1.1 Introduction to Operation Management
‘This lesson introduces to students, basic concepts of operation management and its functions.
Among various functions. performed in an organization, production and operation function is an
‘important one. An organization composed of four functional subsystems i.e. production .
‘marketing, finance and human resource management. The marketing function in an organization
is for promotion of ‘its product sell o customers which help it to increase its sales, This sale
‘volume is then communicated to the production subsystem to tell them about production
‘volume which is concerned with the management ofall resources for produetion of an item or
services. This ensures that the available facilities should be so managed that it can able to meet
the current market requirements and it requires resources (raw material, equipment, labour and
‘working capacity). The finance management function is authorized to provides fund to all other
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subsystems and keep control on it to utilize money more effectively. The human resource
management plans about manpower needed in other subsystems of an organization and fulfil
that demand through recruitment process and training and development workshop. It also
evaluates the performance of the employees Therefore it is clear that integration among. all
‘subsystem is must for functioning of the organization. The major concern of any organization
‘now a day is to create more valuable products. Operation management offers way to Search for
action and implement action for reducing waste, how to create value and how the organi
tion
‘can make difference in operations to combat with its competitors Hence we can say operation
‘management the science including techniques ,process and systems that ensures production of
‘goods of the right quality, in the right volume and on right time with the minimum expense
“within shortest time span. The essential characteristics of production and operation function is to
bring together 3 M; men, machines and materials o satisfy and fulfil consumer needs
12. Concept of operation management
‘An operation management is a function that serves the organi
tion, employ techniques and
involves human resources. Operations in the organization is classified as. manufacturing
‘operations and service operations. Operation in a manufacturing concern includes conversion
process that makes tangible output like goods whereas, conversion process that provide output
‘an intangible output i called services organizat
Following points of difference are considered for differentiating manufacturing operations from
service operations:
1. Intangible or Tangible output.
2. Output consumption 12. Concept of operation management
‘An operation management is a function that serves the organization, employ techniques and
involves human resources. Operations in the organization is classified as manufacturing
‘operations and service operations. Operation in a manufacturing concer includes conversion
process that makes tangible output like goods whereas, conversion process that provide output
‘an intangible output is called services organization.
Following points of difference are considered for differentiating manufacturing operations from
service operations:
| ntangible or Tangible ouput
2. Output consumption
3. Nature of job
4, Extent of customer contact
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5. Customer involvement in conversion process
6, Performance measurement.
Manufacturing operation are the operation by which tangible output ie. goods are made and
those output are consumed by customers with the passage of time, jobs are like that uses less
umber of Inbour but more equipment. Customer contact is very little, customer participation i,
‘negligible in the transformation process and sophisticated methods are available for measuring
production activities performance,
Service operation are the operation by which intangible output i. services and those output
‘consumed by customers instantly , jobs are like that uses more number of labour. Customer
‘contact is very vast and direct, customer participation is frequent in the conversion process and.
rudimentary methods are available for measuring service provider performance,
But there are few services where equipments are used just like railroad services, telephone
service provider and some are totally human based namely consultancy services, hairstyling
salon,
According to Slack “ Operation Management is the set of activities that ereate goods and
services through the transformation of inputs into outputs.” According to Slack “ Operation Management is the set of activities that create goods and
services through the transformation of inputs into outputs.”
[As definition given by Joseph G .Monks “Operations Management is the process whereby
resources, flowing within « defined system, are combined and transformed by a controlled
‘manner to add value in accordance with policies communicated by management”.
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Operation Management is heart of every organization, Operations are the tasks that create
‘value. The operations management is responsible for conversion of input to output. One who is
responsible for this called as operation manager. He/she has the main responsibility for
converting inputs into outputs by getting together resources, capacity and availability of
{knowledge in the production facility under production plan and this requires that system work
should be planned and controlled production goods and/or services as per requirement. Control
‘must be put over such paranietrs lke costs, quality and inventory levels
1.3 Functions of Operation Management
‘© Operations management includes “overseeing, designing, controlling the process of
the production of goods and/or
production and redesigning business operation
© In-a manufacturing concer such as a factory, it includes planning an efficient processes
to produce products timely getting hold of raw materials, ensuring adequate numbers of
well trained workers and maintenance and repair work for equipment properly.
‘Ina service concern focus is only on ensuring that workforce are well trained, customer
service locations have enough equipments and are safe for i
‘employees and also for the
public, services are reviewed timely after taking in to consideration feedback given by
customer and other competitive forces.
1.4 Transformation process model
All operations that produce goods as well as services by converting inputs into outputs uses the
“input-transformation-output’ process. In simple words, operations are the kind of provess that
take input resources which is convert in to and completely transform into something, or are
transformed themselves, into more useful products as output and services. The objective behind
‘combining all resources under exact conditions is to transform inputs into goods and services as
‘output which have higher worth and value than the original form of inputs 14 Transformation process mode!
All operations that produce goods as wel as services by converting inputs into outputs uses the
“input-transformation-outpat’ process. In simple words, operations are the kind of process that
take input resources which is convert in to and completely transform into something, or are
transformed themselves, into more useful produets as output and services. The objective behind
combining all resources under exact conditions isto transform inputs into goods and services as
‘output which have higher worth and value than the original form of inputs.
‘The transformation of input to output is functional with the use of technology . (See exhibitl.0)
For example, « hospital takes input in the form of ill patients, treat them by provi
‘ids and transform them into healthy person as output.
‘Transformation processes include:
‘+ Changes in the physical characteristics,
‘+ Changes in the location of materials, information or customers.
‘© Changes inthe rights of materials or information
+ Storage of materials, information of customers
‘© Changes in the purpose of information
‘+ Changes in the physiological or psychological state of customers.
(Exhibit 1.0)
14.1 Input
‘Two categories of inputs are exists in any operation process:
‘© Transformed resources,
+ Transforming resources
1.4.1.1 Transformed resources ~ the resources that are converted in the process. The
transformed resources are generally a combination of materials, information and customers.
‘+ Materials involves converting cither physically ( manufacturing), by location (
‘ransportation), by ownership (retail) or by storage ( warehousing). 1
1 Transformed resources ~ the resources that are converted in the process. The
transformed resources are generally a combination of materials, information and customers.
'* Materials involves converting either physically ( manufacturing), by location (
transportation), by ownership (retail) or by storage ( warehousing),
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‘© Information: This can be transformed by property (accountants), by possession (market
research), by storage ( libraries), or by location (telecommunications).
‘* Customers: They can be transformed either physically (hairdressers), by storage (
hotels), by location (airlines), by physiological state ( hospitals), or by psychological
state (entertainment),
1.4.1.2 Transforming resources are the resources that act upon the transformed resources
to add value e.g, Facilities and staff,
‘+ Facilites which include plant, building, equipment, and process technology etc. and
Staff includes all those who involves in operation, maintenance, planning and managing.
1142 Transformation processes
Ir includes:
+ Changes inthe physical nature of materials
+ Changes in the location of materials, information or customers.
+ Changes in the ownership! possession of materials or information
+ Storage of materials, information or customers
+ Changes inthe form of information
+ Changes inthe physiological or psychological state of customers.
1.42.1 Types of transformation
+ Manufacture — I includes ereation of physical products (example cars, motor bike ete.)
‘+ Transport~ Itincludes the movement of material or customer (example a taxi service)
+ Supply ~ includes changing possession of goods (example whole-selling, retailing)
‘+ Service ~ It includes treating customers or the storing of materials (example hospital room,
warehouses).
1.4.3 Output
Output can be goods or services. ‘+ Transport - It includes the movement of material or customer ( example a taxi service)
‘+ Supply ~ It includes changing possession of goods (example whole-selling, retailing)
‘+ Service ~ It includes treating customers or the storing of materials (example hospital room,
warehouses).
Output
‘Output can be goods or services.
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‘+ Goods: It is a product which is physical in nature which you can watch, touch, or possibly
consume: Examples are fish, oranges, flowers, soap, televisions, airplanes, coal, timber,
‘computers, furniture, paper, and machines
‘+ Service: Service is any activity that cannot be directly produce a product which physical in
nature, Examples are telecommunication service, banking services ete.
‘Comparisons between Goods and Services
1. Both goods and services deliver value and satisfaction to the customers.
2, Both can be customized or standardized to individual will,
3. Creation of both includes the same process i.e. Operation Management
4, Goods are tangible but services are intangible.
5. Customers contribute in many service processes, activities, and transactions but not in case of
goods,
{6 Prediction of demand for services is more harder than in ease of goods
7. Services cannot be stored in warehouses as physical inventory but this is possible in case of
ood
8. Skills are of prime concem in service industry to be successful.
9 Service facilities require to be positioned close to the customer.
10, Patents cannot protect services but goods can be protected by patents. 4.5 Liusstncauon oF operauons,
1.5.1 Based on Demand Pattern:
a) Make-to-Order: These are made from earlier designs, but are finished only after
receipt of an order .Products in make to order are used when the standardized product is
costly to keep in stock, have uncertainty in demand , or will get worse if stocked. (e.g,
Ainplane / Film Developing...)
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Assembly-to-Order: This involves assemblage of standardized products items that in
stock subassemblies. This lets customers enjoy a wide range of options. (e.g. Car/ Fast
food...)
>) Make-to-Stock: Usually goods are standard in nature and mature in in this operation
of product. As a common rule of make to stock; products are stocked on the basis of cost
structure and availability for item. Example of such products can be most retail items.
(e.g. Clothes/ Toys/.....)
Assembly-to-Stock: In this classification of operation prod item is assembled without
having sell in demand and is stocked in the warchouse as an inventory item for sale or
consumption asa subassembly later (eg. Electronic Products/ TV Sets/.....)
1.5.2, Based on Type of Conversion Process:
‘a) Project Shop: Generally this process result in only one output. Examples are constructing
amall or catering to a party. Features of project shop are as follows:
Product mostly standard but sometimes can be customized.
Both general and specialized equipment i used
Large size operation
‘Single item production runs
Fixed production schedule and definite-planning in advance
Priory check quality control in mostly onthe aspeets that are having clear standards
Firms compete on various aspect like quality, price, technology, capacity, and delivery
spe
') Job Shop (Batch Shop): Job shop process operation produces small batches for different
products. Every batch is usually tailored to a specific customer need pertaining to specific
‘quantities, and each product requires different process
ig time and processing step. Examples
‘of batch shop can be a bakery that specializes in making decorative cakes for wedding, each
‘one is different and customized for a particular bride, Characteristics of job shop are as
follows: 1.5.2, Based on Type of Conversion Process:
4) Project Shop: Generally this process result in only one output. Examples are consisting
a mall or eatering toa party. Features of projet shop are as follows:
‘© Product mostly standard but sometimes can be customized.
‘© Both general and specialized equipment is used.
‘© Large size operation
‘© Single item production runs
‘© Fixed production schedule and definite-planning in advance
‘© Priory check quality control in mostly on the aspects that are having clear standards
‘© Firms compete on various aspect like quality, price, technology, capacity, and delivery
speed.
'b) Job Shop (Batch Shop): Job shop process operation produces small batches for different
products. Every batch is usually tailored to a specific customer need pertaining to specific
‘quantities, and each product requires different processing time and processing step. Examples
‘of batch shop can be a bakery that specializes in making decorative cakes for wedding, each
‘one is different and customized for a particular bride. Characteristics of job shop are as
follows:
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‘© Facility of Custom Products ie. each job i
‘© Introduction of new products are easy.
‘© Facility of low is not clea,
‘© General purpose equipment is used mostly.
‘© Difficulty to balance capacities in line with demand i.e. equipment, will be ide.
‘© Suitable for small 1o medium size operation,
‘© Production runs time is short.
‘© Work in process is typically large
‘© Highly skilled workers typically utilized Informal quality control mechanism through
final inspection over worker. Firms contend on technical proficiency and flexibility 10
‘market changes more than its absolute price.
©) Assembly Line: This process produces diverse parts flowing at the controlled rate
through a definite process which is well planned. The assembly line moves parts to the
resource centre, and each resource centre must complete its task before line moves on
head. This requires line balancing, means that each operation completes its task in a similar
‘amount of time period. The line moves at the speed of the slowest operation, This is the
bottleneck,
Characteristics of assembly line are as follows:
‘© Standardized products but in some cases opportunities for selected option are also
available, €) Assemory Lame: nis process proguces averse parts tiowing at tne controuea rate
through a definite process which is well planned. ‘The assembly line moves parts to the
resource centre, and each resource centre must complete its task before line moves on
‘head. This requires line balancing, means that each operation completes its task in a similar
amount of time period. The line moves at the speed of the slowest operation, This is the
botleneck
(Characteristics of assembly line are a follows:
‘© Standardized products but in some eases opportunities for selected option are also
available
+ Inoduction of new product is infrequent.
+ Flow patter in production is iid
+ Canbe either mechanical or worker based.
+ Capacity balancing is easy
+ Specialized equipment is used in production
* Generally capita intensive
* Suitable for large size operation.
+ Difficult to alter capacity of plant incrementally
+ Work-in-process does not sit ide.
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Lower skilled workers are generally used.
* Formal quality contro! manually.
Products have competition on quality aspect and price. (of consistency).
4).Continuous Process: As the name denotes, this process produce items continuously,
Generally in a high automated process. Examples are chemical plants, electric generation
plant and refineries,A continuous flow process sometimes have to run 24/7 because starting
the continuous process and stopping it is very difficult.
Features are as follows:
+ Standardized products are produced, very litle room for customization of products.
Introduction of new products are expensive.
‘Rigid production flow patter,
+ Specialized not general equipment is used.
* Capacity is always balanced.
# Capital investment is very huge.
© Suitable for large business operation,
© Measuring capacity is easy.
‘Difficult and costly to make alteration in capacity.
© Lengthy production run, 1.6 Responsibilities of operations manager
1.6.1Understand the operation's strategic objectives
Operation managers should comprehend the aim of the organisation clearly and build a
clear cut vision of exact operations that will help to achieve goal. This also involves
‘turning these goals into actions, implications for the organizations” performance,
‘objectives achieved, quality, dependability, speed, cost and flexibility.
1.6.2 Developing an operation’s strategy for the organization
Making various decisions involved in operations are
al that require an operation
‘managers to set a framework or guidelines which are aligned with the organisation's
goals,
1.6.3 Designing the operation's products, services and processes
Design involves making decision on the physical aspect like its shape and composition of
services, products and processes.
1.6.4 Planning and controlling the operation
This involves deciding about the operations are to be for and what kind of resources
should be needed to make sure that it is done properly.
1.6.5 Improving the performance of the operation.
Operations managers are responsible for monitoring continuously and improving the
performance of operation as per standard . ‘Whatsoever be the cause, selection of the location for the plant has to be done after taking in to
‘account all the economic factors that have bearing on it. It may be impossible to find location
‘which abound all the facility abound in all the facility required for set up for plant but a search
has to be done for a suitable location, The regulatory principle for search of a location should be
‘where the cost of raw material, cost for fabrication plus cost of marketing of finished goods is as
minimum as possible.
2.3 Importance of Facility Location:
‘The major concem of an industrial establishment is to maximize profit by minimizing cost of
production. This objective can be achieved by choosing an appropriate location for faci
because it affect the profitability of business.
‘The following actions are very normal in any business circumstances like following:
+ Novel venture formation
+ Business enlargement
+ Changing pattern of current demand, supply and marketing location,
+ Cost structure chenging.
‘Policies made by government.
Due to the above business events, business firm will be acute in searching alternate sites for its
production operations. Therefore facility location tum out to be an important decision which
influences plant facilities and layout for operations. Similarly, it has an impact on operating cost
‘nd capital investment decision. Example for this can be steel industry where, we integrate the
extracting ore unit to finally steel formation unit in a proximate places, so that transporting cost
ccan be concentrated slightly and the supplies availability to the initial and also final production
stage operation in the setup will be improved and it will help in improving the productivity of
the plant. 24 Factors that affect location analysis
If the organization are able to configure the best location for the its manufacturing facility, then it
will have advantages of having sufficient access to the workers, customers, transportation etc
For successful commercial activity, and to gain competitive advantage following are the two
‘main factors for facility location:
24.1. General foctors (They are of two types of general factor i
uncontrollable) in any type of organization.
controllable and
2.4.2, Special factors for manufacturing as well as for service organisations.
24.1 General factors
Genera factors i.e, controllable and uncontrollable factors are required for considering location
of plant forall ypes of organisations
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A.Conirollable factors: Controllable factors under the category of general locational
factors are as follows:
1. Market proximity
2. Materials supply
Facilities for transportation
Availability of Infrastructure
Labour and their wages,
Extemal economies
Capital outlay,
Uncontrollabe factors
Government policy
10. Climatic condition
11, Ancillary industry
12, Attitudes of community and labour
13, Infrastructure for community.
‘A. Controllable factors
1, Market proximity: Every company wants to work for its consumers by giving goods and
services on the right time for reasonable price .To do this Organizations must trace all
facility in area near market or distant from the market be contingent on the features of the
‘product. In case where the consumers of the product are intense, iis worthwhile to locate
all the facility near market, A. Controllable factors
1, Market proximity: Every company wants to work for its consumers by giving goods and
services om the right time for reasonable price To do this Organizations must trace all
facility in area near market or distant from the market be contingent onthe fetures ofthe
is worthwhile o locate
product. Incase where the consumers ofthe product are intense,
all the facility near market,
Locating plant close tothe market is preferred when
+ The goods are fragile and vulnerable to damage.
+The products which required aftersales services very often.
+ Transportation cost i higher.
+ life span of the product is short.
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Market proximity safeguards a steady supply of products to consumers and reduces the
transporting cost.
2. Resource supplies: This is extremely important to an organization to acquire raw
‘materials in good conditions, in right quantities and at right time period io enjoy constant
production. This is very important in case where materials ar likely to spoil and where
transportation cost is higher. Yaseen suggested course of action regarding raw materials
supplies. Iteffects on plant location in the following ways:
+ Where particular raw material
in use without loss of weight to it, then location of the
plant is atthe places of sources of raw material or atthe market
‘+ When there is demand for raw material which is weight loosing in nature, locate the set-
up for industry near the raw material source.
+ If availability of raw material is in ample amount at any location ic, universal, then
locate facility near to the market area,
+ IF the processing of materials in process are from different —different location, then
plant should be located to minimize expense in transportation costs in total,
Propinguity to raw ma
ial source is important in case of industries like cement,
sugar.cotion textiles and jute,
3. Amenities for transportation: Fast transport services guarantee supply of raw 3. Amenities for transportation: Fast transport services guarantee supply of raw
materials on the right time to the organization or industry and goods to the consumers,
‘The transport service is an essential for facility Layout and Location decision of plant.
‘There are mainly five physical transportation modes are available to us they are by ar, by
road, by railtrack, by water and through pipeline. Finished goods that are largely
envisioned for exporting will demand locating plant near by the port and airport. The
choice among various transport method depend on cost structure, accessibility, and
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appropriateness. Hence transport facility cost is value driven criteria for location of the
plant.
4, Availability of Infrastructure: Water, power and waste disposal facilities are the
basic infrastructure and become one of the noticeable factor for choosing the plant
location. Some power driven industries are highly power needy for example metal and
non-metal ie. stel aluminium industry and they hod better to be positioned near power
station .The non-availability of power may cause trouble fr its survival, Process oriented
industries like paper industry, chemical industry, cemen
lusty, etc, require constant
supply of water in enormous amount and should be of good quit
in it come to be an imporani facior. A waste disposal facility for process inclined
industries too is an important factor that influences the plant location.
‘and mineral content
‘5, Labour supply and their wages: The cause of employing number of labour workforce and
possessing desired skills are undoubtedly an important issue that should be well-thought-out for
regional and at community through facility location decision. Importing workforee is generally
costly and time consuming and have too many organizational problem. Productivity of labour
workforce, Prevalent wage pattern, living cost and business relation and negotiating power of|
are also considerable factor in making location decision,
6. External economies of seale: Urbanization and locational economies of scale are designated
tas external economies of scale. In urbanization economies of scale, firms originate from locating
firms in big city than in small city in @ search of the admittance to a big. pool of workforce,
transportation , and to upturn their market share to sell their products to a number of consumers.
the time
passes and competition have increased due to availability of production facilities and lower
Economies of scale in location on the other hand in manufacturing sector grown-up wit
production costs by this cheap cost for tansportation and logistical services can be achieved.
‘This headed to manufacturing establishments where many related companies are located in the
same area. Big corporations have now known that inventories and warehouses are major cost
‘occurring factor, So they have tried to reduce it by induction “Just in Time” produ
system,
‘This highly efficient production system was responsible for success of Japanese car industry, Just
in time make sure to oblain spare parts from various suppliers within few hours after making B. Uncontrollable factors
8. Government poliey: The straegy in the form of policy formulated by the central and state
‘administration and local regulatory bodies concerning building codes, labour laws and safety ete.
‘hich are not in the control and that plea attention to maintain balanced regional growth for
industries, both central and state government in our country have proposition towards the
lucrative package of incentives to entrepreneurs in particular location. Some of these incentives
possibly will tempt to place is location for the plant to aval these facilities available.
9. Climatic conditions: The geographic area with its climatic condition (humidity, temperature)
are to be considered in some specific industries, Clim
hhuman efficiency and behaviour. Some industries are in requirement of specific climatic
conditions say in textile mill needs humidity.
ic condition have a great influence on
10, Ancillary industries and services: In today’s world the manufacturer will not make all the
components of products itself but outsource them by making subcontracts for the work to
vendors. Therefore, this ancillary services of source of supply of component or parts will be the
‘one factor that have an impact bearing on the facility location decision. The various services like
professional consultancy services, communication channel, banking and financial services and
‘other civil amenities services will play an important role in making selection ofa location,
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11, Community and labour attitudes: The Attitude of community regarding their work role
‘and towards the approaching industries can build or ruin the industry. Labour and community
‘outlooks to the trade union activ
in trade are the important criteria to take in to account,
Facility location atthe specific place is not desirable even when all the factors are favouring yet
labour altitude towards organization is important so that the strikes and lockouts can be
‘minimized
12, Amenity and Community infrastructure: All manufacturing actions require good
infrastructure for commut
ty and most noticeable amenities including roads, railway
connectivity, port facilities, power av ties and social amenities like
educational institutes and hospitals. These factors will be considered in making location
decisions.
bility and service f
24.2, Special factors (For industrial organisations)
A.Dominant factors
Factors dominating in organization in location decisions for new manufacturing plants can be
classified in six groups. They as follows: 24.2, Special factors (For industrial organisations)
ADominant factors.
Factors dominating in organization in location decisions for new manufacturing plants can be
classified in six groups. They as follows:
1. Encouraging labour elimate
‘An encouraging labour climate is an important factor for location decisions of labour-intensive
‘organization like textiles concems, furniture manufacturing, electronics industry . Labour climate
life
comprises of wage rates, tai
Jing and development requirements, attitudes toward their work
in the form of work-role, worker productivity and union power. Many business take weakness of
union as a distinct advantage,
2. Market Proximity
‘Afier making estimates for the demand of goods and services at any place and measured it as
‘many fold, management should choice a location for the facility that will make sure of smooth
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supply to that demand. Locating near market area is important particularly when the finished
‘goods are massive or heavy and exporting them have high transportation rates. For example,
makers of products such as plastic products, pipes and heavy metals all want proximity to
markets
3. Life Quality
‘An attractive lifestyle having good schools, entertaining facilities, and traditional events
contribute to increase quality of life but this factor is not relatively important, but can do make
the alteration in locational decision.
4. Proximity to the resources and suppliers
In various companies, Facility supply components to other facility rely on other facilities for
‘management support and staff assistance, These necessitate regular coordination and
‘communication, which will become difficult as distance increases.
5. Taxes , utilities and real estate costs
(Other factors that might arise include utility costs (as telephone, energy, and water bills), local
nd stale tax structure, financial incentives that local or state government body offer in land
costs and relocation costs.
B. Secondary factors nal factors to be considered, including business expansion cost ,
‘construction costs, availability of multiple transportation modes, the cost of hobbling people and,
‘materials among plants, competition with other firms for the skilled workforce, attitudes of
‘community , and many more. For global operations,firms usually emphasizes skills of local
‘employee, education level and the local infrastructure.
2.4.3. Specific factors for location of service organisations
Dominant factors
All the factors which are taken in to account in manufacture ring organization ean also be useful
for service providers, with an important impact on location for sales and customer satisfaction
Proximify to consumers
Location of plant is a significant factor in defining how appropriately we can approach to
‘customers. This can help in carrying on the business fora firm i.e, some people may like to go
to emote areas for locating dey cleaner or supermacket
‘Transportation cost and market proximity
For services like warehousing and dispersal of operations; cost occurred in transportation and
rear the markets are also important decisions, It helps in reducing time involved in delivery of
goods and promoting sales.
Competitors’ Location
Competitors’ location put complexity in approximating likely sales at different location,
Management should not only study the current site of competitors but should also try to make
prediction about their reaction towards new location. The place where competitors have their
business well settled, those area should avoid. However, in certain industries, like new-
automobile showrooms and restaurants, locating facility near competitor's location is actully
favourable. The strategy isto generate a mass customer, where competing firms are huddled in
‘one location to attract numerous customers
Secondary factors
Dealers also consider the retail activity level, housing density, flow of traffic, and visibility 10
site, Selling activity inthe retail market is important, because customer usually choose their own
to go for shopping orto eat ina restaurant frequently. Flow of road traffie and site visibility is an
important factor because for businesses usually customers arrive in their cars. Visibility is
distance from the street, road and size of neighbouring buildings and signs. 2.$ General Procedures for Facility Location
Figure:
‘The preliminary Screening: The foremost screening for preliminary recognize viable
starts process of planning for facility location. For some kind of facilities, particular
‘environmental conditions and labour conditions are needed for example, brewery industry
requires an ample amount of clean and fresh water. Aircraft manufacturers should be located
near a variety of subcontractors for providing. aluminum electrical power etc.
Sources of information: After screening several key locational requirements, management
undertake research for finding out altemative location sites that matched those requirements.
Information can come from various sources like local body of chambers of commerce which
provide information on collected works for promoting possibilities for an expansion in various
sate and local communities. The Journal of wall -steet and numerous trade publications provide
advertisements placed by cities and communities hoping to attract new commerce avenues, So as
‘many trade journal available which provide information including geographic breakdowns of
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labour availail
Population, transportation facilities, commerce activity types, and useful
information,
Detailed Analysis: Once the preliminary screening done with narrowing alternative sites to a
few one and then more detailed analysis begins with that time, On each potential site @ labour
survey should be done in research 10 assess the local available skills. Pilot study should be
solution to assessment where community and consumer response is not known towards products.
Response of community is important for every business to be successful Detailed Analysis: Once the preliminary screening done with narrowing alternative sites to a
few one and then more detailed analysis begins with that time. On each potential site a labour
ble skills, Pilot study should be
solution to assessment where community and consumer response is not known towards products
survey should be done in research to assess the local avai
Response of community is important for every business to be successful
Factor Ratings:
Factor ratings are often used to evaluate location alternative sites because:
+ Its simplicity fai
+ Tt enables managers to take diverse location decision considerations into the
tates explanation about why one location site is better than other.
‘evaluation process.
+ Tt fosters uniformity of judgment about location alternatives decisions,
Usually, the first and foremost step in factor ratings analysis i to list the most relevant factors in
the location decision then in next step, each factor is rated on scale from 1 = very low to 5 =very
high, based on its relative importance as compared with other factors. Then, each location is
rated on rated from 1 (very low) to 10 (very high), according to its merits on each aspect
Finally, the multiplication of factor rating with the locaton rating foreach factor and then sum of
the products give results in the total rating score for that location, The total scores indicate which
alternative locations are most promising, considering ofall the various location factors.
26 Location analysis technique:
I is a dynamic process where entrepreneur analyses alternative sites
Various different models are made available to have the best location in place.
Following are the prevalent models we have in place:
2.6.1 Factor rating method : Selection process of a new facility location includes a step
by step process; first discover important location factors, then rate it from high to
ow based on importance, allocate each factor @ rate based on merits do
‘multiplication of both factor and finally calculate sum total of rate and prefer high
rated factor location,
2, Weighted factor rating method: It is @ dynamic process where entrepreneur analyses alternative sites aiming to select best site.
Various different models are made available to have the best location in place.
Following are the prevalent models we have in place:
2.6.1 Factor rating method : Selection process of a new facility location includes a step
by step process; first discover important location factors, then rate it from high to
low based on importance, allocate each factor a rate based on merits .do
‘multiplication of both factor and finally calculate sum total of rate and prefer high
rated factor location.
2. Weighted factor rating method:
‘This technique merges both qualitative as well as quantitative aspect, weights are assigned to the
factors counting a
comparative importance and then weightage rate of score for each location
site is calculated. The site having the maximum weighted score is selected
3. Load-distance method
It is a technique including mathematics model to assess different location based on closeness of
tance to the factors. The objective behind this is to choose that site which minimizes the
assigned total weighted piles moving in and moving out from the facility. An alternative
approach can be using time rather than distance,
4, Centre of gravity method
This centre of gravity method takes cost considerations as primary factor. This method used to
assist directors in matching and maintaining cost and service. This method takes locations of
plants and markets, the number of goods moved, and transportation costs in reaching at the good
location for a single midway warehouse as factors. The centre of gravity is to select the location
that minimizes the weighted distance between the warehouse and its supply and distribution
points, where the distance is weighted by the number of tones supplied or consumed.
5. Break-even analysis,
Page 138
Break even analysis states that total revenue equal to the total cost at some point. It deal with
finding the point at which revenues and costs are exactly same. It is called *Break-even Poi
Breakeven point is the volume of output at which no profit no -loss is incurred, 33 Objectives of facility layout
‘An operative and good facility layout should have following objectives:
+ It should arrange for finest space to organization of equipment and enable mobilty of
goods from one operation to another and to make safe and comfortable work
environment
+ should encourage production in terms of order towards a single objective
+ It helps in reducing unnecessary movement of workers, raw material required and
equipment needed.
+ To.uphold plant safety space as well as its workers.
Page (44
+ To ease addition of or change in the layout to accommodate new product line or
technology up-gradation when needed.
+ Itshould able to increase organization's production capacity
‘+ Economie material handling and finished goods.
‘+ Improvement in work condition,
‘+ Unidirectional flow of production operation,
‘An organization can attain the above-mentioned objectives to make sure the following :
‘+ Enhanced training of the workers and supervisors
‘+ Making aware all its employees about the health hazard and safety standards in facility
pret
‘+ Best possible utilization of workgorce’s potential and equipment.
‘+ Reassuring employee empowerment and plummeting executive work and other indirect
work
34 Characteristics of efficient facility layout: There are some principle that follows for an
‘deal facility layout, These principles are describes as follows:
1, Principle of integration: A facility layout can be better if it assimilates men, materials,
‘machines and all supporting services and other things in order to achieve best results from
resources to get maximum organization's effectiveness.
2. Principle of minimum travelling distance: This mainly refers to the least travelling distance
‘of materials and man, Arrangement ofall facilities are like tha, the whole distance travelled by
the workmen and materials should be as lowest as possible and as far as possible straight line
‘movement must give preference when compared to any other movement.
3. Principle of cubic space utilisation: The facility layout when utilises both vertical and
hhorizontal space in a workplace is called cubic space utilisation. Its not only sufficient when we
utilize the floor space only is but the third dimension should also be utilized, Le., the height 3. Principle of cubic space utilisation: ‘The facility layout when utilises both vertical and
horizontal space in a workplace is called cubic space utilisation. I is not only sufficient when we
Utilize the floor space only i but the third dimension should also be utilized, i, the height
(vertical space) is also to be applied effectively and efficiently.
Page [4
{ple of flow: The noble facility layout creates the movement of materials in forward
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