1 Facility Location Customer Service Inventory Transport Location

2 Importance of Location Gives structure to the network Significantly affects inventory and transportation costs Impacts on the level of customer service to be achieved

3 Facility location decisions Decisions Number of facilities Location of facilities Size of facilities Facilities Plants, ports, vendors, warehouses, DC, retail outlets, service centers

Classifying location decisions Driving force (critical factor : trafic,labor rate, transport cost, ….etc ) Number of facilities Discrete vs. Continous choices Data aggregation Time horizon.

13-6 Weber’s Classification of Industries CR (2004) Prentice Hall, Inc.

7 Total Cost Outbound transportation cost Inbound transportation cost Tapered transportation rates force location to the source of materials OR to the market Hoover ’ s (1957) tapered transportation rates minimum costs at either production point or market point Material source Market

8 Central questions How many warehouses (or other facilities) should there be in the logistics network? How large should they be, and where should they be located? Which customers should be assigned to a warehouse? Which warehouse should be assigned to each plant, vendor or port? Which products should be stocked in each warehouse? Which products should be shipped directly from plants, vendors, or ports to customers?

9 The need for logistics network redesign Changing customer service requirements Shifting locations of customer and/or supply markets Change in corporate ownership Cost pressures Competitive capabilities Corporate organizational change

8-10 Location Decision Factors Regional Factors Site-related Factors Multiple Plant Strategies Community Considerations

8-11 Location of raw materials Location of markets Labor factors Climate and taxes Regional Factors

8-12 Quality of life Services Attitudes Taxes Environmental regulations Utilities Developer support Community Considerations

8-13 Land Transportation Environmental Legal Site Related Factors

8-14 Product plant strategy Market area plant strategy Process plant strategy Multiple Plant Strategies

8-15 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

8-16 Comparison of Service and Manufacturing Considerations Manufacturing/DistributionService/Retail Cost FocusRevenue focus Transportation modes/costsDemographics: age,income,etc Energy availability, costsPopulation/drawing area Labor cost/availability/skillsCompetition Building/leasing costsTraffic volume/patterns Customer access/parking Table 8.2

8-17 Trends in Locations Foreign producers locating in U.S. “Made in USA” Currency fluctuations Just-in-time manufacturing techniques Microfactories Information Technology

8-18 Global Locations Reasons for globalization Benefits Disadvantages Risks Global operations issues

8-19 Globalization Facilitating Factors Trade agreements Technology Benefits Markets Cost savings Legal and regulatory Financial

8-20 Globalization Disadvantages Transportation costs Security Unskilled labor Import restrictions Criticisms Risks Political Terrorism Legal Cultural

8-21 Table 8.3