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CHAPTER. 8. Location Planning and Analysis. Need for Location Decisions. Marketing Strategy Cost of Doing Business Growth Depletion of Resources. Nature of Location Decisions. Strategic Importance Long term commitment/costs Impact on investments, revenues, and operations Supply chains

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  1. CHAPTER 8 Location Planning and Analysis

  2. Need for Location Decisions • Marketing Strategy • Cost of Doing Business • Growth • Depletion of Resources

  3. Nature of Location Decisions • Strategic Importance • Long term commitment/costs • Impact on investments, revenues, and operations • Supply chains • Objectives • Profit potential • No single location may be better than others • Identify several locations from which to choose • Options • Expand existing facilities • Add new facilities • Move

  4. Making Location Decisions • Decide on the criteria • Identify the important factors • Develop location alternatives • Evaluate the alternatives • Make selection

  5. Location Decision Factors Community Considerations Regional Factors Site-related Factors Multiple Plant Strategies

  6. Regional Factors • Location of raw materials • Location of markets • Labor factors • Climate and taxes

  7. Community Considerations • Quality of life • Services • Attitudes • Taxes • Environmental regulations • Utilities • Developer support

  8. Site Related Factors • Land • Transportation • Environmental • Legal

  9. Multiple Plant Strategies • Product plant strategy • Market area plant strategy • Process plant strategy

  10. Comparison of Service and Manufacturing Considerations Table 8.2

  11. Trends in Locations • Foreign producers locating in U.S. • “Made in USA” • Currency fluctuations • Just-in-time manufacturing techniques • Microfactories • Information Technology

  12. Table 8.3

  13. Evaluating Locations • Cost-Profit-Volume Analysis • Determine fixed and variable costs • Plot total costs • Determine lowest total costs

  14. Location Cost-Volume Analysis • Assumptions • Fixed costs are constant • Variable costs are linear • Output can be closely estimated • Only one product involved

  15. Example 1: Cost-Volume Analysis Fixed and variable costs for four potential locations

  16. Example 1: Solution

  17. $(000) 800 700 600 500 400 300 200 100 0 D B C A A Superior C Superior B Superior 0 2 4 6 8 10 12 14 16 Annual Output (000) Example 1: Solution

  18. Evaluating Locations • Transportation Model • Decision based on movement costs of raw materials or finished goods • Factor Rating • Decision based on quantitative and qualitative inputs • Center of Gravity Method • Decision based on minimum distribution costs

  19. Design/Facility STA04 Layout choices at St. Alexius Hospital

  20. Flow Charts/Assessment BP3 Example, Tri State Industries

  21. Team/Visual/System PI6 Interview at McDonalds

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