Location Stages in Facility Location Decisions  Determining the need for a new facility  Identifying the relevant factors in selecting a location 

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Presentation transcript:

Location

Stages in Facility Location Decisions  Determining the need for a new facility  Identifying the relevant factors in selecting a location  Selecting a general location  Selecting a site

Determining the Need for a New Factory  Change in demand, up or down  New product  Changes in the economics of the business, e.g. labour costs, material costs, material sources, supporting industries  Government action, I.e. on environmental grounds

Determining the Need for a New Factory Plant Size Cost Production Costs Transport Costs Total Costs Ideal Plant Size

Stages in Facility Location Decisions  Determining the need for a new facility  Identifying the relevant factors in selecting a location  Selecting a general location  Selecting a site

Strategic Considerations in Facility Location  Access to markets, ie EU  Nissan, Toyota & Honda invested $2.6 billion in UK  Responsiveness to Customers  Access to technology

Location Decisions - Manufacturing  Favorable Labour Climate  Proximity to Markets  Quality of Life  Proximity to Suppliers  Proximity to Parent Company  Utilities, Taxes, and Real Estate Costs

Location Decisions - Services  Proximity to Customers  Transportation Costs and Proximity to Markets  Location of Competitors  Site-specific Factors

Locating a Single Facility  On-site expansion +Keeps management together +Reduces construction time & costs +Avoids splitting up operations -Diseconomies of scale -Poor materials handling -Increasingly complex production control -Lack of space

Locating a Single Facility  Building a new plant +Reduced risk of complete loss of production due to accident +Escape unproductive labour +Modernise with new machinery +Reduce transport costs

Locating a Single Facility  Relocate ( move out of existing facility ) -Relocating firms tend to be small -They don’t move very far -Often single-plant companies needing more space and needing to redisign their production processes and layouts

Location Health-Watch

Location Health-Watch North

Location Health-Watch Location FactorWeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105

Location Health-Watch North Location Factor WeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 Weighted Score

Location Health-Watch North Location Factor WeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) Weighted Score

Location Health-Watch North Location Factor WeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) + (20 x 3) Weighted Score

Location Health-Watch North Location FactorWeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) + (20 x 3) + (20 x 3) Weighted Score

Location Health-Watch North Location FactorWeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) + (20 x 3) + (20 x 3) + (15 x4) + (10 x 1) + (10 x 5) Weighted Score

Location Health-Watch North Location FactorWeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=340 Weighted Score

Location Health-Watch

Location Health-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North y (miles) x (miles) East State College B (175, 100)

Location

Location

Location

Location

Location

LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North y (miles) x (miles) East State College B (175, 100) miles

LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North y (miles) x (miles) East State College B (175, 100) miles Rectilinear distance d AB = | x A - x B | + | y A - y B |

LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North y (miles) x (miles) East State College B (175, 100) miles Rectilinear distance d AB = | | + | |

LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North y (miles) x (miles) East State College B (175, 100) miles Rectilinear distance d AB = | | + | |

LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North y (miles) x (miles) East State College B (175, 100) miles Rectilinear distance d AB = 210 miles

Location Health-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North y (miles) x (miles) East State College B (175, 100) miles 210 miles

Location Health-Watch

Location Health-Watch North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles)

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)2

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)2

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = 3

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = = 0

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = = = 0

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = 36 2 * 3 = 6

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = 36

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = 36 E(8, 5)10

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = 36 E(8, 5) = = = 0.5

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = 36 E(8, 5) = * 3 = 30

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5) = 36 E(8, 5) = 330

Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Tractld A6 B25 C0 D21 E30 F80 G77 Total239

Location Health-Watch (b) Locate at F (7, 2) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles)

Location Health-Watch (b) Locate at F (7, 2) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles)

Location Health-Watch (b) Locate at F (7, 2) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Tractld A14 B25 C40 D14 E40 F0 G35 Total168

Location Health-Watch Alternative Locations North x (miles) East y (miles)

Location Health-Watch Alternative Locations North x (miles) East y (miles)

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles)

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)2 B(2.5, 2.5)5 C(5.5, 4.5)10 D(5, 2)7 E(8, 5)10 F(7, 2)20 G(9, 2.5)14

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)25 B(2.5, 2.5) C(5.5, 4.5) D(5, 2) E(8, 5) F(7, 2) G(9, 2.5)

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2) E(8, 5) F(7, 2) G(9, 2.5)

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2) E(8, 5) F(7, 2) G(9, 2.5)

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2)73514 E(8, 5) F(7, 2) G(9, 2.5)

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2)73514 E(8, 5) F(7, 2) G(9, 2.5) Totals Totals

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2)73514 E(8, 5) F(7, 2) G(9, 2.5) Totals Totals x * = y * =

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2)73514 E(8, 5) F(7, 2) G(9, 2.5) Totals Totals x* = y* =

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2)73514 E(8, 5) F(7, 2) G(9, 2.5) Totals Totals x * = y * =

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2)73514 E(8, 5) F(7, 2) G(9, 2.5) Totals Totals x* = 6.67 y* = 2.96

Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East y (miles) x* = 6.67 y* = 2.96

Location Break-Even Analysis

Location Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30

Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30 For 20,000 units Total Variable Costs

Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30 For 20,000 units Total Variable Costs $62 (20,000)

Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30 For 20,000 units Total Variable Costs $62 (20,000) = $1,240,000

Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62$1,390,000 B$300,000$38 C$500,000$24 D$600,000$30 For 20,000 units Total Variable Costs $62 (20,000) = $1,240,000

Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62$1,390,000 B$300,000$38 C$500,000$24 D$600,000$30 For 20,000 units Total Variable Costs $62 (20,000) = $1,240,000

Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62$1,390,000 B$300,000$38$1,060,000 C$500,000$24$ 980,000 D$600,000$30$1,200,000 For 20,000 units

Location Q (thousands of units) Annual cost (thousands of dollars) Break-Even Analysis Fixed CostsTotal Costs Communityper Year(Fixed + Variable) A$150,000$1,390,000 B$300,000$1,060,000 C$500,000$ 980,000 D$600,000$1,200,000

Location Q (thousands of units) Annual cost (thousands of dollars) Break-Even Analysis Fixed CostsTotal Costs Communityper Year(Fixed + Variable) A$150,000$1,390,000 B$300,000$1,060,000 C$500,000$ 980,000 D$600,000$1,200,000 A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980)

Location A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) A best Break-even point Q (thousands of units) Annual cost (thousands of dollars) Break-Even Analysis Fixed CostsTotal Costs Communityper Year(Fixed + Variable) A$150,000$1,390,000 B$300,000$1,060,000 C$500,000$ 980,000 D$600,000$1,200,000

Location Break-Even Analysis B best Break-even point A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) A best 6.25 Break-even point Q (thousands of units) Annual cost (thousands of dollars) Fixed CostsTotal Costs Communityper Year(Fixed + Variable) A$150,000$1,390,000 B$300,000$1,060,000 C$500,000$ 980,000 D$600,000$1,200,

C best (20, 980) B best Break-even point Location A D B C (20, 1390) (20, 1200) (20, 1060) A best 6.25 Break-even point Q (thousands of units) Annual cost (thousands of dollars) Break-Even Analysis 14.3 Fixed CostsTotal Costs Communityper Year(Fixed + Variable) A$150,000$1,390,000 B$300,000$1,060,000 C$500,000$ 980,000 D$600,000$1,200,000

Location Break-Even Analysis Q (thousands of units) A best B bestC best Break-even point A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) Annual cost (thousands of dollars) Break-even point