1. Managing Entrepreneurship: Small & Medium Scale Business
CHOICE OF TECHNOLOGY & SELECTION OF SITE

2. SCOPE Introduction Product/Service Design Technology Determination
Selection of Site

3. OBJECTIVES By the end of the session, you will be able to:
Know why product or service design is important to any organisation,
Understand the various stages involved in product design,
Identify major aspects that determine process,
Identify some of the criteria used to evaluate process,
Explain why location decisions are important,
Learn the general factors involved in determining the location of a business, and
Use the techniques presented to solve typical problems.

4. Importance of Technology in business
Small to large scale enterprises today depend on technology & computers to help them :
With their business needs ranging from Point of Sales systems,
Information management systems capable of handling all kinds of information such as employee profile, client profile,
Accounting and tracking,
Automation systems for use in large scale production of commodities,
Package sorting,
Assembly lines, and even
For marketing and communications through usage of internet

5. Need for Product Design
Why is good product and service design important?
What are the stages in product and service design?

6. Importance of Product Design
Product Liability:
A manufacturer is liable for any injuries or damages caused by a faulty product either because of poor workmanship or design. This aspect, known as product liability, provided under Consumer Protection Act, 1986 is a strong incentive for design improvements
The choice of product essentially determines the technology of production.

7. PRODUCT/SERVICE DESIGN

8. Collection of Ideas
Internal env
R&D
Production
Marketing
Employees
External Env
Consumers
Investors
Competitors
Vendors
Concept Generation
Ideas from customers formally through Marketing activities
Listening to customers – on a day-to-day basis
Ideas from staff – Especially those who meet customers every day
Ideas from research and development
Ideas from competitor activity – For example, reverse engineering
New Product Development
(General Specification)
Feasibility Study

9. Final Design Specification
Concept
Final Design Specification
Large no. of design options
Choice & Evaluation ‘Screens’
One Design

10. Points to be considered in product design finalization
Standardisation,
Reliability,
Product simplification,
Modular design,
Reproducibility,
Maintainability,
Consumer quality level,
Value analysis are important considerations in evaluating designs

11. Points to be considered in Service design finalization
Services offered,
Level of service and
Service availability

12. The product and service design activity is a process in itself
Transformed resources, e.g.
•Technical information
• Market information
• Time information
The product/service design process whose performance is measured by its
• Quality
• Speed
• Dependability
• Flexibility and
• Cost
Fully specified products and services
Inputs
Output
Transforming resources, e.g.
•Test and design equipment
• Design and technical staff

13. Feasibility Study for new product
Market appraisal
Demand
Supply position
Structure of competition
Cost structure
Imports and exports
Consumer behaviour
Distribution channels
Technical appraisal
Materials and inputs
Production technology
Product mix
Equipment choice
Location and site
Layout
Work schedule
Financial appraisal
Investment outlay
Means of financing
Cost of capital
Projected profitability
Breakeven point
Cash flows
Investment worthiness
Economic appraisal
Economic costs and benefits
Impact on society
Self sufficiency
Employment

14. Feasibility Study Prototype Testing - Technical/ Marketing
Preliminary Product Design

15. Product Design Pre Production Run Manufacturing
Technical Specification
Detailed Product Design
Functional Design
Market quality level
• Materials selection
• Reliability
• Maintainability
• Warranty, guarantee
• Patents, copyright, trademark
Form Design
Physical appearance
– colour
– style
– fashion
• Personal identification
• Packaging
Production Design
Product simplification
• Product diversification
• Standardisation
• Modularity
• Value Analysis
Pre Production Run
Manufacturing

16. The interrelationship of design of products/services
Products and services should be designed in such a way that they can be created effectively.
Product/service design has an impact on the process design and vice versa.
Processes should be designed so they can create all products and services which the operation is likely to introduce.
In manufacturing operations, overlapping the activities of product and process design is beneficial.
In most service operations the overlap between service and process design is implicit in the nature of service.

17. TECHNOLOGY DETERMINATION
Process Decision based on Make / Buy.
Factors influencing make or buy decision :
Idle facilities
Plant capabilities (Product quality, quantity and service, personnel, equipment, future capabilities)
Economic advantage
Suppliers reliability (Quality, quantity, service, schedule)
Trade relations
Employment stabilisations
Trade union views
Alternative resource uses
Legal restrictions (Patents)

18. TECHNOLOGY DETERMINATION
Technology can be defined as a combination of labour, machines, processes, energy and other inputs directly involved in the transformation of materials into products.
The major aspects that determine production process are technological (technological feasibility) and sequential considerations (improvement in processes to improve efficiency)

19. Points to consider for service design
Width & Depth of the service line
Financial Resources
Level of service (considering ability to supply the services against the need to operate economically)
Duration of providing service (specific days/ timings)
Good Location

20. Criteria for evaluating production process and equipment selection
Product/service requirements,
Technological feasibility,
Financial considerations,
Labour and skill requirements,
Output and capacity needs,
Compatibility with existing facilities,
Flexibility,
Raw material requirements,
Size and weight limits imposed by plant or building,
Maintainability, and
Spare parts inventory requirements.

21. Selection of Site

22. SITE SELECTION Factors to be considered while selecting Location:
Minimise Total cost of production & distribution
Provide an opportunity for further growth and expansion
Personal Factors / Choice
Economics (Purchasing power of community, number of people employed in the area, per capita retail sales, etc.)
Competition,
Geographic considerations, and
Local laws and regulations

23. Steps for Selecting Location
Determine the criteria that will be used to evaluate location alternatives, such as, increased revenues or community service,
Identify factors that are important, such as, location of markets or customers, materials and destination,
Develop location alternatives.
Identify the general region for a location.
Identify a small number of community site alternatives.
Evaluate the alternatives and make a selection.

24. Factors to be considered for site location
Factors affecting location decision
Region/ Country
Community
Site

25. Locational Factors Country factors Region factors Local factors
Government rules, attitudes, political risk, incentives
Culture & economy
Market location
Labor availability, attitudes, productivity, and cost
Availability of supplies, communications, energy
Exchange rates and currency risks
Attractiveness of region (culture, taxes, climate, etc.)
Labor, availability & costs Costs and availability of utilities
Environmental regulations of state and town
Government incentives Proximity to raw materials & customers
Land/construction costs
Site size and cost
Air, rail, highway, and waterway systems
Zoning restrictions
Nearness of services / supplies needed
Environmental impact issues

26. Locational Problems Single Facility Location Multi facility Location
Location of competitive retail store
Emergency Service Location

27. Single Facility Location
Assuming that revenue, costs and other facility characteristics of the firm do not depend on the location of other facilities of the firm or competitors. Single facility location situation can be evaluated by qualitative factor rating and locational break-even analysis
The process of selecting a new facility location involves a series of steps.
Identify the important location factors and categorize them as dominant or secondary.
Consider alternative regions; then narrow the choices to alternative communities and finally to specific sites.
Collect data on the alternatives.
Analyze the data collected, beginning with the quantitative factors.
Bring the qualitative factors into the evaluation. The site with the highest weighted score is best.

28. Health-Watch Preference Matrix
A new medical facility, Health-Watch, is to be located in Erie, Pennsylvania.
The following table shows the location factors, weights, and scores (1 = poor, 5 = excellent) for one potential site.
Location Factor Weight Score (W)(S)
Total patients per month
Facility utilization
Average time per emergency trip
Expressway accessibility
Land and construction costs
Employee preference
Weighted Score 340

29. Example X Y Z
WS =
WS =
WS =

30. Using Break-Even Analysis
Break-even analysis can help a manager compare location alternatives on the basis of quantitative factors that can be expressed in terms of total cost.
Determine the variable costs and fixed costs for each site.
Plot the total cost lines—the sum of variable and fixed costs—for all the sites on a single graph
Identify the approximate ranges for which each location has the lowest cost.
Solve algebraically for the break-even points over the relevant ranges.

31. Example
Calculate the breakeven point for Banquet X with the following data –
Fixed Cost – Rs 2,50,000 per month
Average Sales price of an event – Rs 2,00,000
Variable cost – 40% of sales
Formula
1)Breakeven in Units = Fixed Cost / ASP of event – Variable cost
2) Breakeven in terms of Money = Breakeven in Units X ASP

32. © 2007 Pearson Education
Step 1. Plot the total cost curves for all the communities on a single graph. Identify on the graph the approximate range over which each community provides the lowest cost.
Fixed Costs Total Costs
Community per 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
C best
(20, 980)
B best
Break-even point A D B C
(20, 1390)
(20, 1200)
(20, 1060)
A best
6.25
Break-even
point
Q (thousands of units)
200
400
600
800
1000
1200
1400
1600 2 4 6 8 10 12 14 16 18 20 22
14.3
Annual cost (thousands of dollars)
Beyond the second break-even point, C will remain the best alternative.

33. Profit
Break – Even Point 6 5 4 3 2 1
Sales in Rupees
Fixed Cost
2.5 Lakhs
Loss
No. of events in a month

34. Break-Even Solution (A) (B)
Step 2. Using break-even analysis, calculate the break-even quantities over the relevant ranges. If the expected demand is 15,000 units per year, what is the best location?
(A) (B)
$150,000 + $62Q = $300,000 + $38Q
Q = 6,250 units
(B) (C)
$300,000 + $38Q = $500,000 + $24Q
Q = 14,286 units

35. Multi Facility Location
In this type of location problem, total distribution costs and perhaps total production costs will be affected by the location decision. This problem is usually formulated by considering a production distribution network of plants and warehouses with criterion of minimising a transportation cost, subject to satisfying overall supply and demand requirements.
It utilizes linear programming to minimize the cost of shipping products from two or more plants, or sources of supply, to two or more warehouses, or destinations

36. Example
An electronics manufacturer must expand by building a second facility. The search has been narrowed to four locations, all of which are acceptable to management in terms of dominant factors. Assessment of these sites in terms of seven location factors is shown below.

37. Example
Based on the weighted scores shown below, location C is the preferred site, although location B is a close second.

38. Example
The operations manager for Mile-High Beer has narrowed the search for a new facility location to seven communities. Annual fixed costs (land, property taxes, insurance, equipment, and buildings) and variable costs (labor, materials, transportation, and variable overhead) are shown below.

39. Example
Which of the communities can be eliminated from further consideration because they are dominated (both variable and fixed costs are higher) by another community?
Aurora and Colorado Springs are dominated by Fort Collins, as both fixed and variable costs are higher for those communities than for Fort Collins. Englewood is dominated by Golden.

40. Mile-High Beer
Using break-even analysis, calculate the break-even quantities to determine the range over which each community provides the lowest cost.
Breakeven for Ft. Collins/Boulder
Breakeven for Boulder/Denver
Plot the total cost curves for all remaining communities on a single graph. Identify on the graph the approximate range over which each community provides the lowest cost.

41. Mile-High Beer Boulder Break- even point Fort Collins 2.67 Break-even
Barrels of beer per year (in hundred thousands) 10 8 6 4 2
Location cost (in millions of dollars)
Denver
Golden
Fort Collins is best for low volumes, Boulder for intermediate volumes, and Denver for high volumes
This is Figure 9.10 to support Solved Problem 2.

42. Location of competitive retail stores
Revenue is proportional to the size of the facility and inversely proportional to the time the customer has to travel to the facility.
The basic statement of the retailing model developed by D.L. Huff is EI = PijCI
where
Eij = expected number of customers at I likely to travel to shopping centre j.
Ci = number of customers at i.
Pij = probability of a customer at point of origin I travelling to shopping centre j.
Pij is a function of the size of shopping centre j, the travel time for a customer at point of origin I to travel to shopping centre j, and the effect of travel time on various types of trips.

43. Emergency Service Location
The locations of the two existing EMS facilities in Tyler, Texas are shown on the following map.
The population density for each of the city’s tracts is also shown. The darker red areas have up to 5,000 people per square mile.
The southeast part of Tyler, census tract 18.03, has experienced rapid growth, with its population almost doubling in the last twelve years.
The residents of this tract have complained that it takes too long for the EMS vehicles to reach them.

45. A general guideline for locating EMS facilities in urban areas is that an EMS vehicle should be able to answer 95 percent of its calls within 10 minutes in tracts that have a population density of 1,000 people per square mile.
Census tract 7, on the west side of the city with a population density of 967 people per square mile, should be included in the study as well.
Thus, the census tracts that are as dark as or darker than census tract 7, should be within a 10-minute drive time zone of an EMS facility.
Where should EMS locate three facilities so as to meet its coverage goals for Tyler?

46. 10 minute response zones
Census Track 7
With MapPoint, it is easy to calculate a drive time zone by just selecting the pushpin and going under “Tools” on the menu bar to select drive time zone in terms of the number of minutes of drive time.
Some areas not in coverage zone.

47. Emergency Services
Emergency services like fire, police, and ambulance.
These problems often have minimum response time as a decision criterion, since time is of the essence in delivering emergency service.
These problems illustrate location decisions where a measure of service, such as, response time, is the most important location criterion.
Emergency response time can be estimated for different location sites by using simulation models. These models permit the incorporation of factors such as density of calls, speed of travel, despatching rules, and number of vehicles available

48. Thank you!