Operations Management

June 2023

Q.1 As a business owner, one of the most critical decisions you will make is choosing a
location for your business setup. What are the various decision criteria for deciding a
location for a business setup, and how do they apply to setting up an electric vehicle
charging station? Assume any size for the setup.

Ans

Introduction

Finding the right location means understanding the right qualities to look for in a potential space.
Analysing your area, reading about potential customer demographics, and considering where
competitors are located are all important aspects to finding and choosing the right location.

It’s also important to consider your needs as a business owner before deciding on a location. If
you’re not running a retail or restaurant-type business and therefore won’t need to rely on foot
traffic, it’s important to consider access for other business needs. This can mean supply
deliveries, client meetings, and warehouse or major storage space for your business. By analysing
your options and defining your needs, you’re well on your way to finding the right business space
for you.

Why business’s location is important

In case of setting up of location for electrical vehicle charging station you need to thoroughly
consider how your location will contribute to your business. Your location should be inviting and
refined, depending on the type of business you’re running. It should create a positive association
for clients and customers so they think highly of your business.

Consider these steps first before examining other factors:

 Do your research. Researching the right business location means understanding local
zoning laws, plotting competitors’ locations, and maintaining a keen awareness of what
properties are available (or may become available soon). You should also research your
target market and other benefits or restrictions from local or state entities.

 Consider taxes. Consider the state and local tax implications of your prospective location.
Depending on your business type and location, it may be more lucrative to seek out a
location outside a certain zone or municipality to get a tax benefit.

 Ask about government incentives. There are incentives on both a federal and state level
for small businesses in certain industries. By choosing the right location, you may qualify
for certain incentives that could apply to your business.
Factors to consider as you look for a business location

By analysing your business, what’s available to you in your general area, and what types of
features you find important, you can find the right location for your business. Of course,
oftentimes the most important factor is affordability. It’s critical to assess your options and work
with a local bank while you’re trying to find the right location for your business.

Beyond affordability and lease terms, however, there are other factors and questions to assess in
finding the right business location.
1. How important is the location to your business?

This may seem like an obvious question, but consider how location will impact your business. An
EV charging station varies widely as compared to the central office’s headquarters. You want to
choose a location that makes the most sense for everyone.

2. Who will see and interact with your location?

Consider who will come to your business on a regular basis. You need to tailor a location that
meets both their needs and your needs as a business owner.

3. Does your business require a large space?

Choosing the location for your business depends on the type of business and the size of your
business you are going to set up.

How to choose the right business location

Besides the factors listed above, when it comes time to choose where your business will be based,
there are some important steps to take to make the right decision.

You want to analyse all of your options and consider the perspectives of as many people
associated with your business as possible. Choosing the right business location means doing as
much research as possible.

Consider these factors, too, as you hunt for the best location for your business:

 Demographics: Consider your target audience and where they’re located. Research
different demographic aspects about your local area, particularly around where your
desired location is. If you’re a business that relies on foot traffic, you want to position
your business as close to where your target audience is clustered as possible. By knowing
this information, you can also build more facts about disposable income in your area and
how high the demand for your product or service could be.

 Competition: Consider where your competitors are. You don’t want to move in directly
next door or across the street from a business rival. By knowing where your competitors
are, you can find a business location that allows you to establish your own base. It can
also allow you to better gauge demand for your product or service compared to other
companies.
  Building structure: Of course, finding the right business location is not just about the
property, but about what’s on the property. Find a location with a building both you and
your employees like. Consider its perspective from a potential client or customer. You
need a location with a structure that makes the most sense for your business and your
clients or customers.

 Zoning: Research zoning maps for your local town or city. This allows you to gauge
what business activities are allowed, according to your local area. If you’re a retail store
or restaurant, considering the proximity to commercial zoning can be essential. Nearby
residential zoning means you could have direct access to foot traffic in your area.

 Other nearby businesses: Similar to considering where your competition is based,

consider what other businesses are nearby your potential location. This is important,
because those businesses could attract customers that are in your target demographic.
Make a balanced, conscious decision when considering your neighbours. You want to
collaborate with other businesses to create a prosperous economic environment. You
shouldn’t have to settle for adversarial business relationships.

 Power: Industries which run day and night require continuous power supply. So, they
should be located near the power stations and should ensure continuous power supply.
Especially in case of EV charging station, regular power supply is very important.

Conclusion

On the basis of above details, it can be said that, plant location is very much crucial for any
business and while finalising it, all necessary points should be considered.

Q.2 Explain in detail the various types of plant layout concepts that are available in
operations management. Give examples of where each of these types can be employed
respectively. Briefly explain a layout applicable for a cloud kitchen format vis-à-vis a dine-
in restaurant, highlighting the good points and bottlenecks, if any.

Ans

Introduction

Plant layout is simply a mechanism which involves knowledge of the physical arrangement of
every component of the production Process for the facilities to additional space efficiency
for manufacturing cost reduction to continuous and steady movement of the production cycle.
This arrangement includes the space needed for material movement, storage, indirect labour and
all other supporting activities or services.
.
Types

1. Product Layout

If all the machines are arranged in a line sequence according to the sequence of operations of the
products then it is known as Product or Line Layout.
In this arrangement each following machine or section is arranged to perform the next operation
that is performed by its preceding machine or section, i.e. raw material starts from one end of
production lines and moves from one machine to next with a storage and material handling
and minimum work in process in a sequential path.
This type of layout is suitable for mass production and for the products having steady demand.
This arrangement is also good for the continuous production system where the products have
small parts that are highly standardised and interchangeable.

2. Process Layout
In Process or Functional Layout all the similar machines are positioned together so that all the
similar operations are performed at the same place.
Machines are arranged according to the nature or type of the operations or their functions.
This type of layout is useful where low volume of production is needed.
It is normally preferred for the industries involved in batch production, manufacturing and
maintenance activities of non- repetitive type.

3. Fixed or Position Layout

In Fixed or Position type of layout the major part of a material remains at a fixed position and all
accessories, material, required tools , machinery and other supporting equipment are brought to
this location and this layout is also known as project layout.
This layout is good for extremely large items manufactured in very small quantities and highly
preferable when the cost of moving a major piece of material is high.
This layout is used in the manufacturing factory of boilers, hydraulic and steam turbines etc.

4. Combination Layout
Combination Layout is also known as group layout.
In this layout we use a combination of all above layouts.
Every layout has its advantages and disadvantages therefore industries prefer to use a
combination of layouts.
These days most of the manufacturing industries have adopted this kind of layout.
 In this type of layout we connect all the good features of all the types of layout to obtain a
compromise solution which will be more economical and flexible.

Designing a restaurant layout

A restaurant layout is a conceptual sketch of your restaurant space that includes the dining areas,
kitchen, storage, bathrooms, and so on. It shows how your restaurant will look and function.

Creating a layout is a crucial step to getting started with a restaurant. In most cases, you’ll need to
include it in your application for a business permit. You’ll also use it to determine your
construction and decor budget as well as get investors on board.

1. Consider the flow.

Flow is a concept that shows how rooms interact with each other and how they are laid out in
terms of furniture, windows, and space usage. Your restaurant’s layout should enable the flow of
people, food and beverage delivery, and practical tools throughout.

Before the furniture and equipment are even considered, it’s important to have an idea of where it
will all be positioned. This can help avoid making the dining room feel chaotic or the kitchen
cramped and hazardous.

2. Brainstorm design ideas.

Here are nine restaurant layout ideas owners and customers love:

o Small bistro tables evenly scattered throughout a select dining room space.

o A combination of a horizontal bar with long vertical tables for community-style seating.

o Restrooms on the opposite side of the restaurant from the kitchen.

o A bar situated at the back of the restaurant for a more social atmosphere as guests travel the
length of the space and meet people as they go.

3. Remember spacing.
It’s not just about what looks good on paper. There are many rules and laws requiring proper
spacing for nearly every element of a restaurant layout. They’re there to keep people safe, but
they also make the experience more comfortable for everyone involved.
4. Follow best practices.
Chances are yo`1u’re already working with a kitchen advisor or interior designer who can help
offer expert advice. But it never hurts to know what common guidelines are typically used when
creating a restaurant layout in the first place.

5. Choose great software.

Last but certainly not least, diagramming software is essential for creating a restaurant layout that
is stylish and functional. Enter your exact space measurements along with custom measurements
for objects such as tables, kitchen islands, and statement decor items. Place them throughout the
space with drag and drop tools.

Bottlenecks

There could be bottlenecks while designing the layout of a restaurant such as:

If there are too many tables, there would not be optimum space utilisation and customers, May
not have the best experience while visiting the restaurant.

Many restaurants forget to provide lots of storage space. Even though most of the storage of food
and goods happens behind the scenes, you still need to include places to hide things where the
activity is.

In many restaurants, kitchen space is not correctly planned. Whether it is an interference

regarding the flow of circulation between the dining area and kitchen, or maybe the kitchen is too
small and there simply is not enough space for the chefs to prepare the food and meet consumer
demands, many restaurants have these kinds of problems.

On the basis of above discussion, it can be said that, plant layout is very important for all types of
setups and good layout would be beneficial for the firms in many ways.

3) A patisserie brand is planning to open a new mid-sized pastry shop near your locality.
Considering their expertise and knowledge in manufacturing and branding their product
offerings, they are confident of getting into the new pastry shop operations. You are
required to suggest the team on the following points:

a) What strategy would the pastry shop adopt for an Aggregate Operation Plan of resources
given a time frame of a year?

Ans

Aggregate Planning Strategy:

Aggregate planning is the process of developing, analysing, and maintaining a preliminary,

approximate schedule of the overall operations of an organization. The aggregate plan generally
contains targeted sales forecasts, production levels, inventory levels, and customer backlogs.
Chase Strategy is suitable for a new restaurant; the team should analyse market demand to
determine the level of position. It is necessary to match demand and production in the business to
avoid wastage and unnecessary workforce and inventory for the period.
Characteristics of aggregate planning strategy

1. A planning horizon is considered from about 3 to 18 months, with the periodic updating.
2. Aggregate product demand, stated in the common terms is observed.
3. Aggregate resource quantities, stated in the common terms are observed.
4. Influence both the supply and the demand by adjusting the production rates, workforce levels,
the inventory levels etc., but the facilities cannot be expanded.

Types of Aggregate Planning Strategies

Success depends on having the following inputs: an aggregate demand forecast for the period
you’re planning for, evaluating capacity management (including using subcontractors,
outsourcing, etc.), and the existing operational status of your workforce. All this will lead to
greater accuracy, and therefore, a greater likelihood of success.

You can achieve this by applying a variety of aggregate planning strategies. There are three main
ones that organizations have used:

1. Level Strategy: The goal of an aggregate planning strategy is to keep the

production rate and the workforce level. This requires strong forecasting of
demand to know if production levels must be increased or decreased as customer
demands grow and shrink. This aggregate production planning strategy will keep
your workforce steady but can increase your inventory and backlog.

2. Chase Strategy: As the name implies, you are chasing market demand. The
production matches demand, and excess inventory isn’t held over. This is part of
a larger lean production strategy, which saves money by waiting until an order is
placed. However, productivity and quality can be reduced, and it can negatively
impact the morale of your workforce.

3. Hybrid Strategy: There is a third alternative, which is a hybrid of the previous

two strategies. This keeps the balance between the production rate, workforce
and inventory levels, while still responding to demand as it changes. This
alternative offers a bit of flexibility that can satisfy demand while working to
keep production costs low.
By considering the above points, it can be said that patisserie brand should follow chase strategy.
As we know chase strategy is well suitable for a company which is new in the market which will
help the brand to establish in the market. Companies that use the Chase strategy produce just
enough goods to meet the demand for goods in the market. As we know initially the pastry shop
will find it difficult to find more new employees in the market but by using this chase strategy it
can later increase the number of employees. Chase strategy also known as matching strategy
reduces inventory cost and at times it is used when the demand is fluctuating during the year.
With this strategy production capacity decreases and increases making it equivalent to the
demand.

b) Discuss the concept of Q and P systems of ordering along with its issues in inventory
control for the pastry shop

Ans

An inventory system facilitates the organizational structure and the operating policies for
maintaining and controlling materials to be inventoried. This system is responsible for ordering
and receipt of materials, timing the order placement and keeping record of what has been ordered,
how much ordered and from whom the order placement has been done.

Models of inventory system

1. FIXED ORDER QUANTITY SYSTEM (Q SYSTEM)

The fixed order quantity system is also known as the Q system. In this system, whenever the
stock on hand reaches the reorder point, a fixed quantity of materials is ordered. The fixed
quantity of material ordered each time is actually the economic order quantity. Whenever a new
consignment arrives, the total stock is maintained within the maximum and the minimum limits.
The fixed order quantity method is a method that facilitates for a predetermined amount of a
given material to be ordered at a particular period of time. This method helps to limit reorder
mistakes, conserve space for the storage of the finished goods, and block those unnecessary
expenditures that would tie up funds that could be better utilized elsewhere. The fixed order
quantity may be bridged to an automatic reorder point where a particular quantity of a good is
ordered when stock at hand reaches a level which is already determined. The Fixed Order
Quantity method assumes that all the variables are known with certainty and remains constant.
Such variables could be the sales, unit cost, holding cost, Lead time, stock out cost, etc. But,
however, this assumption could not be true in the real life situations and despite this, the method
is frequently applied by the firms and yields excellent results.

2. FIXED ORDER PERIOD SYSTEM (P SYSTEM)

In this system, the stock position of each material of a product is checked at regular intervals of
time period. When the stock level of a given product is not sufficient to sustain the operation of
production until the next scheduled tested, an order is placed destroying the supply. The
frequency of reviews varies from organization to organization. It also varies among products
within the same organization, depending upon the importance of the product, predetermined
production schedules, market conditions and so forth. The order quantities vary for different
materials.