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OPERATIONS MANAGEMENT
CHECK POINT 63: FACILITY DESIGN, LOCATION, AND ORGANIZATION

Please Select Any Topic In Check Point 63 Below And Click.

1. what is an operational facility?
2. importance of the operational facility
3. facility design
4. facility location
5. the point-rating method
6. small business example
selection of facility location
7. facility organization
8. principles of industrial organization
9. allocation of authority, accountability and responsibility
10. for serious business owners only
11. the latest information online
 

DO I NEED TO KNOW THIS CHECK POINT?

 

WELCOME TO CHECK POINT 63

TUTORIAL 1 General Management TUTORIAL 2 Human
Resources Management
TUTORIAL 3 Financial Management TUTORIAL 4 Operations Management TUTORIAL 5 Marketing
And Sales Management
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
2 7 12 17 22 27 32 37 42 47 52 57 62 67 72 77 82 87 92 97
3 8 13 18 23 28 33 38 43 48 53 58 63 68 73 78 83 88 93 98
4 9 14 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
 

HOW CAN YOU BENEFIT FROM CHECK POINT 63?

 
The main purpose of this check point is to provide you and your management team with detailed information about Facility Design, Location, And Organization and how to apply this information to maximize your company's performance.
 
In this check point you will learn:
 
• What is an operational facility?
• About the importance of an operational facility.
• About the facility design parameters and essential considerations.
• About facility location and facility location factors.
• About the point-rating method for selecting a facility location.
• About facility organization issues.
• What is an industrial organization?
• About principles of sound industrial organization.
• About allocation of authority, accountability, and responsibility in an operational facility.
• About allocation of duties in an operational facility... and much more.
 

LEAN MANAGEMENT GUIDELINES FOR CHECK POINT 63

 
You and your management team should become familiar with the basic Lean Management principles, guidelines, and tools provided in this program and apply them appropriately to the content of this check point.
 
You and your team should adhere to basic lean management guidelines on a continuous basis:
 
Treat your customers as the most important part of your business.
Provide your customers with the best possible value of products and services.
Meet your customers' requirements with a positive energy on a timely basis.
Provide your customers with consistent and reliable after-sales service.
Treat your customers, employees, suppliers, and business associates with genuine respect.
Identify your company's operational weaknesses, non-value-added activities, and waste.
•. Implement the process of continuous improvements on organization-wide basis.
Eliminate or minimize your company's non-value-added activities and waste.
Streamline your company's operational processes and maximize overall flow efficiency.
Reduce your company's operational costs in all areas of business activities.
Maximize the quality at the source of all operational processes and activities.
Ensure regular evaluation of your employees' performance and required level of knowledge.
Implement fair compensation of your employees based on their overall performance.
Motivate your partners and employees to adhere to high ethical standards of behavior.
Maximize safety for your customers, employees, suppliers, and business associates.
Provide opportunities for a continuous professional growth of partners and employees.
Pay attention to "how" positive results are achieved and constantly try to improve them.
Cultivate long-term relationships with your customers, suppliers, employees, and business associates.

1. WHAT IS AN OPERATIONAL FACILITY?

OPERATIONAL FACILITY

Facility design, location and organization are among the main responsibilities of the small business owner and operations manager in every manufacturing and non-manufacturing organization alike.


Various types of operational processes take place in a specially allocated part of the organization called an Operational Facility, or Work Facility, or simply, Facility. A facility, which provides industrial or commercial premises for conducting company operations, may differ in its organizational character depending upon the nature of the company's operations.

In a Manufacturing Environment the facility represents a major part of any industrial enterprise and provides the necessary environment for implementing various manufacturing processes and accomplishing specific manufacturing objectives. A Manufacturing Facility provides industrial premises where production employees are able to convert materials into semi-finished and finished products using appropriate equipment, machinery, and tools.

In a Non-Manufacturing Environment the operational facility may also represent a major part of the business, depending upon the specific type of operations, as outlined below. Thus, based upon the nature of your company’s business, the operational facility may require the bulk of your financial resources, utilize most of the physical assets, and often employ the majority of your employees.

Furthermore, the facility represents a special system which has to operate continuously within the larger organizational structure and in conjunction with such essential functions as general administration, human resources, finance and accounting, marketing and sales.

 

ADDITIONAL INFORMATION ONLINE

Charlie Chaplin - Factory Work.
Inside A Factory By TVChoiceFilms.
How Factories Work? By TVChoiceFilms.
Leupold Factory Tour - Part 1 By ScopeShack By Tim Lesser.
Inside Meat Processing Factory By Ed Sanchez, Lopez Foods.

2. IMPORTANCE OF THE OPERATIONAL FACILITY

IMPORTANCE OF THE OPERATIONAL FACILITY
IN VARIOUS TYPES OF BUSINESSES

1.

A Manufacturer.  
Manufacturers always place high importance in developing a suitable manufacturing facility to ensure a cost-effective utilization of the company’s human, material, and financial resources. The location of such a facility is not really important, since manufacturers usually don’t deal directly with end-users. For this reason, the majority of all manufacturers are located in various industrial areas. Despite the relatively low cost per square foot, the manufacturing facility and the utility costs often represent a substantial portion of the company’s overall production budget.

2.

A Wholesaler.
Wholesalers utilize the largest portion of their facilities for operational needs, i.e. for storing merchandise in various convenient locations. Since the majority of wholesalers don’t deal directly with end-users, many wholesalers chose to locate their business operations in industrial areas to minimize the cost of rent, utilities, and other related expenses.

3.

A Retailer.  
Retailers utilize the largest portion of their operational facilities for the actual retail space, while a smaller portion is allocated to store the merchandise. Since location of the retail facility is highly important, the cost of retail space often represents a high portion of the overall operational budget.

4.

A Service Provider.  
Service providers usually utilize the largest portion of their facilities for operational needs where customers can be served efficiently. Some service providers have to be in a high-customer-traffic location to achieve their business objectives. This, however, may subsequently incur potentially high rental expenses and other related costs. However, in other instances, the location of a service facility is not as important, since the large part of the services is provided at the customers’ location.

5.

A Project Management Company.  
Project management companies usually utilize the largest portion of their operational facilities for office space where the project design takes place. An additional part of the project management company’s business may take place at the customers’ premises, thereby reducing the need for a large facility and minimizing the rent and other related expenses.

6.

A Contractor.  
Contractors usually need a small facility to accommodate the company's office needs and a larger facility to store equipment and materials. The other part of the contractors’ activities may be carried out at the customers' premises, thereby reducing the need for a large facility and minimizing rent and other related expenses.

3. FACILITY DESIGN

FACILITY DESIGN

Facility Design represents a very important issue for brand new and existing companies alike. One important aspect of facility design is determining the size of the commercial or industrial organization. 

A common approach in determining the size of the facility is to evaluate the company’s minimal floor space requirements, which will produce goods or services at the lowest unit cost, while using the existing resources and operational methods. 

Management in the existing organizations is also required to evaluate the facility design parameters on a continuous basis to ensure that their organization will remain successful in a competitive and changing market environment.

A preliminary study is usually helpful in determining the Facility Design Parameters, as outlined below. All of these design parameters should be evaluated by business owners and managers and summarized in accordance with the overall long-term objectives of the company. There are a number of essential considerations related to facility design and development which should be taken into consideration as outlined below.

FACILITY DESIGN PARAMETERS

1.

Accommodation required at present.

2.

Accommodation required in the future.

3.

Facilities required in the building.

4.

Quality of the building.

5.

Details of the proposed site.

6.

Budgetary limitations.

7.

Final completion date.

 

ESSENTIAL CONSIDERATIONS RELATED TO FACILITY DESIGN

1.

Number of floors.

2.

Access to facility.

3.

Technological process requirements.

4.

Weight and size of equipment and products.

5.

Material handling requirements.

6.

Service requirements.

7.

Illumination.

8.

Heating and ventilation.

9.

Noise, pollution and waste disposal.

10.

Administrative office requirements.

11.

Receiving, storage, and distribution of materials.

12.

Safety considerations.

 

ADDITIONAL INFORMATION ONLINE

Facility Design By Solid Works 2014.
Facility Design Part 1 By Inderdeep Sing, Nptelhrd.
Facility Design Part 2 By Inderdeep Singh, Nptelhrd.
Facility Design Part 3 By Inderdeep Singh, Nptelhrd.
Facility Design And Process Flow By PublicResourceOrg.

4. FACILITY LOCATION

FACILITY LOCATION

In order to prepare the final blueprint of the facility design it is necessary to consider and select an appropriate location of the new facility. There are no set rules applicable to selection of Facility Location, but there are a number of Location Factors which may influence the decision and should be taken into consideration as outlined below.  (1)

FACILITY LOCATION FACTORS

• Inter-Company Integration.

If the new facility is a part of a larger group of companies, it is essential to ensure sufficient integration of such a facility within the group's total organizational structure.

• Availability And Cost Of Labor.

It is necessary to assess the availability and cost of labor in the proposed facility location area. Skilled labor is not always available in every location.

• Availability And Cost Of Services.

It is necessary to examine the availability and cost of such services as electricity,  water, gas, plumbing, and disposal of waste. Various manufacturing processes may require these services to a greater or lesser extent.

• Availability And Cost Of Materials.

It is necessary to ensure that all materials are available for timely delivery to the facility. A location near main suppliers may reduce delivery costs and allow more efficient liaison between the company and suppliers.

• Availability Of Transport.

It is necessary to ensure that transport is available for company employees to reach  the facility at prescribed time. In addition, it is important to have adequate goods transportation facilities to accommodate shipping and receiving requirements.

• Availability Of Car Parking Space.

It is necessary to assess the number of vehicles which may be used by company employees and to ensure that a sufficient space will be available for parking.

• Expansion Potential.

It is necessary to evaluate long-term planning requirements of the organization and to ensure that the size of the site will allow expansion of the facility if it is required in the future.

• Zoning And Legal Regulations.

It is essential to examine local zoning regulations which control the types of businesses that are allowed to operate in certain areas. State and federal requirements pertaining to issues such as air and noise pollution, disposal of waste, and effluence should also be examined.

• The Cost Of Land.

It is necessary to assess the total cost of the industrial land required by the new facility development. This factor plays a particular role in  the location selection process and depends substantially on the company's immediate financial resources and future prospects.

• New Development Areas.

Federal, state, and local authorities sometimes offers special subsidies, low interest loans, grants, and low rentals in order to develop new industrial areas.

• Living Conditions.

It is necessary to consider existing housing facilities, shops, services, entertainment, and safety of employees. Availability of acceptable living conditions will enhance the company's ability to attract employees.

 

DIFFERENT DEGREES OF IMPORTANCE OF THE FACILITY LOCATION

Selection of a facility location requires a comprehensive examination of the aforementioned Location Factors. These factors may have a different degree of influence depending on the specific type of operation. 

Retailers, wholesalers, and service companies, for example, place higher importance on the external appearance of the facility since their operations involve direct contact with consumers.

Manufacturing companies have less contact with customers and therefore place a higher priority on the actual cost of the facility and the related operating costs.

5. THE POINT-RATING METHOD

THE POINT-RATING METHOD

Production facility location factors may be evaluated in different ways. A simple and practical approach is the Point-Rating Method. 

This method entails an examination of the importance of each factor in the location selection process. Each Location Factor is assigned a relative weight out of a maximum number of possible points, usually 100. Thereafter, a potential location is evaluated according to every factor considered by management. A number of points is assigned to each factor and the location which scores the highest number of points is subsequently selected as the most suitable one. 

The Point-Rating Method is illustrated in the example below.

6. SMALL BUSINESS EXAMPLE
SELECTION OF FACILITY LOCATION

SELECTION OF FACILITY LOCATION

It is apparent in this example that Location B with 700 points is more suitable than Location A with 510 points. It is important, however, for management to consider all location factors before making a final decision.

7. FACILITY ORGANIZATION

FACILITY ORGANIZATION

The next stage in the facility development process necessitates creation of a comprehensive organizational structure in accordance with the overall objectives of the company. The process of Facility Organization, therefore, represents an important task of operations management and entails formulation of several issues outlined below. (2)

FACILITY ORGANIZATION ISSUES

1.

Nature of facility organizational activities.

2.

Functions under which these activities are to be carried out.

3.

Positions and titles assigned to these functions.

4.

Production employees who occupy positions indicated by the assigned titles.

5.

Range of individual authority and responsibility of production employees.

6.

Framework of relations among production employees.

7.

Coordination of activities and timing performance of production employees.

8. PRINCIPLES OF INDUSTRIAL ORGANIZATION

INDUSTRIAL ORGANIZATION

Many Industrial Organizations often start as small businesses which undergo a continuous growth and expansion over a certain period of time. In the beginning, the business owner generally has all the authority and responsibility for the company’s overall performance. In fact, the entire operation centers around that individual who is sometimes called the “chef and the bottle-washer”.

However, as the company grows, it becomes necessary to engage additional employees   to meet the increasing operational requirements. At the same time, the centralization of operational planning and control becomes ineffective and business owners sometimes inadvertently cause decision-making “bottle-necks” within the organization. To prevent this inefficiency, business owners must employ additional managers and delegate to them certain operational responsibilities to meet the company’s increasing operational requirements.

The process of facility organizational development entails determination of authority, responsibility, and duties of operations managers, supervisors, and their subordinates. Authority, Responsibility, and Accountability should be assigned to employees in an orderly manner and in accordance with principles of sound industrial organization. These principles, discussed earlier in Tutorial 1, provide the foundation of the Management Structure, and are summarized below.

PRINCIPLES OF SOUND INDUSTRIAL ORGANIZATION

1.

Separation of functions within the operational facility, e.g. operations manager, foreman, operators, laborers.

2.

Arranging functions in a logical manner to avoid overlapping or potential conflict and to ensure that each employee receives an order only from one supervisor.

3.

Clear distinction between line and staff functions and positions within the operational facility.

4.

Clear job descriptions and job specifications related to each job to avoid divided responsibility and possible confusion in the workplace.

5.

Appropriate allocation of authority, responsibility, and accountability to each employee within the operational facility.

6.

Competent selection of suitable employees to perform various tasks within the operational facility.

9. ALLOCATION OF AUTHORITY, ACCOUNTABILITY AND RESPONSIBILITY

ALLOCATION OF AUTHORITY, ACCOUNTABILITY AND RESPONSIBILITY

Authority, Responsibility, and Accountability should be allocated to employees to ensure a functional work division within the operational facility. The Work Division approach is very useful in assigning a range of duties, responsibilities, and accountability to the company’s management team, supervisors, operators and laborers within the operational facility. Work division among employees is important for several reasons outlined below.

REASONS FOR WORK DIVISION IN THE OPERATIONAL FACILITY

1.

High volume of work in the operational facility.

2.

Broad range of experience and knowledge requirements by supervisors and operators.

3.

Different types of skills and capabilities requirements by supervisors and operators.

A typical example describing various degrees of responsibility and corresponding duties in a operational facility are illustrated below.

ALLOCATION OF DUTIES IN THE OPERATIONAL FACILITY

Degree Of Responsibility

First

Second

Third

Fourth

Position

President

Operations
Manager

Supervisor

Operator
Or Laborer

Range 
Of Duties

General management administration, overall planning, and control of the  company’s performance.

General operations planning and control in the operations department. Detailed implementation and control of performance in assigned areas of responsibility. Execution of an allocated job or assignment.
Additional details regarding various organizational issues and allocation of duties in companies which adopt Kaizen  and Just-In-Time Methodology, including Service Operations Management, Project And Contract Management companies, are provided in Tutorial 4.

10. FOR SERIOUS BUSINESS OWNERS ONLY

ARE YOU SERIOUS ABOUT YOUR BUSINESS TODAY?

Reprinted with permission.

11. THE LATEST INFORMATION ONLINE

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2.

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3.

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If you are U.S. Veteran, your membership in Lean Business Club and complete access to the Lean Business 2100 Management Program online will be available to you free of charge for an unlimited period.

 

LESSON FOR TODAY:
The Quality Of Your Facility Organization
Will Determine The Quality Of Your Products And Services!