Page 596 - Introduction to Business

570 PART 6 Managing Business Operations, Management Information Systems, and the Digital Enterprise

respondents included quality of life as a major factor in locating their companies.
Most of these respondents were executives in high-tech industries.
Proximity to suppliers and resources was chosen by 31 percent of the respon-
dents as a major factor in location decisions. Most of these respondents work in
companies where inputs are heavy, bulky, or perishable. For example, food compa-
nies would locate near farms, and paper businesses would locate near forests.
Proximity to the parent company’s other facilities received a 25 percent vote
from respondents in the survey. Good candidates for this factor would be compa-
nies that own multiple facilities, where some manufacturing plants supply materi-
als to other manufacturing plants.
When it comes to service systems, proximity to customers is without question
the dominant factor in location decisions, since with few exceptions, customers are
not willing to travel long distances to obtain services. Other important factors in
service facility locations are operating costs, competitors, environment, support
systems, and transportation. Service businesses such as warehousing and distribu-
tion tend to locate where operating costs are the lowest. Some service companies
favor locations that are close to their competitors. For example, fast-food restaurants
and car dealerships are usually located near each other. In fact, fast-food chains
such as McDonald’s, Burger King, and Wendy’s find that locations within 1 mile of
each other stimulate sales. The environment can play a fundamental role for serv-
ice businesses such as skiing, where they have to be close to snow areas, or recre-
ational parks, where the climate must be good most of the year for the business at
hand. An example of the last situation would be the area around Orlando, Florida,
where a cluster of entertainment parks is located. Support systems are another fac-
tor in location decisions for service firms where as in the case of big medical cen-
ters, they attract doctor’s offices, pharmacies, and hotels. For service companies
such as mail order companies, transportation becomes an essential ingredient, and
they tend to locate in areas with an excellent transportation network.

Layout
Layout decisions involve the best physical arrangement of activity centers, where
activity centers can be anything that consumes space: a person or group of people,
chairs and desks, machines, stairways, aisles, storage rooms, workstations, and so
on. The objective of layout decisions is to facilitate the flow of materials, people,
and information. As a first step in the layout decision, the operations manager must
address the following four issues:
• Activity centers to be included in the layout. For example, should the company
have a centralized storage room or several smaller, decentralized storage
rooms?
• Amount of space to be allocated to activity centers. Not enough space leads to
reduced productivity, lack of privacy, and potential health and safety prob-
lems. Too much space leads to reduced productivity and higher costs.
• Configuration of activity centers. The physical placement of machines and
workers at a production stage or workstation can have a significant impact on
efficiency and materials flow. A similar argument can be made for the configu-
ration of a maternity ward at a hospital.
• Placement of activity centers in relation to each other. Activity centers with
frequent interactions or movements of people and materials should be located
next to each other, assuming there are no technical constraints.
The second step in the layout decision is the selection of one of the following
three basic types of layout: fixed-position layout, process-oriented layout, and product-

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