Chapter 18 Location, Facilities, and Layout

1. Entrepreneurship and Small Business Management Chapter 18 Location, Facilities, and Layout

2. Ch. 18 Performance Objectives • Understand the importance of the physical location of a business. • Know the key factors to consider in the location decision. • Learn how location needs differ by business type. • Determine locations via multiple methods.

3. Ch. 18 Performance Objectives(continued) • Explore the design of facilities and their layouts. • Recognize the special considerations for home-based businesses. • Describe location factors for Web-based businesses.

4. Why Is Location Important? • Determines access to markets • Affects essential portions of your cost structure including transportation and distribution • Impacts customer satisfaction and overall levels of risk and profitability • Can make the difference between business success and failure

5. Factors in Location Decision • Access for customers • Access to suppliers • Climate & geography • Convenience • Cost of facilities • Economic conditions & business incentives • Demographics • Regulations & laws • Labor pool • Proximity to competitors • Visibility

6. Location Needs Differ byBusiness Type Manufacturers Wholesalers Economical distribution costs Proximity to customers and suppliers Tangible costs of facilities Incentives and regulations • Customer service • Facilities and distribution costs • Skilled labor pool • Access to suppliers • Laws and regulations

7. Location Needs Differ byBusiness Type (continued) Retailers Service and Professional Needs vary considerably Customer convenience and accessibility Demographics Image/positioning Safety/security factors • Drawing power • Demographics • Traffic generators • Competitor locations • Selling space needed • Rental costs

8. Evaluating Locations • Simplest way—select location you know • Factor-rating method—prioritize and weight criteria with these steps: • Develop a list of critical factors. • Determine “weight” of each factor relative to importance. • Create a measurement scale. • Score each location for each factor using scale. • Multiply factor weight times factor score (for each factor in each location). • Compare sums of locations’ weighted factors.

9. Evaluating Locations (continued) • Use geographic information systems which include demographic data, maps, topographic data, major transportation routes, and so on. • Use market research to gather demographic, psychographic, geographic, and competition data.

10. Evaluating Locations (continued) • Location breakeven analysis—calculates and compares fixed and variable costs of each location • Center-of-gravity method—used to locate a distribution center by judging: • Locations of the destinations • How much product will ship to destinations • Frequency of delivery • Cost of delivery

11. Facilities Design and Layout • Manufacturing, warehousing, and distribution facilities need space to operate cost effectively. • Retail facilities must draw maximum revenue from design and layout. • Service and professional firms have individual facility requirements based on business type.

12. Facilities Factors forManufacturers/Distributors • Capacity for efficient movement of materials, equipment, and people • Flexibility to adapt to changing needs • Loading docks for deliveries and shipments • Environment conducive to work requirements • Ability to include vital control regulators • Parking for commercial, employee, and visitor vehicles • Adequate utility services to the building • Security and safety

13. Types of Manufacturing Layouts • Product layouts—appropriate for continuous, mass-production processes • Process layouts—functional layouts that work well where there are common procedures for varied products • Fixed-position layouts—used for production of large objects where materials and teams are brought to a single location

14. Facilities Factors for Retailers • Appropriate selling area and configuration of that space • Permission to complete necessary changes (or improvements to be done by landlord) • Space for offices, storage, restrooms, deliveries, special needs, etc. • Signage for rules/regulations • Adequate customer parking • Lighting and security

15. Retail Store Design and Layout • Building exterior, window displays and cleanliness, and signage all send messages to customers. • Inside layout should be designed to entice customers to purchase. • Product placement • Type of shopping experience desired for the customer

16. Considerations forHome-Based Businesses • Investigate zoning ordinances, deed restrictions, and civic association rules. • Determine how to divide your business area from your family’s living area. • Plan for appropriate business furnishings and a separate telephone line. • Consider if customers will prefer to visit an office building or store, instead of a home.

17. Location Factors forWeb-Based Businesses • The physical space needed for operations could be as small as a one-room office. • Location is more a function of personal preference, cost, or proximity of vendors. • Location, facility, and layout decisions should minimize distribution costs and time. • Some technology-based companies prefer to cluster with similar firms.