Task-1Question Module 5 Discussion ForumChapter-Manufactu.docx

Task-1
Question: Module 5 Discussion Forum
Chapter-Manufacturing and Service Technologies
Discuss the ideas that are essential while designing an
organization.
Follow below instruction/rules to complete the assignment.
Within each module, there is a list of key terms. Each student
will select one of the key terms and conduct a search of
Campbellsville University’s online Library resources to find 1
recent peer reviewed article (within the past 3 years) that
closely relate to the concept. Your submission must include the
following information in the following format:
DEFINITION: a brief definition of the key term followed by the
APA reference for the term; this does not count in the word
requirement.
SUMMARY: Summarize the article in your own words- this
should be in the 150-200-word range. Be sure to note the
article's author, note their credentials and why we should put
any weight behind his/her opinions, research or findings
regarding the key term.
DISCUSSION: Using 300-350 words, write a brief discussion,
in your own words of how the article relates to the selected
chapter Key Term. A discussion is not rehashing what was
already stated in the article, but the opportunity for you to add
value by sharing your experiences, thoughts and opinions. This
is the most important part of the assignment.
REFERENCES: All references must be listed at the bottom of
the submission--in APA format. (continued) Be sure to use the
headers in your submission to ensure that all aspects of the
assignment are completed as required.
Any form of plagiarism, including cutting and pasting, will

result in zero points for the entire assignment.
Material:
Reading Assignment
· Read Description and definition of Organization Design
· Read JOAN WOODWARD: TECHNOLOGY DRIVES
STRUCTURE
· Read and watch What is Lean?
· Read and view resources with What is Kaizen
· Read The organization of organizations
· View SocioTechnical Systems Overview then read Socio-
Technical Systems Theory
· Read Factors to Consider in Organizational Design
· Read How Leadership Characteristics Affect Organizational
Decline and Downsizing
Task2:
Please provide comments/replies for below three discussions.
Each comment/reply should be atleast 150 words.
Classmate disc1:
by Kaushik Sanghi - Saturday, 4 April 2020, 3:03 AM
Designing an organization's structure is an important process
and involves the consideration of the accompanying factors:
Manufacturing/Service: Whether the center offering of the firm
is a fabricated item or service is critical for designing the
organization since the strategy, innovation, and execution shift
generally between the 2 offerings.
Process stream: The process stream of the center activities of
the firm assume a vital job in designing the organizational
structure so as to increase the effectiveness of accessible

resources. An increasingly inflexible process stream described
by the association of departments leads to a couple of options in
designing versus a progressively adaptable process with
increasingly autonomous groups. Having an increasingly
adaptable work process leads to the formation of an
organizational design structure that helps in adjusting to the
outside condition in an unpredictable, unstable condition.
Lines of correspondence: The work process sets the tone for
designing the lines of correspondence. On the off chance that
the organization is comprised of free departments, the
interdepartmental correspondence will be insignificant, and the
organization will have a divisional structure with standardized
rules and procedures. In the event that the organization has an
assembly line work process, where each office is reliant on
another, the interdepartmental correspondence will be
sequential, and the correspondence will mostly be for
demonstrating plans, schedules, and input. “The
interdepartmental correspondence is the highest in equal
reliance between departments because the yield of one office is
the contribution for another office that is not necessarily in a
sequential request. Such an organization will have an even
structure with shared adjustment, social coordination, and
collaboration” (Daft, 2015).
Lines of power: The structure for lines of correspondence as
well as the administration's decision for the official lines of
power will manage whether the organization's decision-
production process will be brought together or decentralized.
Social versus specialized system: The human fit in terms of
leadership style, organizational culture, and board practices will
coordinate whether an organization has a social or specialized
design structure.
References:
Daft, R. L. (2015). Organizational Theory and Design. Canada:
Cengage Learning.
Stallings, W. (2003). Computer organization and architecture:
designing for performance. Pearson Education India.

Classmate disc2:
by Vijay Ramanth Thotakura - Saturday, 4 April 2020, 3:01 AM
A well-built organizational design configuration builds up
better approaches for working, identifying each other,
completing the work. In a general sense about utilizing the
engineering of the association to make an interpretation of
business strategy into operational reality and keeping in mind
that this can feel overwhelming (Hall, M. 2016). Making a solid
association configuration does not require a multitude of
advisors. A counselor with abilities around there can be
valuable yet isn't required if pioneers comprehend the
fundamental segments of association plan. The most essential
ideas are as following.
Strategy - This is one of the key factors to be considered while
setting up an organization. The business strategy that the
organization is endeavoring to accomplish its goals and make its
mark is the very first step to be considered. The principle
drivers for the organization's prosperity should also be put in a
thought process and come up with a plan and ideology (Davila,
J and Landis, B. 2017).
Plan criteria – Planning should be done as to understand what
the new working model should be, that fits conveying. The
expected criteria to convey on the strategy (abilities, culture,
and so on.) should be considered.
Current state – The inception process should define the "as-
seems to be" condition of the organization's present client
encounter, forms, basic leadership stream, cost structure,
condition of innovation, culture of the association, structure of
the association, connections among offices, current
representative experience, existing qualities and expertise holes
and practices being remunerated (Hall, M. 2016). The present
state should dependably be a thought when structuring an
association, now and again it is helpful to approach the

procedure as a "clear page" work out, leaving the present state
until the very end, as a beginning stage for plan
implementation.
Key process streams – The planning has to be done as to know
what center procedures are required, either existing or yet to be
planned, to drive the business strategy. In the event that the
procedures as of now exist, where does the "torment focus" you
need to move forward should be thought about and while some
little spots exist to moderate sized organizations pride
themselves on being "without process" and not bureaucratic, it
is imperative to perceive when that introduction is more a
symbol of respect than one that is helpful for the organization's
proceeded with development.
Governance structure – The judgement of hat choices are to be
made, where, when, and by whom to help the plan criteria and
the conveyance of the strategy should be made. The situation of
choices that are currently made must be considered.
Association structure – The association structure is also very
critical to drive the business strategy of the association. The
aptitudes and capacities that are to be expected to convey
business esteem in the new working model must be kept ready
before establishment.
Implementation plan – The final and the important factor to be
considered which reveals about what manner should the new
structure be enlivened to, inside the association and if it will be
actualized at the same time (Hall, M. 2016). Other things to
think of are about the one who will be leading the
implementation and by what means will the plan be conveyed to
the association. This will ensure the proper designing and setup
of an organization.
Classmate disc3:
by Ravindra Reddy Avula - Saturday, 4 April 2020, 2:56 AM
A well-assembled hierarchical structure setup develops better

methodologies for working, distinguishing one another,
finishing the work. In a general sense about using the building
of the relationship to realize an elucidation of business system
and remembering this can feel overpowering (Hall, M. 2016).
Making a strong affiliation design does not require a large
number of consultants. An advisor with capacities around there
can be significant yet isn't required if pioneers understand the
central portions of affiliation plan. The most basic thoughts are
as following.
Methodology - This is one of the key variables to be considered
while setting up an association. The business system that the
association is trying to achieve its objectives and make its
imprint is the absolute initial step to be considered. The
guideline drivers for the association's thriving should likewise
be placed in a manner of thinking and concoct an arrangement
and belief system.
Plan criteria – Planning ought to be done as to comprehend what
the new working model ought to be, that fits passing on. The
normal criteria to pass on the methodology (capacities, culture,
etc.) ought to be considered.
Current state – The beginning procedure ought to characterize
the "as-is by all accounts" state of the association's present
customer experience, shapes, fundamental initiative stream, cost
structure, state of development, culture of the affiliation,
structure of the affiliation, associations among workplaces,
current delegate understanding, existing characteristics and skill
openings and works on being compensated (Hall, M. 2016).
Associations trust that they need the least complex plan of
action or procedure anyway actually it originates from a
progression of choices made by the officials to enhance the
business ways execution (Hall, 2016). To do that, one ought to
be uncommonly clear on what you're attempting to achieve as a
business, and assurance your targets and objectives are
associated with the vision and estimations of the corporate. The
These are simple things that would impact anyway a business
style are recognized.

Managing Quality
PowerPoint presentation to accompany
Heizer, Render, Munson
Operations Management, Twelfth Edition, Global Edition
Principles of Operations Management, Tenth Edition, Global
Edition
PowerPoint slides by Jeff Heyl
6
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Copyright © 2017 Pearson Education, Ltd.
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Outline
Global Company Profile:
Arnold Palmer Hospital
Quality and Strategy
Defining Quality
Total Quality Management
Tools of TQM
The Role of Inspection
TQM in Services
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2
Managing Quality Provides a Competitive Advantage
Arnold Palmer Hospital
Delivers over 12,000 babies annually
Virtually every type of quality tool is employed
Continuous improvement
Employee empowerment
Benchmarking
Just-in-time
Quality tools
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3
Learning Objectives
When you complete this chapter you should be able to:
6.1Define quality and TQM
6.2Describe the ISO international quality standards
6.3Explain Six Sigma
6.4Explain how benchmarking is used in TQM
6.5Explain quality robust products and
Taguchi concepts
6.6Use the seven tools of TQM

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Quality and Strategy
Managing quality supports differentiation, low cost, and
response strategies
Quality helps firms increase sales and reduce costs
Building a quality organization is a demanding task
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Two Ways Quality
Improves Profitability
Improved Quality
Increased Profits
Increased productivity
Lower rework and scrap costs
Lower warranty costs
Reduced Costs via
Improved response
Flexible pricing
Improved reputation
Sales Gains via

Figure 6.1
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The Flow of Activities
Organizational Practices
Leadership, Mission statement, Effective operating procedures,
Staff support, Training
Yields:What is important and what is to be
accomplished
Quality Principles
Customer focus, Continuous improvement, Benchmarking, Just-
in-time, Tools of TQM
Yields:How to do what is important and to be
accomplished
Employee Fulfillment
Empowerment, Organizational commitment
Yields:Employee attitudes that can accomplish
what is important
Customer Satisfaction
Winning orders, Repeat customers
Yields:An effective organization with
a competitive advantage
Figure 6.2
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Defining Quality
An operations manager’s objective is to build a total quality
management system that identifies and satisfies customer needs
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Defining Quality
The totality of features and characteristics of a product or
service that bears on its ability to satisfy stated or implied
needs
American Society for Quality
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Different Views
User based: better performance, more features
Manufacturing based: conformance to standards, making it right
the first time
Product based: specific and measurable attributes of the product
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Implications of Quality
Company reputation

Perception of new products
Employment practices
Supplier relations
Product liability
Reduce risk
Global implications
Improved ability to compete
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Malcolm Baldrige National Quality Award
Established in 1988 by the U.S. government
Designed to promote TQM practices
Recent winners include
MidwayUSA, Charter School of San Diego, Mid-America
Transplant Services, Hill Country Memorial,
PricewaterhouseCoopers Public Sector Practice, Elevations
Credit Union, Lockheed Martin Missiles and Fire Control,
MESA Products Inc.
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Baldrige Criteria
Applicants are evaluated
on:CATEGORIESPOINTSLeadership120Strategic Planning
85Customer Focus85Measurement, Analysis, and Knowledge
Management 90Workforce Focus85Operations

Focus85Results450
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ISO 9000 International Quality Standards
International recognition
Encourages quality management procedures, detailed
documentation, work instructions, and recordkeeping
2015 revision gives greater emphasis to risk-based thinking
Over one million certifications in 206 countries
Critical for global business
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ISO 9000 International Quality Standards
Management principles
Top management leadership
Customer satisfaction
Continual improvement
Involvement of people
Process analysis
Use of data-driven decision making
A systems approach to management
Mutually beneficial supplier relationships
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Costs of Quality
Prevention costs - reducing the potential for defects
Appraisal costs - evaluating products, parts, and services
Internal failure costs - producing defective parts or service
before delivery
External failure costs - defects discovered after delivery
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Costs of Quality
External Failure
Total Cost
Internal Failure
Prevention
Appraisal
Total Cost
Quality Improvement

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Takumi
A Japanese character that symbolizes a broader dimension than
quality, a deeper process than education, and a more perfect
method than persistence
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Leaders in QualityTABLE 6.1Leaders in the Field of Quality
ManagementLEADERPHILOSOPHY/CONTRIBUTIONW.
Edwards DemingDeming insisted management accept
responsibility for building good systems. The employee cannot
produce products that on average exceed the quality of what the
process is capable of producing. His 14 points for implementing
quality improvement are presented in this chapter. Joseph M.
JuranA pioneer in teaching the Japanese how to improve
quality, Juran believed strongly in top-management
commitment, support, and involvement in the quality effort. He
was also a believer in teams that continually seek to raise
quality standards. Juran varies from Deming somewhat in
focusing on the customer and defining quality as fitness for use,
not necessarily the written specifications.
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Leaders in QualityTABLE 6.1Leaders in the Field of Quality
ManagementLEADERPHILOSOPHY/CONTRIBUTIONArmand
FeigenbaumHis 1961 book Total Quality Control laid out 40
steps to quality improvement processes. He viewed quality not
as a set of tools but as a total field that integrated the processes
of a company. His work in how people learn from each other’s
successes led to the field of cross-functional teamwork. Philip
B. CrosbyQuality Is Free was Crosby’s attention-getting book
published in 1979. Crosby believed that in the traditional trade-
off between the cost of improving quality and the cost of poor
quality, the cost of poor quality is understated. The cost of poor
quality should include all of the things that are involved in not
doing the job right the first time. Crosby coined the term zero
defects and stated, “There is absolutely no reason for having
errors or defects in any product or service.”
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Ethics and Quality Management
Operations managers must deliver healthy, safe, quality
products and services
Poor quality risks injuries, lawsuits, recalls, and regulation
Ethical conduct must dictate response to problems
All stakeholders must be considered
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Total Quality Management

Encompasses entire organization from supplier to customer
Stresses a commitment by management to have a continuing
companywide drive toward excellence in all aspects of products
and services that are important to the customer
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Deming's Fourteen PointsTABLE 6.2Deming's 14 Points for
Implementing Quality Improvement1.Create consistency of
purpose 2.Lead to promote change3.Build quality into the
product; stop depending on inspections to catch
problems4.Build long-term relationships based on performance
instead of awarding business on price5.Continuously improve
product, quality, and service6.Start training7.Emphasize
leadership
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Deming's Fourteen PointsTABLE 6.2Deming's 14 Points for
Implementing Quality Improvement8.Drive out fear9.Break
down barriers between departments10.Stop haranguing
workers11.Support, help, and improve12.Remove barriers to
pride in work13.Institute a vigorous program of education and
self-improvement14.Put everyone in the company to work on

the transformation
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Seven Concepts of TQM
Continuous improvement
Six Sigma
Employee empowerment
Benchmarking
Just-in-time (JIT)
Taguchi concepts
Knowledge of TQM tools
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Continuous Improvement
Never-ending process of continuous improvement
Covers people, equipment, suppliers, materials, procedures
Every operation can be improved
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4. Act
Implement the plan, document
2. Do
Test the plan
3. Check
Is the plan working?
Plan
Identify the pattern and make a plan
Shewhart's PDCA Model
Figure 6.3
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Continuous Improvement
Kaizen describes the ongoing process of unending improvement
TQM and zero defects also used to describe continuous
improvement
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Six Sigma
Two meanings
Statistical definition of a process that is 99.9997% capable, 3.4
defects per million opportunities (DPMO)
A program designed to reduce defects, lower costs, save time,
and improve customer satisfaction
A comprehensive system for achieving and sustaining business
success
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Six Sigma
Two meanings
Statistical definition of a process that is 99.9997% capable, 3.4
defects per million opportunities (DPMO)
A program designed to reduce defects, lower costs, save time,
and improve customer satisfaction
A comprehensive system for achieving and sustaining business

success
Mean
Lower limits
Upper limits
3.4 defects/million
2,700 defects/million
Figure 6.4
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Six Sigma Program
Originally developed by Motorola, adopted and enhanced by
Honeywell and GE
Highly structured approach to process improvement
A strategy

A discipline – DMAIC
A set of 7 tools
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Six Sigma
Defines the project’s purpose, scope, and outputs, then
identifies the required process information keeping in mind the
customer’s definition of quality
Measures the process and collects data
Analyzes the data ensuring
repeatability and reproducibility
Improves by modifying or
redesigning existing
processes and procedures
Controls the new process
to make sure performance
levels are maintained
DMAIC Approach
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Implementing Six Sigma
Emphasize defects per million opportunities as a standard
metric
Provide extensive training
Focus on top management leadership (Champion)
Create qualified process improvement experts (Black Belts,
Green Belts, etc.)
Set stretch objectives
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Implementing Six Sigma
Emphasize defects per million opportunities as a standard
metric
Provide extensive training
Focus on top management leadership (Champion)
Create qualified process improvement experts (Black Belts,
Green Belts, etc.)
Set stretch objectives
This cannot be accomplished without a major commitment from
top level management
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Employee Empowerment
Getting employees involved in product and process
improvements
85% of quality problems are due

to materials and process
Techniques
Build communication networks
that include employees
Develop open, supportive supervisors
Move responsibility to employees
Build a high-morale organization
Create formal team structures
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Quality Circles
Group of employees who meet regularly to solve problems
Trained in planning, problem solving, and statistical methods
Often led by a facilitator
Very effective when done properly
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Benchmarking
Selecting best practices to use as a standard for performance
Determine what to benchmark
Form a benchmark team

Identify benchmarking partners
Collect and analyze benchmarking information
Take action to match or exceed the benchmark
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Best Practices for Resolving Customer ComplaintsTable
6.3BEST PRACTICEJUSTIFICATIONMake it easy for clients
to complainIt is free market researchRespond quickly to
complaintsIt adds customers and loyaltyResolve complaints on
first contactIt reduces costUse computers to manage
complaintsDiscover trends, share them, and align your
servicesRecruit the best for customer service jobsIt should be
part of formal training and career advancement
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Internal Benchmarking
When the organization is large enough
Data more accessible
Can and should be established in a variety of areas
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Just-in-Time (JIT)
'Pull' system of production scheduling including supply
management
Production only when signaled
Allows reduced inventory levels
Inventory costs money and hides process and material problems
Encourages improved process and product quality
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Just-in-Time (JIT)
Relationship to quality:
JIT cuts the cost of quality
JIT improves quality
Better quality means less inventory and better, easier-to-employ
JIT system
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Taguchi Concepts
Engineering and experimental design methods to improve

product and process design
Identify key component and process variables affecting product
variation
Taguchi Concepts
Quality robustness
Target-oriented quality
Quality loss function
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Quality Robustness
Ability to produce products uniformly in adverse manufacturing
and environmental conditions
Remove the effects of adverse conditions
Small variations in materials and process do not destroy product
quality
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Quality Loss Function
Shows that costs increase as the product moves away from what
the customer wants
Costs include customer dissatisfaction, warranty
and service, internal

scrap and repair, and costs to society
Traditional conformance specifications are too simplistic
Target-oriented quality
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Unacceptable
Poor
Good
Best
Fair
Quality Loss Function
High loss
Loss (to producing organization, customer, and society)
Low loss
Figure 6.5
Frequency

Lower
Target
Upper
Specification
Target-oriented quality yields more product in the "best"
category
Target-oriented quality brings product toward the target value
Conformance-oriented quality keeps products within 3 standard
deviations
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TQM Tools
Tools for Generating Ideas
Check Sheet
Scatter Diagram
Cause-and-Effect Diagram

Tools to Organize the Data
Pareto Chart
Flowchart (Process Diagram)
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TQM Tools
Tools for Identifying Problems
Histogram
Statistical Process Control Chart
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Hour
Defect12345678
A
B
C

Seven Tools of TQM
(a)Check Sheet: An organized method of recording data
Figure 6.6
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/

/
/
/
/
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Seven Tools of TQM
(b)Scatter Diagram: A graph of the value of one variable vs.
another variable
Absenteeism
Productivity
Figure 6.6
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Seven Tools of TQM
(c)Cause-and-Effect Diagram: A tool that identifies process
elements (causes) that may effect an outcome
Figure 6.6
Cause
Materials
Methods
Manpower
Machinery
Effect
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50
Seven Tools of TQM
(d)Pareto Chart: A graph to identify and plot problems or
defects in descending order of frequency
Figure 6.6
Frequency
Percent
ABCDE
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Seven Tools of TQM
(e)Flowchart (Process Diagram): A chart that describes the
steps in a process
Figure 6.6

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Seven Tools of TQM
(f)Histogram: A distribution showing the frequency of
occurrences of a variable
Figure 6.6
Distribution
Repair time (minutes)
Frequency
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Seven Tools of TQM
(g)Statistical Process Control Chart: A chart with time on the
horizontal axis to plot values of a statistic
Figure 6.6
Upper control limit
Target value
Lower control limit
Time
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Cause-and-Effect Diagrams
Material
(ball)
Method
(shooting process)
Machine
(hoop &
backboard)
Manpower
(shooter)
Missed
free-throws
Figure 6.7
Rim alignment
Rim size
Backboard stability
Rim height
Follow-through
Hand position
Aiming point
Bend knees
Balance

Size of ball
Lopsidedness
Grain/Feel (grip)
Air pressure
Training
Conditioning
Motivation
Concentration
Consistency
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Pareto Charts
Number of occurrences
Room svcCheck-inPool hoursMinibarMisc.
72%16%5%4%3%
12
4

3
2
54
– 100
– 93
– 88
– 72
70 –
60 –
50 –
40 –
30 –
20 –
10 –
0 –
Frequency (number)
Causes and percent of the total
Cumulative percent
Data for October
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Flow Charts
MRI Flowchart
Physician schedules MRI
Patient taken to MRI
Patient signs in
Patient is prepped
Technician carries out MRI
Technician inspects film
If unsatisfactory, repeat
Patient taken back to room
MRI read by radiologist
MRI report transferred to physician
Patient and physician discuss
11
10
20%
9
8
80%

1
2
3
4
5
6
7
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Statistical Process Control (SPC)
Uses statistics and control charts to tell when to take corrective
action
Drives process improvement
Four key steps
Measure the process
When a change is indicated, find the assignable cause
Eliminate or incorporate the cause
Restart the revised process
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Control Charts
Upper
control limit
Coach’s
target
value
Lower
control
limit
Game number
|||||||||
123456789
40%
20%
0%
Plot the percent of free throws missed

Figure 6.8
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Inspection
Involves examining items to see if an item is good or defective
Detect a defective product
Does not correct deficiencies in process or product
It is expensive
Issues
When to inspect
Where in process to inspect
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When and Where to Inspect
At the supplier’s plant while the supplier is producing
At your facility upon receipt of goods from your supplier
Before costly or irreversible processes
During the step-by-step production process
When production or service is complete
Before delivery to your customer
At the point of customer contact
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Inspection
Many problems
Worker fatigue
Measurement error
Process variability
Cannot inspect quality into a product
Robust design, empowered employees, and sound processes are
better solutions
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Source Inspection
Also known as source control
The next step in the
process is your
customer
Ensure perfect
product to your
customer
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Source Inspection

Poka-yoke is the concept of foolproof devices or techniques
designed to pass only acceptable products
Checklists ensure consistency and
completeness
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Service Industry InspectionTABLE 6.4Examples of Inspection
in ServicesORGANIZATIONWHAT IS
INSPECTEDSTANDARDAlaska AirlinesLast bag on carousel
Airplane door openedLess than 20 minutes after arrival at the
gate
Less than 2 minutes after arrival at the gateJones Law
OfficeReceptionist performance
Billing
AttorneyPhone answered by the second ring
Accurate, timely, and correct format
Promptness in returning callsHard Rock HotelReception desk
Doorman
Room
MinibarUse customer’s name
Greet guest in less than 30 seconds
All lights working, spotless bathroom
Restocked and charges accurately posted to bill
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65
INSPECTEDSTANDARDArnold Palmer HospitalBilling
Pharmacy
Lab
Nurses
AdmissionsAccurate, timely, and correct format
Prescription accuracy, inventory accuracy
Audit for lab-test accuracy
Charts immediately updated
Data entered correctly and completelyOlive Garden
RestaurantBusboy
Busboy
WaiterServes water and bread within 1 minute
Clears all entrée items and crumbs prior to dessert
Knows and suggest specials, desserts
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66

INSPECTEDSTANDARDNordstrom Department
StoreDisplay areas
Stockrooms
SalesclerksAttractive, well-organized, stocked, good lighting
Rotation of goods, organized, clean
Neat, courteous, very knowledgeable
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67
Attributes Versus Variables
Attributes
Items are either good or bad, acceptable or unacceptable
Does not address degree of failure
Variables
Measures dimensions such as weight, speed, height, or strength
Falls within an acceptable range
Use different statistical techniques
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TQM In Services
Service quality is more difficult to measure than the quality of
goods
Service quality perceptions depend on

Intangible differences between products
Intangible expectations customers have of those products
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69
Service Quality
The operations manager must recognize:
The tangible component of services is important
The service process is important
The service is judged against the customer’s expectations
Exceptions will occur
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Service Specifications
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Determinants of Service QualityTable 6.5Reliability involves
consistency of …

Location Strategies
PowerPoint presentation to accompany
Heizer, Render, Munson
Operations Management, Twelfth Edition, Global Edition
Principles of Operations Management, Tenth Edition, Global
Edition
PowerPoint slides by Jeff Heyl
8
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Outline
Global Company Profile:
FedEx
The Strategic Importance of Location
Factors That Affect Location Decisions
Methods of Evaluating Location Alternatives
Service Location Strategy
Geographic Information Systems
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2

Location Provides Competitive Advantage for FedEx
Central hub concept
Enables service to more locations with fewer aircraft
Enables matching of aircraft flights with package loads
Reduces mishandling and delay in transit because there is total
control of packages from pickup to delivery
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3
Learning Objectives
8.1Identify and explain seven major factors that effect location
decisions
8.2Compute labor productivity
8.3Apply the factor-rating method
8.4Complete a locational break-even analysis graphically and
mathematically
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4

Learning Objectives
8.5Use the center-of-gravity method
8.6Understand the differences between service- and industrial-
sector location analysis
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5
One of the most important decisions a firm makes
Increasingly global in nature
Significant impact on fixed and variable costs
Decisions made relatively infrequently
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6
Long-term decisions
Once committed to a location, many resource and cost issues are
difficult to change
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7
The objective of location strategy is to maximize the benefit of
location to the firm
Options include
Expanding existing facilities
Maintain existing and add sites
Closing existing and relocating
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8
Location and Costs
Location decisions require careful consideration
Once in place, location-related costs are fixed in place and
difficult to reduce
Effort spent determining optimal facility location is a good
investment
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9

Factors That Affect Location Decisions
Globalization adds to complexity
Drivers of globalization
Market economics
Communication
Rapid, reliable transportation
Ease of capital flow
Differing labor costs
Identify key success factors (KSFs)
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10
Location Decisions
Country Decision
Key Success Factors
Political risks, government rules, attitudes, incentives
Cultural and economic issues
Location of markets
Labor talent, attitudes, productivity, costs
Availability of supplies, communications, energy
Exchange rates and currency risks
Figure 8.1

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11
Location Decisions
Region/ Community Decision
Key Success Factors
Corporate desires
Attractiveness of region
Labor availability and costs
Costs and availability of utilities
Environmental regulations
Government incentives and fiscal policies
Proximity to raw materials and customers

Land/construction costs
Figure 8.1
MN
WI
MI
IL
IN
OH
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12
Location Decisions
Site Decision
Key Success Factors
Site size and cost
Air, rail, highway, and waterway systems
Zoning restrictions

Proximity of services/ supplies needed
Environmental impact issues
Customer density and demographics
Figure 8.1
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13
Global Competitiveness Index of CountriesTABLE
8.1Competitiveness of 144 Selected CountriesCOUNTRY2015
RANKINGSwitzerland1Singapore2U.S.3Finland4Germany5Japa
n6Canada15Israel27China28Russia53Mexico61Vietnam68Haiti1
37Chad143Guinea144
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14
Factors That Affect
Location Decisions
Labor productivity
Wage rates are not the only cost
Lower productivity may increase total cost
Labor cost per day
Productivity (units per day)

= Labor cost per unit
South Carolina
= $1.17 per unit
$70
60 units
Mexico
= $1.25 per unit
$25
20 units
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Factors That Affect
Location Decisions
Can have a significant impact on costs
Rates change over time
Costs
Tangible – easily measured costs such as utilities, labor,
materials, taxes
Intangible – not as easy to quantify and include education,
public transportation, community, quality-of-life
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Factors That Affect
Location Decisions

Can have a significant impact on costs
Rates change over time
Costs
Tangible – easily measured costs such as utilities, labor,
materials, taxes
Intangible – not as easy to quantify and include education,
public transportation, community, quality-of-life
Location decisions based on costs alone can create difficult
ethical situations
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Factors That Affect
Location Decisions
Political risk, values, and culture
National, state, local governments' attitudes toward private and
intellectual property, zoning, pollution, employment stability
may be in flux
Worker attitudes toward turnover, unions, absenteeism
Globally cultures have different attitudes toward punctuality,
legal, and ethical issues
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Ranking Corruption
Rank Country2015 CPI Score (out of 100)
1Demark91
2Finland 90
3Sweden89

4New Zealand 88
5Netherlands, Norway, 87
7Switzerland 86
8Singapore85
9Canada 83
10Germany, UK81
16USA 76
18Japan75
17USA74
30Taiwan62
37South Korea56
83China37
119Russia29
Least Corrupt
Most Corrupt
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Factors That Affect
Location Decisions
Proximity to markets
Very important to services
JIT systems or high transportation costs may make it important
to manufacturers
Proximity to suppliers
Perishable goods, high transportation costs, bulky products
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Factors That Affect
Location Decisions
Proximity to competitors (clustering)
Often driven by resources such as natural, information, capital,
talent
Found in both manufacturing and service industries
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Clustering of CompaniesTABLE 8.3Clustering of
CompaniesINDUSTRYLOCATIONSREASON FOR
CLUSTERINGWine makingNapa Valley (U.S.) Bordeaux region
(France)Natural resources of land and climateSoftware
firmsSilicon Valley, Boston, Bangalore, IsraelTalent resources
of bright graduates in scientific/technical areas, venture
capitalists nearbyClean energyColoradoCritical mass of talent
and information, with 1,000 companies
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22
CLUSTERINGTheme parks (Disney World, Universal Studios,
and Sea World)Orlando, FloridaA hot spot for entertainment,
warm weather, tourists, and inexpensive laborElectronics firms
(Sony, IBM, HP, Motorola, and Panasonic)Northern

MexicoNAFTA, duty free export to U.S.Computer hardware
manufacturersSingapore, TaiwanHigh technological penetration
rate and per capita GDP, skilled/educated workforce with large
pool of engineers
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23
CLUSTERINGFast food chains (Wendy’s, McDonald’s, Burger
King, Pizza Hut)Sites within 1 mile of each otherStimulate food
sales, high traffic flowsGeneral aviation aircraft (Cessna,
Learjet, Boeing, Raytheon)Wichita, KansasMass of aviation
skillsAthletic footwear, outdoor wearPortland, Oregon300
companies, many owned by Nike, deep talent pool and outdoor
culture
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24
Factor-Rating Method
Popular because a wide variety of factors can be included in the
analysis
Six steps in the method
Develop a list of relevant factors called key success factors

Assign a weight to each factor
Develop a scale for each factor
Score each location for each factor
Multiply score by weights for each factor and total the score for
each location
Make a recommendation based on the highest point score
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25
Factor-Rating ExampleTABLE 8.4Weights, Scores, and
Solution
SCORES
(OUT OF 100)WEIGHTED SCORESKEY SUCCESS
FACTORWEIGHTFRANCEDENMARKFRANCEDENMARKLa
bor availability and attitude.257060(.25)(70) = 17.5(.25)(60) =
15.0People-to-car ratio.055060(.05)(50) = 2.5(.05)(60) = 3.0
Per capita income.108580(.10)(85) = 8.5(.10)(80) = 8.0Tax
structure.397570(.39)(75) = 29.3(.39)(70) = 27.3Education and
health.216070(.21)(60) = 12.6(.21)(70) =
14.7Totals1.0070.468.0

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26
Locational
Cost-Volume Analysis
An economic comparison of location alternatives
Three steps in the method
Determine fixed and variable costs for each location
Plot the cost for each location
Select location with lowest total cost for expected production
volume
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27

Locational Cost-Volume Analysis Example
Three locations:
Athens$30,000$75$180,000
Brussels$60,000$45$150,000
Lisbon$110,000$25$160,000
FixedVariableTotal
CityCostCostCost
Total Cost = Fixed Cost + (Variable Cost x Volume)
Selling price = $120
Expected volume = 2,000 units
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28
Crossover point – Athens/Brussels
30,000 + 75(x1)= 60,000 + 45(x1)
30(x1)= 30,000

x1= 1,000
60,000 + 45(x2)= 110,000 + 25(x2)
20(x2)= 50,000
x2= 2,500
Crossover point – Brussels/Lisbon
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29
–
$180,000 –
–
$160,000 –
$150,000 –
–
$130,000 –
–
$110,000 –

–
–
$80,000 –
–
$60,000 –
–
–
$30,000 –
–
$10,000 –
–
Annual cost
|||||||
05001,0001,5002,0002,5003,000
Volume
Athens lowest cost
Brussels
lowest cost

Lisbon lowest
cost
Lisbon cost curve
Athens
cost curve
Brussels
cost curve
Figure 8.2
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8 - ‹#›
30
Center-of-Gravity Method

Finds location of distribution center that minimizes distribution
costs
Considers
Location of markets
Volume of goods shipped to those markets
Shipping cost (or distance)
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8 - ‹#›
31
Place existing locations on a coordinate grid
Grid origin and scale are arbitrary
Maintain relative distances
Calculate x and y coordinates for 'center of gravity'
Assumes cost is directly proportional to distance and volume
shipped
8 - ‹#›

8 - ‹#›
32
wherexi=x-coordinate of location i
yi=y-coordinate of location i
Qi=Quantity of goods moved to or from location i
x-coordinate of the center of gravity
y-coordinate of the center of gravity
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8 - ‹#›
33

Center-of-Gravity MethodTABLE 8.5Demand for Quain's
Discount Department StoresSTORE LOCATIONNUMBER OF
CONTAINERS
SHIPPED PER MONTHChicago 2,000Pittsburgh 1,000New
York1,000Atlanta2,000
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34
North-South
East-West
120 –
90 –
60 –
30 –
–
||||||
306090120150

Arbitrary origin
Chicago (30, 120)
New York (130, 130)
Pittsburgh (90, 110)
Atlanta (60, 40)
Figure 8.3
x1 = 30
y1 = 120
Q1 = 2,000
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35
x-coordinate =

(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)
2000 + 1000 + 1000 + 2000
= 66.7
y-coordinate =
(120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)
2000 + 1000 + 1000 + 2000
= 93.3
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36
North-South
East-West
120 –
90 –
60 –

30 –
–
||||||
306090120150
Arbitrary origin
Chicago (30, 120)
New York (130, 130)
Pittsburgh (90, 110)
Atlanta (60, 40)
Center of gravity (66.7, 93.3)
+
Figure 8.3
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8 - ‹#›

37
Transportation Model
Finds amount to be shipped from several points of supply to
several points of demand

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