Chapter 12 – Obtaining and Laying Out Operating Facilities
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CHAPTER
Obtaining and Laying
Out Operating Facilities
CHAPTER CONTENTS
Learning Objectives 12.2
Chapter Overview 12.3
Brief Chapter Outline 12.3
12
Chapter 12 – Obtaining and Laying Out Operating Facilities
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LEARNING OBJECTIVES
After studying the material in this chapter, the student will be able to:
1. Explain what an operating system is and how it functions.
2. Discuss how to determine the right location for a small business.
CHAPTER OVERVIEW
Chapter 12 gives you in depth coverage of Obtaining and Laying Out Operational Facili-
ties. A successful business base is its location, its operations systems, before it even begins hiring staff or
selling its products and/or services.
You have heard it on television time and again, so here we go one more time: “Location, Loca–
tion, Location! ” This is imperative. It is also said, “Build it and they will come”, but that is not true of
Chapter 12 – Obtaining and Laying Out Operating Facilities
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BRIEF CHAPTER OUTLINE
I. DEVELOPING OPERATING SYSTEMS
A. What Are Operating Systems?
II. CHOOSING THE RIGHT LOCATION
A. Why Choosing the Right Location Is So Important
B. Some Important Factors Affecting Location Choice
III. LOCATING RETAIL STORES
A. Types of Stores
B. Types of Locations
IV. LOCATING MANUFACTURING PLANTS
V. PLANNING PHYSICAL FACILITIES
A. Determining Product to Be Produced
VI. HOW TO IMPROVE OPERATIONS
A. State the Problem
VII. SETTING AND USING PERFORMANCE STANDARDS
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CHAPTER OUTLINE AND TEACHING NOTES
CHAPTER OPENING PROFILE:
Gracefully Done
Gracefully Done is a retail furniture and gift shop, with owner Collette Day operating
I. DEVELOPING OPERATING SYSTEMS
Learning Objective 1.
Explain what an operating system is and how it functions.
A. The steps required to start a business
(see Chapter 5) are:
1. Searching for a product.
2. Studying the market for the product.
B. All operating systems have the following
elements:
a. A system for changing form,
place, or time.
Chapter 12 – Obtaining and Laying Out Operating Facilities
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CHAPTER OUTLINE AND TEACHING NOTES
b. A sequence of steps to change
the inputs into outputs.
work is to be done.
C. What Are Operating Systems?
1. OPERATING SYSTEMS consist of
the inputs, processes, and outputs of
a business.
2. INPUTS are materials, people,
money, information, machines, and
D. How Operating Systems Work
1. OPERATIONS, or PRODUCTION, is
converting inputs into outputs for cus-
tomers. See Figure 12.
a. Operations includes all those ac
2. Most businesses have three basic
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CHAPTER OUTLINE AND TEACHING NOTES
systems:
E. How to Begin Operations—After identi-
fying the products, inputs, and processes,
you are ready to begin operations:
1. Choose the right location.
II. CHOOSING THE RIGHT LOCATION
Learning Objective 2.
Discuss how to determine the right location for a small
business.
A. As shown in Chapters 5 and 6, you must
define the character of your business and
decide on your objectives and strategies
B. Why Choosing the Right Location Is
So Important
1. Location can make the difference be-
tween success and failure.
Chapter 12 – Obtaining and Laying Out Operating Facilities
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CHAPTER OUTLINE AND TEACHING NOTES
rather than someone else.
3. Factors influencing the customer’s
C. Some Important Factors Affecting Lo-
cation Choice
1. General factors affecting all busi-
nesses:
a. Access to a capable, well-trained
work force.
2. Flexibility in office space.
a. With rental usually locked into
REAL WORLD EXAMPLE 12.1
Genny Forster used Regus Group PLC to set up a test
market to determine the demand for her business. It took two
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CHAPTER OUTLINE AND TEACHING NOTES
days, as Regus offer ready-to–go, fully furnished offices in
3,000 locations in 900 cities worldwide.
3. Specific factors to consider for vari-
ous businesses
a. The type of business influences
most location decisions.
(1) Retailing.
REAL WORLD EXAMPLE 12.2
When faced with competition from a big Barnes & Noble
store, one independent bookstore owner took stock of her
firm’s strengths and the weaknesses of competitors and up-
graded her customer services to better serve customers.
c. PRODUCERS converting, usu-
ally in considerable volume, ma-
terials, parts, and other items into
products.
(1) The plant and customer
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CHAPTER OUTLINE AND TEACHING NOTES
d. SERVICE COMPANIES, which
provide a service for customers,
have some characteristics of
both retailers and producers.
(1) Some services require
customers to come to the
REAL WORLD EXAMPLE 12.3
Clean Drum experimented with a mobile unit to service
customers at their locations.
e. Many small service businesses
start and continue to operate out
III. LOCATING RETAIL STORES
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CHAPTER OUTLINE AND TEACHING NOTES
Learning Objective 3.
Describe the important factors involved in choosing a re-
tail location.
A. Choosing a Site for a Retail Store
1. In choosing a site for a retail store,
two factors are important:
2. Many small businesses thrive in spe-
cialized niches by emphasizing ser-
vice, expertise, and location.
REAL WORLD EXAMPLE 12.4
Small specialty retailers, such as the 17th Street Surf Shop,
emphasize service, expertise, and location.
B. Types of Stores
1. CONVENIENCE GOODS are prod–
ucts that customers buy often, rou-
tinely, quickly, and in any store that
carries them.
b. Examples: candy bars, milk, cig-
2. Shopping goods stores
a. SHOPPING GOODS are usually
higher priced and specialty
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CHAPTER OUTLINE AND TEACHING NOTES
goods that consumers buy infre-
3. Specialty goods stores
a. SPECIALTY GOODS are
bought infrequently, often at ex-
clusive outlets, after special effort
by the customers to drive to the
store.
4. Seasonal goods stores
a. SEASONAL GOODS are those
that target customers for specific
seasons or events.
b. Some are open year round such
Day).
REAL WORLD EXAMPLE 12.5
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CHAPTER OUTLINE AND TEACHING NOTES
Toomey’s has a 70,000 square foot building with bulk in-
ventories of Mardi Gras throws and supplies, that are sold be-
fore parades.
C. Types of Locations
1. DOWNTOWN LOCATIONS attract
business-oriented activities, as gov-
ernment, financial businesses, and
head offices of large firms are usually
located in the downtown area.
a. A downtown location has ad-
vantages:
(1) Lower rents.
b. Disadvantages include:
(1) Limited shopping hours.
(2) Higher crime rates.
2. FREESTANDING STORES, found in
various locations, are usually best for
customers who have brand or com-
pany loyalty.
a. Advantages: low costs, good
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CHAPTER OUTLINE AND TEACHING NOTES
(2) Acquiring suitable buildings
and land may be difficult.
c. Some entrepreneurs find a lucra-
tive location in neighborhoods
3. SHOPPING CENTERS vary in size
and are designed to draw traffic ac–
cording to the planned nature of the
stores to be included in them.
a. Why shopping centers are so
popular:
(1)) They offer many services,
such as specialized activities
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CHAPTER OUTLINE AND TEACHING NOTES
(6) Kiosks and carts often serve
Real World Example 12.6
Wally Rizza created Shades 2000 Inc., a sunglasses cart
vendor. Using the business’s revenue, he purchased more carts
and expanded into jewelry and watches.
b. Drawbacks of shopping centers:
(1) Cost, restrictions imposed by
c. The total rent of a shopping cen-
ter location includes the basic
rent, plus:
(1) Dues to merchants’ associa-
tion.
IV. LOCATING MANUFACTURING PLANTS
Learning Objective 4.
Describe the most important factors involved in choosing a
manufacturing site.
Chapter 12 – Obtaining and Laying Out Operating Facilities
CHAPTER OUTLINE AND TEACHING NOTES
A. MANUFACTURING, or PRODUCTION,
usually involves making or processing
materials into finished goods.
1. Raw materials may be some sort of
ore or minerals or might be
B. Selection of the location is usually based
on serving customers properly at the low-
est practical cost.
1. Important location factors in locating
a manufacturing plant are:
V. PLANNING PHYSICAL FACILITIES
Learning Objective 5.
Identify the steps in planning the layout of physical facili-
ties and show how to implement them.
A. FACILITIES are the buildings, machines
and other equipment, and furniture and