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Location Planning and Analysis: Factors, Strategies, and Decision-Making Process

This chapter explores the importance of location decisions in business, considering factors such as marketing strategy, cost, growth, and resource depletion. It discusses the nature of location decisions, their impact on investments and operations, and the process of making location decisions. The chapter also examines various location decision factors, including community considerations, regional factors, site-related factors, and multiple plant strategies. Finally, it presents trends in locations and techniques for evaluating and comparing different locations.

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Location Planning and Analysis: Factors, Strategies, and Decision-Making Process

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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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