1. Facility Location
Chapter #4

2. Facility Location Decision
Starbuck focuses on densely populated areas for its 10,000 stores, e.g. it has 124 stores in 24 square mile area of Manhattan, NYC.
Toyota has Manufacturing and assembly plant in 12 different countries.
3M has moved a part of it manufacturing unit including R&D in Texas where temperature is more.
Toys ‘R’ Us open a new store in Tokyo Japan.
Disney world chooses Paris, to start its operations in France.
National Bank of Pakistan has more than 900 branches in Pakistan.
BMW has 16 manufacturing facilities all around the world, 5 in the US.

3. Facility Location
Refers to the process of determining geographic sites for a firm’s operations.
Location choice can be critically important for firm’s performance.
Location choice have a profound impact on the firm’s ability to:
1. Improve productivity and quality
2. Reduce costs
3. Identify quality materials and vendors
4. Identify required Technology
5. Serve customers in a better way
6. Find required labor skills

4. Location Decisions Location decisions affect processes and departments
Marketing
Human resources
Accounting and finance
Production & Operations
Research & Development
International operations

5. Factors affecting Location Decisions
Location decisions vary over industry type and nature of business. E.g. Choice of location has different implications for:
Manufacturing Firms
Service & Retailing Firms

6. Dominant factors in Manufacturing
Please see page 424 (book-1)for details
Favorable labor climate
Proximity to markets
Quality of life (for staff & workers)
Proximity to suppliers and resources
Proximity to the parent company’s facilities
Utilities, taxes, and real estate costs
Other factors
Investment requirement for Construction & Set-up
Available Technology
Available modes of Transportation & Infrastructure
Community attitude
Local & regional Laws & legislation

7. Dominant factors in services
Please see page 426 (book-1)for details
Proximity to customers
Transportation costs and proximity to markets
Location of competitors
Site-specific factors
Traffic flows & visibility
Availability of parking facility
Population density

8. Geographic Information Systems & Location Decisions
GIS is a system of computer software, hardware, and data
Use to manipulate, analyze, and present information relevant to a location decision
Create a visual representation of a firm’s location choices
Useful decision-making tool

9. Selecting a New Facility locations
Step 1: Identify the important location factors and categorize them as dominant or secondary Step 2: Consider alternative regions; then narrow to alternative communities and finally specific sites Step 3: Collect data on the alternatives Step 4: Analyze the data by quantitative Factors Evaluation Matrix or Preference Matrix Step 5: Bring the qualitative factors pertaining to each site into the evaluation

10. Factor Evaluation Matrix
Five-Step process:
List key factors (10-20)
Assign weight to each showing relative important of each factor over others (0 to 1.0)
Sum of all weights = 1.0
Assign a Rating (1-4) to each factor based on the attractiveness or the suitability of each factor for the firm.
1 = not attractive at all
2 = Average attractiveness
3 = Above average attractiveness
4 = very attractive

11. Factor Evaluation Matrix
Multiply each factor’s weight by its rating
Produces a weighted score
Sum the weighted scores for each
Determines the total weighted score for each site.
Highest possible weighted score for the organization is 4.0; the lowest, Average = 2.5

12. Example of factor evaluation Matrix: Shifa International hospital has to select a site for its hospital and labs in Faisalabad. There is a tie between two locations: A) 10 KM Sargodha road B) 18 KM Jaranwala Road
Location Factor
Weight
Site – A Rating
Weighted score
Site – B Rating
Weighted score
Total patients per month
.25 4 1 3
.75
Facility distance from city center
.20
.60 2
.40
Average time per emergency trip
Access ease
.15
.45
.30
Land and construction costs
.10
Employee preferences
3.05
2.55