1. Production and Operations Management
Location Planning and Analysis

2. 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.

3. Need for Location Decisions
Marketing Strategy
Cost of Doing Business
Growth
Depletion of Resources

4. 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

5. 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

6. Location Decision Factors
Regional Factors
Community Considerations
Multiple Plant Strategies
Site-related Factors
8-6 6

7. Location Decision Factors: Regional Factors
Location of raw materials
Location of markets
Labor factors
Climate and taxes
8-7

8. Location Decision Factors: Community Considerations
Quality of life
Services
Attitudes
Taxes
Environmental regulations
Utilities
Developer support

9. Location Decision Factors: Site-Related Factors
Land
Transportation
Environmental
Legal

10. Location Decision Factors: Multiple Plant Strategies
Product plant strategy
Market area plant strategy
Process plant strategy

11. Service and Retail Locations
Manufacturers – cost focused
Service and retail – revenue focused
Traffic volume and convenience most important
Demographics
Age
Income
Education

12. Service and Retail Locations
Service and retail – revenue focused
Location, location, location
Good transportation
Customer safety

13. Manufacturing/Distribution
Service and Retail Locations: Comparison of Service and Manufacturing Considerations
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

14. Global Locations Reasons for globalization Benefits Disadvantages
Risks
Global operations issues

15. Globalization Facilitating Factors Benefits Trade agreements
Technology
Benefits
Markets
Cost savings
Legal and regulatory
Financial

16. Globalization Disadvantages Transportation costs Security
Unskilled labor
Import restrictions
Criticisms

17. Globalization
Risks
Political
Terrorism
Economic
Legal
Cultural

19. Evaluating Locations Cost-Profit-Volume Analysis
Determine fixed and variable costs
Plot total costs
Determine lowest total costs

20. Location Cost-Volume Analysis
Assumptions
Fixed costs are constant
Variable costs are linear
Output can be closely estimated
Only one product involved

21. Example 1: Cost-Volume Analysis
Fixed and variable costs for four potential locations

22. Example 1: Solution

23. 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

24. Evaluating Locations Transportation Model Factor Rating—example 2
Decision based on movement costs of raw materials or finished goods
Factor Rating—example 2
Decision based on quantitative and qualitative inputs
Center of Gravity Method—example 3, 4
Decision based on minimum distribution costs

25. Evaluating Locations—Center of Gravity