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Layout Selection for Service Industry Research Paper


Operation management deals with all the processes and activities that are involved in the transformation of an idea to finished product (Florence, 1984, p. 45). Its also involves the systems that are used in controlling the activities used to produce goods and services. The operations management process basically entails the transformation process involving inputs, transformation processes and the outputs.

Inputs in the transformation process that is made possible through operations management include capital, human resources, natural resources, materials, information and customers of goods and services. Operations managers facilitate in value addition of the inputs through the transformation process enabling the production of goods and services. After value addition, outputs are produced that include products and services e.g., automobiles, furniture and aircraft.

One of the important points in operations management is process selection. Process selection involves making decisions how production of goods and services will be organized. When making the above decisions, managers are confronted with major implications that they have to deal with. They include capacity planning, layout facilities, equipment and work systems design.

Smooth production of goods and services can only be ensured when the above have been optimally met. In this paper, focus will be given to layout selection that will be discussed in detail in subsequent sections. Another bit of operations management that is critical to its success is the process selection and system design. This is a component of the transformation process discussed above that ensures the system runs smoothly.

It involves forecasting, product and service design and technological change on one hand and facilities and equipment, work design and layout on the other. The two parts are made possible through capacity planning and process selection in industrial processes.

In the free market setting, manufacturing and services comprise the biggest chunk of economic activities. The layout selection talked about earlier will concentrate on the services sector. However, for purposes of understanding, it’s imperative that a somewhat detailed discussion of both sectors is carried out to distinguish how elements of the transformation process apply. Additionally, there will be a lot of comparison n between the two in the analysis of layout selection in the services sector.

Manufacturing and service sectors

Since the advent of the industrial revolution, manufacturing has been the backbone of most economies. It still continues to support large sections of many global economies.

McCluskey says that though both economic operations (manufacturing and services) have a common target of satisfying client needs, they do as well have stark differences that make that are clearly highlighted in their transformation processes and that serve to dictate differentiation of capacity planning, layout facilities, equipment and work systems design (2004, p. 43). The differences include tangibility of products from operations, customization and contact with customers.

According to Stevenson manufacturers produce and deal in tangible products. The products are touchable and can be handled by customers (2005, p. 56). They include electronic appliances, vehicles, aircraft and different varieties of food. Services on the other and provide intangible products that customers cannot touch. They include hotel services, banking, education, and entertainment.

Another difference between manufacturing and services is the customization of the products. In manufacturing, products are normally standardized such that goods of the same kind are similar across the board. For instance, ten cans of Coca-Cola are exactly the same with not varied differentiation.

Service products on the other hand are normally customized according to the customers’ taste. Service products are tailored to meet specific client requirements hence they lack uniformity that is associated with manufactured products. For instance, different people have different preferences to hairstyles hence they will demand a style that conforms to their tastes, believes and budget.

There is minimal contact between manufacturers and consumers of products. It’s highly unlikely for instance; that a car owner will ever met owners of Toyota or General Motors or the people who help in assembling the cars. Customer contact in the service industry on the other hand is unavoidable.

Providers and workers in the service industry meet and interact with customers every day. According to Shogun & Madeheim, part of the satisfaction that the customers derive from the service is partly due to the face to face meeting that takes place between them and providers. It’s important to note that buying and consumption of services takes place simultaneously (1986, p. 108).

Service sector

In recent years, industrialized economies have experienced a drop in manufacturing activities. Instead, the service sector has exponentially grown and overtaken manufacturing as the biggest economic sector. Currently, the service sector is the biggest employer accounting for over 90% of jobs created.

Manufacturing comes in with only 12%. The analysis of service layout will entails through understanding of the context of service industry as used in contemporary economies. The word therefore carries as many meanings as within the service economy. According to Verma & Gurpal (2002, p.29), assert that any package must include benefits that are both explicit and implicit. For instance when one seeks a haircut, it amounts to supporting the facility (barber shop).

The customer may pay for “Mohawk” hair cut which is the facilitating good that the barber will perform which is the service. Verma & Gurpal therefore concludes that services are the perceptions and expectations that employers, customers and stakeholders have set up in their minds. The equipment layout and the procedures through which this service is dispensed in this setting is the service system. It’s also used in quality and standard maintainace (2002, p. 30).

In service sector, transformation involves rendering service to customers through the use of inputs available to the providers to outputs that technically are satisfied consumers. This is achieved through the correct use of resources. The resources may include and not limited to materials, labour and the consumer. Satisfaction in the form of psychological fulfillment and as well as time is the utility that customers derive from services.

For instance, the utility derived from eating at a fast food restaurant is time while on the other hand a young man taking a lady for a date at an elegant restaurant gives him/her psychological boost. Spacious shopping places like Wal-Mart attract millions of clients because the clients access many services under one roof. Managing operations in the services sector like in, manufacturing entails a lot of planning. The operations planning process of the services sector is however different from what manufacturing is.

Operations planning

Decisions made in operations planning in the service sector are more or less that in manufacturing. Starting or expanding business operations in the services sector requires managers to provide answers to the following questions. What types of services should they offer, and goods if necessary? They need to answer how they are going to provide the process, the location where the business is going to be operating from.

The location question also includes the way the facilities of the business will look like. Finally managers need to answer how they are going to forecast and meet demand for the services they are offering. When answering the above questions, operations managers in the services sector effectively develop a plan that defines the operations process, facilities, site selection, capacity planning and size and layout (Metters et al, 2006, p. 27).

Layout selection

Layout can be described as the division, structuring and configuration of the various departments and work centres that specifically aims at streamlining the movement of work through the production system. Equipment too is grouped under work centers and the movement of work included the customers and materials used in the transformation process.

Stevenson (2005, p. 59) says that layout is concerned with the arrangement of the people and machinery to ensure efficiency of the production process. Layout therefore can be described as the physical planning that is involved in the designing of the transformation process through which the product or service will be produced in the required output, quantity as well as quality.

For many operations managers in the services sector, layout and flow issues are the most important as far as general area design in the business environment is concerned. The importance stems from the fact that positioning of facilities relative to each other has a ripple effect on many operations aspects. The aspects that are as direct result of the effect of facility positioning are the distance that materials, information and customers have to travel during the operations chain.

In a general sense many business layout s including the services sector adopt designs that minimize the distance covered by the above factors.

Additionally, the layouts selected by managers in the service sector directly affect the quality of the services rendered. Many points of in the chain of operation where information and materials have to pass is likely to result in the annoyance or damage. Another important point that, managers have to consider when selecting layout for the service industry is its effect on throughput time. Generally long distances in the operations chain will result into longer times materials and information will pass through the operation.

Finally, managers must consider the space that materials, information and customers have to cover in the operations process. In any business environment, space is costly. The importance of every square meters cannot be overstated. All financial aspects must be considered when selecting layout and the location of the business. It’s therefore important if the operations managers try to save on costs by seeking compact layouts that are commensurate to the services sector.

Considering the above perspectives, McCluskey (2004, p. 49) says that layout and site selection in the service industry is a macro decision. It cannot be compared to site selection that is a micro decision. Layout and location in service industry is dependent on variables that include expansion, environmental impact and regulation from the government. More importantly however for service industry operators are variables such as accessibility, visibility, traffic density completion and availability of parking spaces.

It’s important to note that the terminology that is used in describing layout selection requirements for service providers is that same as that is used in manufacturing but with slightly different meanings depending on the operations sectors that is being described. Both services and manufacturing settings exhibit fixed position layouts, process layouts, cell layouts and product layouts which in this case may also be referred to as service layouts. These layout types will be discussed in detail in the context of services sector operations.

Fixed position layout

As the name suggests, resources used to produce services in the service sector travel to the customer or to the product instead of vice versa (Stevenson, 2005, p. 65).

In other words the consumers in the operations process hypothetically remain fixated in one position while materials and labour are availed in the customers’ location, throughout the service. It therefore means that if the consumer of the service needs to stay in one place, the providers have no choice but to relocate to the consumers’ location. Fixed layout is common in service industries such as pool cleaning, landscaping and in consulting for decors. Fixed layout is also evident in movie production.

It’s important to note that in the examples provided above the resources are concentrated in a fixed position. The simple reason behind this is the costs involved in moving the equipment and personnel to the client location is easier than moving the customer the resources location. However there are exceptions here the nature of the equipment used defines the fixed position such as barber shops, salons and hospitals that offer dialysis services.

The above factors come in handy when operations managers are deciding on the layout selection for services offered in the industry. The fixed position comes out as the simplest among the four mentioned earlier. There may be a bit of investment that is required to establish the layout but the operation costs are relatively lower compared to the other layouts.

Process layout

This layout is also referred to as the functional layout (Verma & Gurpal, 2002, p. 78). This is because the resources used in the transformation process are most of the time grouped together according to the function they are performing. Goods of similar functions are therefore grouped together.

In this layout, services that need different requirements move in different ways between the clusters of the resources used for transformation. The above feature accords process layout flexibility in that it can easily adopt different processing requirements. The process layout is presents complexity in managing it given that there are flows that are crossing each other that may sometimes exhibit irregular patterns.

The process applies in the services sector through the grouping together similar machines in the production of groups of services (McCluskey, 2004, p. 55). For instance service providers in a salon may group similar hair driers that offer the same service. Other service sector examples that exhibit the process layout include university lecture theaters and movie theatres.

Grouping of the resources that are used in the transformation process is critical in the service industry and in the selection of this particular layout. Groping or clustering makes it easier for service providers who in the above cases are universities and salon owners to provide the service to many clients at the same time.

Like all other layouts, process layout has many advantages that a service provider may want to consider in the selection process. The layout is well versed to handle many processing requirements simultaneously. This will especially come in handy in the service industry where time is of the essence. Another advantage that the service industry can take advantage of in the process layout is the fact that it is not prone to equipment failures.

Furthermore, the equipment used in this particular layout is not costly. These characteristics make it attractive especially in the cost saving measures that every service operators is always looking forward to. Finally, the process layout presents to service providers the platform to implement individual incentive plans. These are particularly important in boosting employee morale so that they can dispense high quality service to the operator’s consumers.

Cell layout

Users of this layout system in the service industry aims at reducing the complexities that are associated with process layouts. Transformation resources are divided into many small manageable groups that are used in any action in products or groups of products.

According to (Florence, 1984, p. 45), cellular production entails the arrangement of machines into a cell that makes it easier for the processing of services that have identical requirements. For instance all driers in a salon may be grouped together for a salon to offer only drier services. Group technology is a term that is commonly used in cellular layout designs. Equipment and/or transformation resources that have similar characteristics are grouped together in this layout design.

Product layout

According to Shubin & Madeheim (1986, p. 81) the convenience of service flow is the most important consideration that service providers take into account. The product layout emphasizes standardized processing operations that are aimed at producing smooth hitch free services rapidly and in high volumes.

The specific processing requirements of a service dictate the location of the facilities that are used in its production. Shubin & Madeheim (1986, p. 81) adds that the traditional assembly line presents the most basic idea of what product layouts should look like. According to Stevenson (2005, p. 68), the classic assembly layouts is the most common I many service industries for instance in back office settings for instance banks.

In the service industry according to (McCluskey, 2004, p. 75) the striking feature is the sequential arrangement of the equipment used in customer service. The machines are arranged in a sequence that depending on the service process that is sold. In service layouts in the service industry, there may be interruptions unlike in manufacturing. Services rendered during university registrations are atypical example of product layout.

It’s safe to assume that product layout is the most important in the service industry. Given that the products or the services that are dispensed in the service industry are don’t need to go through production chain similar to that in manufacturing, its therefore important that service industry operators give impetus to this layout.

Production layout has numerous advantages that service operators may want to take into consideration during the production process. They include a high rate of output that is as a result of the convenience that the layout emphasizes. In product layouts, the units’ cost is low compared to the other layouts. Additionally, labor specialization is high in the production layout.

Labor specialization helps in high quality service provision hence achievement of maximum utility on the part of the consumers. Due to the arrangement of the transformation resources in product layout in the service industry, there is high utilization of labor and equipment and low material handling cost. Additionally, there is consistent routine and scheduling in the layout that is critical in service industry operations.

Importance of layout selection decisions in the service industry

Decision making in the selection of service industry layouts is the most important point in the whole process. Stevenson (2005, p. 70) says that smart choices in layout decision making is important in that it helps in curbing inefficiencies in operations that for instance may result in high costs and bottle necks. Layout decisions are also critical in the safety management of the service industry. Good choices inn layout decisions will minimize the occurrence of accidents and other safety hazards within the work environment.

Decisions should also make sure the layout chosen meets environmental and other legal requirements as may be required by the territories where the firm(s) is operating.

Another very important aspect that any layout decision should make involves the ease with which changes in methods of production and equipment can be easily carried out. This will enable redesign of the layout plan as need be by the operators. The changes may be necessitated by fluctuations in demand and changes to the economic environment as well as government regulations.

When making layout decisions in the service sectors, it’s important that all the factors and the layout systems discussed in the above sections be taken into account (Shubin & Madeheim, 1986, p. 85). This is because layout selection in the service industry needs huge investments in terms of money, time and effort.

The service sector like manufacturing requires substantial capital and labor intensive investments. Whether financing is done through private equity or loan agreements with financial institutions, both parties, interest are too important to ignore. Considering the primary business aim is to minimize costs and make more profits any investments that are done in layout selection in the industry must be smart to avoid unnecessary changes that re likely to add to the business’s expenditure.

Closely related to the investment is the long term commitment that is needed in selecting these layouts. There is a lot of volatility that is associated with the service sector. Though research and analysis needs to be done before one settles on a layout for business in the service industry. The urge to change the layout is likely to drive investors with no long term commitments into changing business layouts that will result in huge losses that may not be recovered in the long term. Compounded with the volatility, the business may likely go under.

Many business experts agree that layout selection is important especially considering its impacts on the short-term operations in terms of cost and efficiency (Stevenson, 2005, p. 68).

Short term operations will more often than not determine the long term position of business. The service industry is not different. If layout selection is not properly done, the cost and efficiency on the transformation process will weigh down on the business whose ripple effect will be felt in the long term. The most likely impact of the above will be slow business or losses.

Service Sector Layout selections: points to note

The paper has highlighted different phenomena that are critical in operations management and that help in layout selection in the service industry. Layout selection in the service industry is different from manufacturing through there are few similarities. It’s important that for service providers to bear in mind that the primary functions of the service industries like all other industries is customer satisfaction.

Therefore any layout selection that they may make must ne commensurate with customers needs and must always guided by principles that are important in the service industry.

When selecting layouts for the industry, one of the most important factors for serviced providers to remember is that the industry more often than not deals in intangible products.

The products are customized according to customer preferences so as to achieve his/her needs. It should also to take into account the fact that the services produced in the service sectors are produced and consumed at the same time hence the layout should reflect that. Additionally, it’s important for service providers to bear in mind that any layout selection they make must uphold operational efficiency (Metters et al, 2006, p.23).

On many accounts service sectors operations managers are hoping to make decisions just like operations managers in the manufacturing sector. Therefore it’s important if they can spend some time learning from their manufacturing counterparts on which services they will offer, how to provide the services, the demand for the services and most importantly the location of the services that will encompass the facilities and site. Layout selection therefore does not have to be implicitly centered on service industry requirements.

Perhaps an interesting point to note in layout selection by service industry professionals is the fact that like manufacturers, they too can produce services by adopting the make to order approach where the providers will be availing services in exactly according to individual preferences or according to make to stock approaches where the serviced providers will be availing services for inventory.

For instance a fast food restaurant may produce fries that are made according to a generally accepted a standard. On the other hand they fast food restaurant can make fries according to an individual preference. Alternatively, hotel can avail a standard room service as well as custom room service.

Estimating capacity for a service business layout is somewhat more complicated than it is in manufacturing. This is because most of the services available in the economy are delivered on a need basis. Therefore estimating capacity for start up or expansion layout can prove to be a little tricky especially for inexperienced service providers or in cases where the plans were rushed without proper research.

Operations managers in service industries should bear in mind that contact with customers is inevitable. Given that different customers have different tastes that have to be met, it’s possible to deal with irate customers whose special demand may subject managers to considerable pressure.

The layout of the business should therefore provide for a mechanism through which quality is maximized and problem solving is dealt with in different levels. That way, managers are will be reprieved and will have ample time in concentrating in business management.

Personalized service is one of the most proffered marketing tools in the service industry. Scheduling workers therefore is needed to ensure personalized service is available to customers round the clock. Unlike in manufacturing, scheduling in the service industry is about difficult and complicated.

Scheduling the service sectors is done to ensure there are enough personnel to handle fluctuating demand from customers. One of the ways that this problem is handled is through layout selection and design. The layout should ensure it corresponds to the needs of both workers and customers in such a way that scheduling will be easy and personalized service is achieved.


Layout selection is one of the most important decisions any service operator can make. The long-term impacts the decision carries with it cannot be overstated. The layout should ensure that optimum relationship exists among the transformation variables which will lead to provision of quality services.

Additionally, it’s important that service producers realize the delicate nature of the service industry and the vulnerability that economic shocks present to it. This can be clearly demonstrated through the 2007 financial crisis where the services sector was worst hit. Again given the increasingly conscious and educated consumer, the layouts that service operators adopt should ensure they provide for the needed flexibility that will allow modification from time to time to suit demand, preferences and developments in the industry.


Florence. P. S. (1984). Investment, Location and Size of plant. London: Cambridge University Press.

McCluskey, M. (2004). How Mature is Your Service Operation? Supply Chain Management Review 8, no. 5 (2004): 17–20.

Metters, R. et al. (2006). Successful Service Operations Management. Mason: Thomson South-Western

Shubin J. A. & Madeheim, H. (1986). Plant Layout, New Delhi: Prentice Hall of India.

Stevenson, J.W. (2005). Operations Management. New York: McGraw Hill/Irwin.

Verma, J.C., & Gurpal S. (2002). Small Business and Industry – A handbook for Entrepreneurs. New Delhi: Sage

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