Operations Management / Supply Chain Management

Module 08.01 Key Concepts: Layout Design Options for Products and Services

In this section we will review the characteristics of many typical operational layouts.

An Office Layout is often reflected by a grouping of workers, their equipment, and spaces to provide comfort, safety, and movement of information.  The movement of information is main distinction.  Office Layouts are typically in state of flux due to frequent technological changes.   Selection / design of a particular layout usually considers three physical and social aspects: Proximity, Privacy and Permission.  In addition, these layouts are significantly impacted by information technology and the dynamic needs for space and services.

A Relationship Chart can be used to illustrate some inter-dependencies between functions and these key dimensions.

A Super Market / Retail Layout has a unique objective – to maximize profitability per square foot of floor space.  The basic assumption is that sales and profitability vary directly with customer exposure.  Manufacturers pay fees to retailers to get the retailers to display (slot) their product.  Therefore, it is possible to optimize the use of limited shelf space but try to accommodate an increasing number of new products.  Retailers and suppliers both seek to achieve better information about sales through POS data collection and maintain closer control of inventory.  Retailers must be cognizant of the impact from: Ambient conditions (background characteristics such as lighting, sound, smell, and temperature); Spatial layout and functionality (customer circulation path planning, aisle characteristics, and product grouping; Signs, symbols, and artifacts (characteristics of building design that carry social significance.  The following characteristics help enable effective Supermarket Layout:
  • Locate high-draw items around the periphery of the store
  • Use prominent locations for high-impulse and high-margin items
  • Distribute power items to both sides of an aisle and disperse them to increase viewing of other items
  • Use end-aisle locations
  • Convey mission of store through careful positioning of lead-off department

A Warehouse Layout typically is designed to optimize trade-offs between handling costs and costs associated with warehouse space.  As such, the objective is to maximize the total “cube” utilization of the warehouse (utilize its full volume) while maintaining low material handling costs.   Material handling costs are all those associated with the various transactions and movements: incoming transport, storage, locating and moving material, outgoing transport.  It also includes other costs such as: equipment, people, material, supervision, insurance, depreciation and cost of damage and spoilage.

Warehouse density tends to vary inversely with the number of different items stored.  Automated Storage and Retrieval Systems (ASRSs) can significantly improve warehouse productivity by an estimated 500%.  Dock location is a key design element to be considered.  Cross-Docking is a special approach that can minimize cost by eliminating the need to put away and then retrieve stock from storage locations.

With Cross-Docking, materials are moved directly from receiving to shipping and are not placed in storage in the warehouse.  This requires tight scheduling and accurate shipments.  Bar code or RFID identification are often used for advanced shipment
notification as materials are unloaded.
There are many options to assignment of storage locations.  Fixed Locations can be established for each specific product or family of products.  This simplifies data management / transaction processing and may be easier for manual picking of goods.  However, this is not usually effective for optimization of cube utilization.  Random Socking Locations typically requires automatic identification systems (AISs) and effective information systems.  This allows more efficient use of space.  For Random Locations warehouse managers must maintain list of open locations, maintain accurate records, sequence items to minimize travel / pick time, combine picking orders, and typically assign classes of items to particular areas.
Warehouse activities are not just limited to storage, movement and picking of goods.  Some other value added activities are often found within Warehouse Locations.  Some companies apply a principle of “Postponement” where some final configuration of products is done in the Warehouse instead of in production.  This enables low cost and rapid response strategies.  Some typical examples might include: assembly of components, loading software, repairs or customized labeling and packaging.

A Fixed Position Layout is selected for large projects but is also quite relevant to other situations.   With this type of layout, product remains in one place and workers and equipment come to site.  This is complicate by the fact that space is limited at the site and different materials are required at different stages of the project.  Therefore, the volume of materials needed is dynamic.  Fixed Position Layouts are found in Airline Manufacturing, Ship Building, Construction, and yes, even in Operating Rooms.   Limited space and long lead times can be addressed through completion of process elements / steps in an off-site product-oriented facility.  This can significantly improve efficiency but is only possible when multiple similar units need to be created.

A Process-Oriented Layout is typically selected when flexibility is important.  Like machines and equipment are grouped together that are flexible and capable of handling a wide variety of products or services.  Scheduling can be difficult and setup, material handling, and labor costs can be high.   Layout work centers are arranged so as to minimize the costs of material handling and minimize cost attributed to: number of loads (or people) moving between centers and the distance loads (or people) move between centers.   There are many approaches that can be used to optimize Process Oriented Layouts.  For example, three dimensional visualization software allows managers to view possible layouts and assess process, material handling, efficiency, and safety issues.

Work Cell Layouts are used to provide some of the benefits of a Process Layout but reduce unnecessary movements, lower costs, and speed throughput.   Work Cell Location reorganizes people and machines into groups to focus on single products or product groups.  Group technology identifies products that have similar characteristics for particular cells.  In this case, production volume must justify the creation of work cells.  However, cells can be reconfigured as designs or volume changes.  Establishment of work cells requires identification of families of products; a high level of training, flexibility and empowerment of employees; and being self-contained, with its own equipment and resources.  Mistake Proofing (poka-yoke) is often an accepted approach at each station in the cell.  Work Cells generally provide many benefits:

  • Reduced work-in-process inventory
  • Less floor space required
  • Reduced raw material and finished goods inventories
  • Reduced direct labor cost
  • Heightened sense of employee participation
  • Increased equipment and machinery utilization
  • Reduced investment in machinery and equipment

It is possible to create many different Work Cell Layout configurations.

A mathematical approach can be applied to staffing and balancing Work Cells.

Work Balance charts are often used for evaluating operation times in work cells.  They can help identify bottleneck operations.  Optimum Work Cell performance is dependent on flexible, cross-trained employees which can help address labor bottlenecks.  Machine bottlenecks may require other approaches.
Two special derivations are presented in the text: Focused Work Center and Focused Factory.  A Focused Work Center requires identification of  a large family of similar products that have a large and stable demand.  This moves production from a general-purpose, process-oriented facility to a large work cell.   A Focused Factory represents a focused work cell in a separate facility.  In this case the work cell may be focused by product line, layout, quality, new product introduction, flexibility, or other requirements.
A Repetitive or Product-Oriented Layout is organized around products or families of similar products with high volume and low variety output. To be practical, volume should be adequate for high equipment utilization and product demand should be  stable enough to justify high investment in specialized equipment.  With Product Layout, product is standardized or approaching a phase of life cycle that justifies investment. Supplies of raw materials and components are adequate and of uniform quality.  Some common characteristics are presented below:
  • Fabrication line Builds components on a series of machines
  • Machine-paced require mechanical or engineering changes to balance
  • Assembly line puts fabricated parts together at a series of workstations
  • Paced by work tasks and Balanced by moving tasks
Product Layouts typically offer benefits of: Low variable cost per unit, low material handling costs, reduced work-in-process inventories, easier training and supervision and rapid throughput.  Conversely, there are many disadvantages as well: high volume is required, work stoppage at any point ties up the whole operation and lack of flexibility in product or production rates can be inconsistent with market needs.
Assembly Lines are designed to operate at a specific rate and are in principle designed to be balance from a connected work center perspective in order to maintain a constant flow.  Therefore, the objective is to minimize the imbalance between machines or personnel while meeting the required output.  Assembly Line Balancing starts with the establishment of precedence relationships.  Following detailing of the connected steps and precedence relationships, the next tasks are to: determine the cycle time; calculate theoretical minimum number of workstations and then balance the line by assigning specific tasks to workstations.
The text provides a simple example to illustrate the approach.


  • The Task List, Task Times and Precedence Relationships – given above
  • The Total Task Assembly Time – calculated as shown in the Table above.
  • The Production Time Available – given above
  • The required production output per day – given above
  • The Required Cycle Time: Production Time per day / Required Output per day
  • The Theoretical Min. # of Work Stations: Sum of Task Times / Cycle Time
  • A Precedence Diagram – Constructed based on Information in the Table
  • Workstation Assignments based on the selected Layout Heuristic
  • The Efficiency: Sum of Task Times / (Actual # of Workstations x Cycle Time)
  • Idle Time: (Actual # of Workstations x Cycle Time) – Sum of Task Times

The Precedence Diagram and calculation of Theoretical Minimum # of Workstations is shown in detail in the text.

In addition to the given data you will need to calculate the following in order to establish your final recommendation for Workstation structure.

  • The Cycle Time
  • The Minimum # of Workstations

To Calculate the Cycle Time

  • Production Time per day (in minutes) / Required Output per day (in Units)

To Calculate Theoretical Minimum # of Workstations:

  • Sum of Task Times (in minutes) / Cycle Time (in minutes)

I suggest that you go back to the Practice Homework and give this Process a try to see how it works for you. The Text Authors provide tools there to help you solve the problem and you will be able to practice without negatively impacting your grade.