Chapter 6 Design of the Operations Network

1
Chapter 6 Design of the Operations
Network

• the network of customer-supplier relationships
  has on its supply side the supplier of parts
  and information, and on the demand side the
  customers

downstream
upstream
Page 1 of 6
2
6 Design of the Operations Network

• suppliers and customers who have direct contact
  with the operation are called immediate supply
  network
• all the operations forming the network are
  called total supply network
• design decisions of the network include
• configuration of the network
• changing the shape of the network by merging,
  reducing number of suppliers, reducing complexity

Page 2 of 6
3
6 Design of the Operations Network

• vertical integration is the extent to which an
  organisation owns the network
• defined by
• direction (backward or upstream, or, forward or
  downstream)
• extent
• balance (the amount of total capacity of one
  stage, devoted to supplying the next)
• vertical integration affects all 5 performance
  objectives

Page 3 of 6
4
6 Design of the Operations Network

• location of capacity
• geographical position of the operation in
  relation to supply and demand sources
• location is important as it directly influences
  profits
• they are hard to undo once erected
• changes in location are caused by changes in
  supply and demand
• decision influenced by
• labour costs
• land costs
• energy costs
• transportation costs
• community factors (tax, politics)
• labour skills

Page 4 of 6
5
6 Design of the Operations Network

• location decisions are on 3 levels
• region/country
• area of country
• specific site within area
• long-term capacity management
• decision on the size (capacity) of each facility
• fixed costs and capital costs do not increase
  proportionally to its capacity
• economies of scale
• transportation and complexity costs increase as
  size increase
• diseconomies of scale

Page 5 of 6
6
6 Design of the Operations Network

• the network will operate efficiently, if all its
  stages have the same capacity
• balancing
• when capacity is not balanced at each stage, the
  system capacity will be limited to that of the
  bottleneck
• there are 2 strategies of introducing network
  capacity change
• capacity leads demand
• capacity lags demand

Page 6 of 6
7
Chapter 7 Layout and Flow

• layout planning is the physical arrangement of
  economic activity centers (people, machines)
  needed by processes
• the layout procedure is important because
• it is a lengthy and difficult task
• re-layout of existing operation can cause
  disruptions
• if layout is wrong, it can lead to poor flow
  patterns
• layout choice begins with identification of
  process type, determined by volume-variety
  characteristics of operation
• next, a basic layout type is chosen, which is
  the general arrangement of the facilities

Page 1 of 7
8
7 Layout and Flow

• There are several basic layout types
• fixed position layout
• the recipient of the processing is stationary
• equipment, machinery, plant and people doing the
  process move as necessary
• eg. motorway construction
• process layout
• the needs of the transforming resources dominate
  layout decisions
• product moves within
• eg. hospital

Page 2 of 7
9
7 Layout and Flow

• cell layout
• transformed resources entering the operation are
  pre-selected to move to one part of the operation
  (or cell) in which all the necessary
  transforming resources are located
• brings some order to the process layout concept
• eg. lunch products area in a supermarket (?)
• product layout
• arranging transforming resources entirely for
  the convenience of the transformed resources
• transformed sources flow along a line of
  processes (called flow or line layout)
• standardised requirements of the product lead to
  operations choosing this layout
• eg. automobile assembly lines

Page 3 of 7
10
7 Layout and Flow

• mixed layout
• either hybrid layouts or basic layouts in
  different parts of the operation
• operations must select the most appropriate
  layout
• when volume is low and variety high, flow is not
  a major concern
• when volume is high and variety low, flow
  becomes important

Page 4 of 7
11
7 Layout and Flow

• for various volume-variety characteristics,
  selection of layout type changes, although there
  is overlap
• advantages and disadvantages of each type needs
  to be considered
• unit cost implications are significant (fixed
  and variable costs)
• fixed costs increase when moving from fixed
  position layout to product layout types, but
  variable costs decrease
• the detailed design of the layout includes
• precise location of all facilities, plant,
  equipment, staff
• space devoted to each work center
• tasks to be undertaken by each work center

Page 5 of 7
12
7 Layout and Flow

• a good layout is characterised by
• inherent safety
• length of flow (optimum)
• clarity of flow
• staff comfort
• accessibility
• use of space
• long-term flexibility
• detail of fixed-position layout is to optimise
  contribution of transforming resources
• detail of process layout is to minimise costs

Page 6 of 7
13
7 Layout and Flow

• detail of cell layout is to either group
  processes together or products together
• detail of product layout establishes
• cycle time
• number of stages
• balancing layout
• configuration (long thin line, short fat line,
  U-shaped, straight)
• balancing loss is the proportion of the time
  invested in processing the product, which is not
  used productively (existence of bottleneck)

Page 7 of 7