earned value chart to monitor a project.  Discuss the reasons why projects fail to meet performance, time, and cost objectives.

34. The Nature of Project Management  Characteristics of Projects: purpose, life cycle, interdependencies, uniqueness, and conflict.  Project Management Process: planning (work breakdown structure), scheduling, and controlling.  Selecting the Project Manager: credibility, sensitivity, ability to handle stress, and leadership.  Building the Project Team: Forming, Storming, Norming, and Performing.  Principles of Effective Project Management: direct people individually and as a team, reinforce excitement, keep everyone informed, manage healthy conflict, empower team, encourage risk taking and creativity.  Project Metrics: Cost, Time, Performance

35. Work Breakdown Structure 1.0 Move the hospital (Project) 1.1 Move patients (Task) 1.1.1 Arrange for ambulance (Subtask) 1.1.1.1 Prepare patients for move 1.1.1.2 Box patients personnel effects 1.2 Move furniture 1.2.1. Contract with moving company 1.1.1.1 Prepare patients for move 1.1.1.2 Box patients personnel effects 1.2 Move furniture 1.2.1. Contract with moving company

36. Project Management Questions  What activities are required to complete a project and in what sequence?  When should each activity be scheduled to begin and end?  Which activities are critical to completing the project on time?  What is the probability of meeting the project completion due date?  How should resources be allocated to activities?

37. Tennis Tournament Activities ID Activity Description Network Immediate Duration Node Predecessor (days) 1 Negotiate for Location A - 2 2 Contact Seeded Players B - 8 3 Plan Promotion C 1 3 4 Locate Officials D 3 2 5 Send RSVP Invitations E 3 10 6 Sign Player Contracts F 2,3 4 7 Purchase Balls and Trophies G 4 4 8 Negotiate Catering H 5,6 1 9 Prepare Location I 5,7 3 10 Tournament J 8,9 2

38. Notation for Critical Path Analysis Item Symbol Definition Activity duration t The expected duration of an activity Early start ES The earliest time an activity can begin if all previous activities are begun at their earliest times Early finish EF The earliest time an activity can be completed if it is started at its early start time Late start LS The latest time an activity can begin without delaying the completion of the project Late finish LF The latest time an activity can be completed if it is started at its latest start time Total slack TS The amount of time an activity can be delayed without delaying the completion of the project

39. Scheduling Formulas ES = EFpredecessor (max) (1) EF = ES + t (2) LF = LSsuccessor (min) (3) LS = LF - t (4) TS = LF - EF (5) TS = LS - ES (6) or

40. Tennis Tournament Activity on Node Diagram J2J2 B8B8 START A2A2 C3C3 D2D2 G4G4 E 10 I3I3 F4F4 H1H1 TS ESEF LSLF

41. Early Start Gantt Chart for Tennis Tournament ID Activity Days Day of Project Schedule 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 A Negotiate for 2 Location B Contact Seeded 8 Players C Plan Promotion 3 D Locate Officials 2 E Send RSVP 10 Invitations F Sign Player 4 Contracts G Purchase Balls 4 and Trophies H Negotiate 1 Catering I Prepare Location 3 J Tournament 2 Personnel Required 2 2 2 2 2 3 3 3 3 3 3 2 1 1 1 2 1 1 1 1 Critical Path Activities Activities with Slack

42. Resource Leveled Schedule for Tennis Tournament ID Activity Days Day of Project Schedule 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 A Negotiate for 2 Location B Contact Seeded 8 Players C Plan Promotion 3 D Locate Officials 2 E Send RSVP 10 Invitations F Sign Player 4 Contracts G Purchase Balls 4 and Trophies H Negotiate 1 Catering I Prepare Location 3 J Tournament 2 Personnel Required 2 2 2 2 2 2 2 2 2 2 2 2 2 3 2 2 2 2 1 1 Critical Path Activities Activities with Slack

43. Incorporating Uncertainty in Activity times A M D B F(D) P(D<A) =.01 P(D>B) =.01 optimistic most pessimistic likely TIME

44. Formulas for Beta Distribution of Activity Duration Expected Duration Variance Note: (B - A )= Range or

45. Activity Means and Variances for Tennis Tournament Activity A M B D V A 1 2 3 B 5 8 11 C 2 3 4 D 1 2 3 E 6 9 18 F 2 4 6 G 1 3 11 H 1 1 1 I 2 2 8 J 2 2 2

46. Uncertainly Analysis Assumptions 1. Use of Beta Distribution and Formulas For D and V 2. Activities Statistically Independent 3. Central Limit Theorem Applies ( Use “student t” if less than 30 activities on CP) 4. Use of Critical Path Activities Leading Into Event Node Result Project Completion Time Distribution is Normal With: For Critical Path Activities

47. Completion Time Distribution for Tennis Tournament Critical Path Activities D V A 2 4/36 C 3 4/36 E 10 144/36 I 3 36/36 J 2 0 = 20 188/36 = 5.2 =

48. Question What is the probability of an overrun if a 24 day completion time is promised? 24 P (Time > 24) =.5 -.4599 =.04 or 4% Days

49. Costs for Hypothetical Project Cost (0,0) Schedule with Minimum Total Cost Duration of Project Total Cost Indirect Cost Opportunity Cost Direct Cost

50. Activity Cost-time Tradeoff C C*C* D*D* D Activity Duration (Days) Normal Crash Slope is cost to expedite per day Cost

51. Cost-Time Estimates for Tennis Tournament Time Estimate Direct Cost Expedite Cost Activity Normal Crash Normal Crash Slope A 2 1 5 15 B 8 6 22 30 C 3 2 10 13 D 2 1 11 17 E 10 6 20 40 F 4 3 8 15 G 4 3 9 10 H 1 1 10 10 I 3 2 8 10 J 2 1 12 20 Total 115

52. Progressive Crashing Project Activity Direct Indirect Opportunity Total Duration Crashed Cost Cost Cost Cost 20 Normal 115 45 8 168 19 41 6 18 37 4 17 33 2 16 29 0 15 25 -2 14 21 -4 13 17 -6 12 13 -8 Normal Duration After Crashing Activity Project Paths Duration A-C-D-G-I-J 16 A-C-E-I-J 20 A-C-E-H-J 18 A-C-F-H-J 12 B-F-H-J 15

53. Applying Theory of Constraints to Project Management  Why does activity safety time exist and is subsequently lost? 1. The “student syndrome” procrastination phenomena. 2. Multi-tasking muddles priorities. 3. Dependencies between activities cause delays to accumulate.  The “Critical Chain” is the longest sequence of dependent activities and common (contended) resources.  Measure Project Progress as % of Critical Chain completed.  Replacing safety time with buffers - Feeding buffer (FB) protects the critical chain from delays. - Project buffer (PB) is a safety time added to the end of the critical chain to protect the project completion date. - Resource buffer (RB) ensures that resources (e.g. rental equipment) are available to perform critical chain activities.

54. Accounting for Resource Contention Using Feeding Buffer J2J2 B8B8 START A2A2 C3C3 D2D2 G4G4 E 10 I3I3 F4F4 H1H1 FB=7 FB=5 NOTE: E and G cannot be performed simultaneously (same person) Set feeding buffer (FB) to allow one day total slack Project duration based on Critical Chain = 24 days

55. Incorporating Project Buffer J2J2 B4B4 START A2A2 C3C3 D2D2 G2G2 E5E5 I3I3 F2F2 H1H1 FB=2 FB=3 NOTE: Reduce by ½ all activity durations > 3 days to eliminate safety time Redefine Critical Chain = 17 days Reset feeding buffer (FB) values Project buffer (PB) = ½ (Original Critical Chain-Redefined Critical Chain) PB=4

56. Sources of Unexpected Problems

57. Earned Value Chart