20. Strategic Decisions


[MUSIC] Welcome back to our lecture on Strategic Decisions in Manufacturing. Upon completion of this lesson, learners should be able to discuss the importance of facility location decisions in manufacturing operations strategy development, and discuss alternative manufacturing operations facility layout approaches. The placement of facilities is clearly an important and strategic decision, as facility construction and acquisition costs can lead to millions of dollars of investment. And facility location impacts overall supply chain performance. Some considerations include the required customer response times. Organizations need to be able to meet customer delivery expectations. And one important aspect to this is operations facility proximity to key customer demand, or proximity to transportation assets that facilitate delivery of products within the required timeframe.
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From a delivery perspective, you can think of Memphis and Louisville as a couple of regions in the United States that are well-situated as air hubs for transportation in that they can deliver in a 365 degree
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radius to all parts of the country fairly effectively.
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Another consideration is the very macro network tradeoffs, and I view these as companies determining how many facilities to operate in the overall network. So if you are only going to have one facility to serve an entire country with a universally distributed population, and all other factors were equal, you might prefer to be in the center of the country. But if your macro strategy is to operate two facilities, perhaps to reduce operations risk, you might prefer to have facilities located in opposite end points of the country.
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Economic considerations are important to think of, such as investment incentives, tax rebates or incentives, as well as political considerations such as government policies, labor laws, political stability, and quotas. All of these are important drivers of facility locations, often driving businesses to low tax states from neighboring higher tax states.
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The availability of supporting infrastructure, such as transportation carriers, the availability of good roads, harbors, electricity supply, and telecommunications networks is also important, as are initial and future investment requirements. The infrastructure and costs associated with placement of a factory in an inland location may be substantially different than one that is to be built on or near a coastline. And it may require different investments for structural foundation due to different geological conditions.
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The cost of ongoing operations is another important consideration and depends on the cost of raw materials in the area, support services, utilities, labor, etc., in the local area. All these are important factors for consideration.
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Facilities layout is another component of a firm’s overall operational strategy. >> An effective manufacturing facility layout is essential to maximize the effectiveness of production processes, and to meet the need of employees working in the facility. The basic objective of manufacturing facility layout is to ensure a smooth flow of work material and information through a manufacturing process, while ensuring productivity and safety.
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The key to good facility layout and design is the integration of the needs of people, materials such as raw materials, in process and finished goods, processes such as receiving, put away, picking, transformation, etc. And equipment in such a way that they facilitate effective and efficient manufacturing outputs.
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Facilities layout is typically the responsibility of facilities engineers working in conjunction with operations managers, who provide on input on process requirements and strategic growth projections. Popular layout approaches include product or line layout. These can be seen as being when production work can be laid out in a straight line with labor and equipment subdivided in a smooth line. In an automotive line layout, the automotive frame flows through a line where equipment and labor are used to apply tires and wheels, engines and drive trains, interior, and other required components.
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We see here characteristics and benefits of product line layout,
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as well as process layout, which is when machines and equipment integral to a workflow are grouped together by function. Garment manufacturing, with the various cutting, sewing, customization, and packing steps, may be an example of where process layouts would be beneficial.
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In an assembly line, the main product, perhaps an automobile in this example, is moving by robotics and conveyors from raw material at the start to finished automobile production at the end, while each workstation is supplied with the necessary items for its role in assembling the vehicle. When the manufacturing process is in the initial planning stages, the capacity of each workstation must be defined. Workstation capacity is the measure of tasks that can be generated in a defined period of time.
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Once each workstation’s capacity is defined, the flow between workstations can be evaluated to ensure that one workstation will not hold up workstations down the line. Finally, workstations must be staffed with skilled workers to perform required tasks within the allotted time.
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In a continuous process layout, the typical around the clock type of operation is employed for mass production of extremely high volumes of goods with very limited variety.
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Orange juice production provides an interesting example of continuous flow production with multiple products being produced. The raw materials include oranges and packaging materials. The main product may be 96 ounce plastic packages of orange juice, but perhaps a second size and smaller carton is made simultaneously. Additionally, the by-products of the orange squeezing process may create orange peels. And these peels can provide oils for use in perfumes and dried orange peels, which may be used as cattle feed.
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In a job shop layout, similar functional capabilities are clustered together in the same general area. In order for the product to be manufactured or the service to be delivered, materials must move from one cluster to the next in a defined sequence. For example, when manufacturing replacement windows, complementary operations like framing, painting, glass cutting and glass installation are grouped nearby, even though the size and type outputs may vary widely from customer to customer.
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In this lesson we have discussed the importance of facility location decisions in manufacturing operations strategy development, and discussed alternative manufacturing operations facility layout approaches. Thank you, and we’ll see you on the next lesson. >> [MUSIC]

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