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Location Planning and Analysis

8. Location Planning and Analysis. Learning Objectives. List some of the main reasons organizations need to make location decisions. Explain why location decisions are important. Discuss the options that are available for location decisions.

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Location Planning and Analysis

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  1. 8 Location Planning and Analysis

  2. Learning Objectives • List some of the main reasons organizations need to make location decisions. • Explain why location decisions are important. • Discuss the options that are available for location decisions. • Describe some of the major factors that affect location decisions. • Outline the decision process for making these kinds of decisions. • Use the techniques presented to solve typical problems.

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

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

  5. Making Location Decisions • Decide on the criteria • Identify the important factors • Develop location alternatives • Identify general region • Identify a small number of community alternatives • Identify site alternatives • Evaluate alternatives and make selection

  6. Location Decision Factors Community Considerations Regional Factors Multiple Plant Strategies Site-related Factors 8-6

  7. Location of raw materials Location of markets Labor factors Climate and taxes Regional Factors 8-7

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

  9. Site-Related Factors • Land • Transportation • Environmental • Legal

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

  11. Service and Retail Locations • Manufacturers – cost focused • Service and retail – revenue focused • Traffic volume and convenience most important • Demographics • Age • Income • Education • Location, location, location • Good transportation • Customer safety

  12. Comparison of Service and Manufacturing Considerations Table 8.2

  13. Global Locations • Reasons for globalization • Benefits • Disadvantages • Risks • Global operations issues

  14. Globalization • Facilitating Factors • Trade agreements • Technology • Benefits • Markets • Cost savings • Legal and regulatory • Financial

  15. Globalization • Disadvantages • Transportation costs • Security • Unskilled labor • Import restrictions • Criticisms • Risks • Political • Terrorism • Economic • Legal • Cultural

  16. Table 8.3

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

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

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

  20. Example 1: Solution

  21. Example 1: Solution $(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)

  22. 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

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