1. Module 5 Location Operations Management as a Competitive Weapon

2. 2 Module 5: Location OM Course Framework TOC JIT MRP Operational Issues Aggregate Planning Inventory Location Capacity Tactical Issues Manufacturing Design & Selection Process Analysis Operations Strategy Strategic Issues

3. 3 Module 5: Location Learning Objectives At the end of this module, each student will be able to: 1.Describe factors affecting location decisions 2.Discuss facility location sequence 3.Explain some methods of evaluating location alternatives

4. 4 Module 5: Location 1. Overall - Global Other Languages Different Norms and Customs Work-Force Management Unfamiliar Laws and Regulations Unexpected Cost Mix

5. 5 Module 5: Location Type of Facility Product-focused (55%) Market-focused (30%) Process-focused (10%) General purpose (5%)

6. 6 Module 5: Location Product-focused Produces one family or type of product Usually for a large market Transportation costs are low Scale economies are high

7. 7 Module 5: Location Market-focused Located in the markets they serve Service operations, since services cannot be transported Require quick response, customized products, high transportation costs

8. 8 Module 5: Location Process-focused Have one technology Produce components or parts that are shipped to other facilities for further processing or assembly Can make a wide variety of products with the given process technology

9. 9 Module 5: Location General-purpose Produce several types of products and use several different processes

10. 10 Module 5: Location 2. Location Decision Sequence © 1995 Corel Corp.Country Region/Community Site

11. 11 Module 5: Location Location Decision Example BMW decided to build its first major mfg. plant outside Germany in Spartanburg, South Carolina. © 1995 Corel Corp.

12. 12 Module 5: Location Country Decision Factors Market location Labor Manufacturing labor costs Labor productivity

13. 13 Module 5: Location Country Decision Factors Other Shipping cost New plant & equipment

14. 14 Module 5: Location Region Decision Factors Labor Wages in South Carolina (SC) Government incentives Free-trade zone

15. 15 Module 5: Location 3. Location Methods Factor weighting method Center of gravity method © 1995 Corel Corp.

16. 16 Module 5: Location Factor Rating Method Most widely used location technique Useful for service & industrial locations Rates locations using factors

17. 17 Module 5: Location Factor Rating Method Steps List relevant factors Assign importance weight to each factor Develop scale for each factor (0-1, etc.) Score each location using factor scale Multiply scores by weights for each factor & total Select location with maximum total score

18. 18 Module 5: Location Factor Rating Method Example Youre an analyst for John Deere. Youre considering locating a new mfg. plant in Omaha (NE) or Denver (CO). Factor Wgt NE CO Mfg. costs.7.8.9 Cost of living.1.6.8 Labor avail..21.8 Where should you locate? © 1995 Corel Corp.

19. 19 Module 5: Location Factor Rating Method Solution.56.63.06.08.20.16 0.82 0.87.7.1.2.1.7.1.2 1.0.6 1.8.9 Mfg. Cost $ Cost Living Labor Avail. TOTAL

20. 20 Module 5: Location Center of Gravity Method Finds location of single distribution center serving several destinations Used primarily for services

21. 21 Module 5: Location Center of Gravity Method Steps Place existing locations on a coordinate grid Calculate X & Y coordinates for center of gravity

22. 22 Module 5: Location Center of Gravity Equations C dW W x ixi i i i X Coordinate C dW W y iyi i i i Y Coordinate d ix = x coordinate of location i W i =Volume of goods moved to or from location i d iy = y coordinate of location i

23. 23 Module 5: Location Center of Gravity Example Youre an analyst for Home Depot. You want to find the best location of a warehouse serving retail stores in Lincoln (coord. 90, 60), Columbia (coord. 150, 30), & Austin (coord. 90, 10). Monthly demand is 2k, 3k, 5k units respectively. Columbia, SC Austin, TX Lincoln, NE Warehouse Warehouse? © 1995 Corel Corp.

24. 24 Module 5: Location Center of Gravity Example 0306090120150 30 60 90 0 Lincoln Store (90,60) 2k demand Austin Store (90,10) 5k demand Columbia Store (150,30) 3k demand © 1995 Corel Corp.

25. 25 Module 5: Location Center of Gravity Solution C dW W y iyi i i i (60)(2)(30)(3)(10)(5) 235 26C dW W x ixi i i i (90)(2)(150)(3)(90)(5) 235 108

26. 26 Module 5: Location COG Method Solution 0306090120150 30 60 90 0 Austin Store Columbia Store Lincoln Store X Warehouse at (108, 26): Little Rock © 1995 Corel Corp.