PLANNING AND FACILITY LOCATION
• Write a description of an operations management issue based on a provided scenario and draw or outline a decision tree showing possible decisions for addressing the issue. In addition, complete a load-distance analysis for the scenario and describe your calculations.
The focus in this assessment is on the factors in layout planning and facility layout. Companies realize that the costs of a product are inherent in how they transform their inputs into outputs. Transformation costs correlate directly to how well the facility is laid out and how well that layout translates to the delivery of a high-quality, on-time product. Operational decisions also have substantive impact on sustainability; for example, layout can affect how much electric power, heating, and cooling resources are expended.
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By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
• Competency 2: Apply the tools and technology used in operations management.
o Analyze capacity planning using a decision tree approach.
o Analyze a facility layout using a load-distance approach.
Context
In the current business reality, we find many forces that affect a company’s decision on where to do business and how to design capacity. Though factors can vary, a key component for all companies is to determine how they can best serve their customers. Many operation managers today consider how planning and facility location can impact the organization’s sustainability. For example, logistics, such as the distance between suppliers and warehouses, may have an impact on organizational costs and ecosystems.
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Breakeven Analysis
A tool used by managers to help with capacity planning and plant location is the breakeven analysis. This process weighs the factors and allows managers to quantitatively evaluate a decision. Capacity planning takes into consideration the maximum output each facility can produce. Decision trees are used to help analyze the choices. It is important to make sure that all choices are evaluated and related to future forecasts. This will help ensure that facilities are efficient and located in the right area, and lead to correct volume output. Technology has had a tremendous impact on these decisions and competitors are constantly evaluating their best practices to ensure they stay ahead of the competition.
Basic Layouts
Layout planning and facility layout are important components in organization management. The four basic layouts are process, product, hybrid, and fixed position. Each layout is critical to delivering a low-cost, high-quality product, while being flexible enough to meet the needs of the customer. The type of layout a company uses is based on volume, product type, and the customer needs. It is extremely important to recognize that costs and efficiency help to deliver a low-cost product.
Questions to Consider
To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.
• Consider your own business specialty. What is the best city in your state in which to open a new business in this specialty? Why?
• How do the layout for a product and the layout for a process differ?
• How is the design for a product similar to the design for a process?
Scenario
Jackson Medical Diagnostics Lab is a small lab providing medical testing for doctors and hospitals. It was founded 10 years ago, has a good reputation among local doctors, and has been experiencing strong growth the past two years. Jackson’s general manager knows from a relatively recent operations management analysis that the lab’s design capacity is 340 patients per day, its effective capacity is 310 patients per day, and the lab currently processes 295 patients per day. The general manager is concerned that the lab will not have the capacity to meet future demand unless the lab is expanded. She has hired a market research firm to study the demand for the lab’s services in the area.
After completing its study, the market research firm predicted that there is a .60 probability of continued high demand (PH) for the lab’s services over the next five years, and a .40 probability of low demand (PL). Based on that, Jackson’s general manager has decided to move forward with an expansion. However, she is not sure whether she should do a small expansion (SE) by taking over some adjacent vacant office space that has recently become available, or do a large expansion (LE) by moving the lab to a different floor of the same building.
The general manager has worked with the lab’s finance manager to come up with an estimate that a small expansion would have a profitability of $35,000 if the demand for the lab’s services is low (ProfitSmallLow). If the lab undertakes a small expansion and the demand for the lab’s services is high, the lab would likely have to undertake a second small expansion (assuming appropriate space was available), and the profitability of the two expansions would be $55,000 (ProfitSmallHigh). If the lab undertakes a large expansion, the profit would be $90,000 if the demand for its services is high (ProfitLargeHigh), but only a $52,000 profit is the demand is low (ProfitLargeLow).
Directions
Complete all of the following three components of this assessment:
Component 1. First, briefly describe the operations management issue in the scenario above, and describe how you would approach an analysis.
Component 2. Draw or outline a decision tree showing the possible decisions, the probability of each, and the profitability of each. Based on those probabilities and profits, determine the probabilistic profitability of each, and thus the best expansion decision for Jackson to pursue.
Component 3. As part of considering these two expansions, Jackson’s general manager is looking into how they might best lay out the lab areas if they do the large expansion. The new larger space they would be using is already divided into several rooms connected by doors. Plumbing is available in each area, and thus the bathrooms (which are not yet built) could be located in any area. Jackson’s general manager would like to design a layout that minimizes the number of trips employees must make between rooms each day.
Her preliminary layout involves a 3×2 equal size room arrangement. One set of three rooms in that preliminary layout consists of the reception (R) room, the office (O), and the private patient stations (P) room. The other set of three rooms in that preliminary layout consists of the employee break area (E), the bathrooms (B), and the storage area (S). (Refer to the Preliminary Layout Diagram.)
Preliminary Layout Diagram
Reception (R) Office (O) Private patient stations (P)
Employee break area (E) Bathrooms (B) Storage area (S)
Jackson’s general manager has asked each employee to fill out a form logging how many times they currently walk from one area to the next (in their current location). Refer to the Data Table for the resulting data.
Data Table
(R) (O) (P) (E) (B) (S)
Reception (R) – 350 30 40 28 5
Office (O) – 410 76 42 23
Patient stations (P) – 15 295 2
Employee area (E) – 37 8
Bathrooms (B) – 3
Storage (S) –
• Complete a load-distance (LD) analysis for the preliminary layout by assigning a load of 15 feet for each room-to-adjacent-room movement (assume there is a door between all adjacent rooms).
• Describe your calculations associated with that analysis, and calculate and provide the final LD numeric value.
Additional Requirements
• Written communication: Written communication should be free of errors that detract from the overall message.
• APA formatting: Any references and citations should be formatted according to APA (6th edition) style and formatting.
• Font and font size: Times New Roman, 12-point.
