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Location Planning and Analysis
8 Location Planning and Analysis
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Learning Objectives List some of the main reasons organizations need to make location decisions. Explain why location decisions are important. Discuss the options that are available for location decisions. Describe some of the major factors that affect location decisions. Outline the decision process for making these kinds of decisions. Use the techniques presented to solve typical problems.
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Need for Location Decisions
Marketing Strategy Cost of Doing Business Growth Depletion of Resources
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Nature of Location Decisions
Strategic Importance of location decisions Long-term commitment/costs Impact on investments, revenues, and operations Supply chains Objectives of location decisions Profit potential No single location may be better than others Identify several locations from which to choose Location Options Expand existing facilities Add new facilities Move
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Making Location Decisions
Decide on the criteria Identify the important factors Develop location alternatives Identify general region Identify a small number of community alternatives Identify site alternatives Evaluate alternatives and make selection
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Location Decision Factors
Community Considerations Regional Factors Multiple Plant Strategies Site-related Factors 8-6 6
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Regional Factors Location of raw materials Location of markets
Labor factors Climate and taxes 8-7
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Community Considerations
Quality of life Services Attitudes Taxes Environmental regulations Utilities Developer support
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Site-Related Factors Land Transportation Environmental Legal
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Multiple Plant Strategies
Product plant strategy Market area plant strategy Process plant strategy
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Service and Retail Locations
Manufacturers – cost focused Service and retail – profit/revenue focused Traffic volume and convenience most important Demographics Age Income Education Location, location, location Good transportation Customer access/parking/safety
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Comparison of Service and Manufacturing Considerations
Table 8.2 Manufacturing/Distribution Service/Retail Cost Focus Revenue Focus Transportation modes/costs Demographics: age, income, etc Energy availability/costs Population/drawing area Labor cost/availability/skills Competition Building/leasing costs Traffic volume/patterns Customer access/parking
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Global Locations Reasons for globalization Benefits Disadvantages
Risks Global operations issues
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Globalization Facilitating Factors Benefits Trade agreements
Technology Benefits Markets Cost savings Legal and regulatory Financial New perspectives, ideas and solutions
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Globalization Disadvantages Risks Transportation costs Security
Unskilled labor Import restrictions Criticisms Risks Political Terrorism Economic Legal Cultural
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Issues For Foreign Locations
Table 8.3
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Evaluating Locations Cost-Profit-Volume Analysis
Determine fixed and variable costs Plot total costs Determine lowest total costs
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Location Cost-Volume Analysis
Assumptions Fixed costs are constant Variable costs are linear Output can be closely estimated Only one product involved
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Example 1: Cost-Volume Analysis
Fixed and variable costs for four potential locations
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Example 1: Solution
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Example 1: Solution 800 700 600 500 400 300 200 100 Annual Output (000) $(000) 8 10 12 14 16 6 4 2 A B C B Superior C Superior A Superior D
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Evaluating Locations Transportation Model Factor Rating
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
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