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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location.

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Presentation on theme: "To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location."— Presentation transcript:

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2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Chapter 10

3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Reasons for Globalization Improved transportation and communication technologies Improved transportation and communication technologies Loosened regulations on financial institutions Loosened regulations on financial institutions Increased demand for imported services and goods Increased demand for imported services and goods Reduced import quotas and other international trade barriers Reduced import quotas and other international trade barriers

4 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managing Global Operations  Other Languages  Different Norms and Customs  Workforce Management  Unfamiliar Laws and Regulations  Unexpected Cost Mix

5 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Decisions - Manufacturing  Favorable Labor Climate  Proximity to Markets  Quality of Life  Proximity to Suppliers  Proximity to Parent Company  Utilities, Taxes, and Real Estate Costs

6 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Decisions - Services  Proximity to Customers  Transportation Costs and Proximity to Markets  Location of Competitors  Site-Specific Factors

7 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-WatchNorthErie Pittsburgh Harrisburg Philadelphia Scranton Uniontown State College Example 10.1

8 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-Watch North Location FactorWeightScore Total patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 Example 10.1

9 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-Watch North Location FactorWeightScore Total patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 Weighted Score Example 10.1

10 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-Watch North Location FactorWeightScore Total patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) Weighted Score Example 10.1

11 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-Watch North Location FactorWeightScore Total patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) + (20 x 3) Weighted Score Example 10.1

12 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-Watch North Location FactorWeightScore Total patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) + (20 x 3) + (20 x 3) Weighted Score Example 10.1

13 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-Watch North Location FactorWeightScore Total patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=(25 x 4) + (20 x 3) + (20 x 3) + (15 x 4) + (10 x 1) + (10 x 5) Weighted Score Example 10.1

14 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Health-Watch North Location FactorWeightScore Total patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 WS=340 Weighted Score Example 10.1

15 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Center of Gravity Approach Census Population Tract(x, y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5)512.512.5 C(5.5, 4.5)105545 D(5, 2)73514 E(8, 5)108050 F(7, 2)2014040 G(9, 2.5)1412635 Totals68453.5205.5 Totals68453.5205.5 Example 10.2 x * = y * =

16 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Center of Gravity Approach Census Population Tract(x, y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5)512.512.5 C(5.5, 4.5)105545 D(5, 2)73514 E(8, 5)108050 F(7, 2)2014040 G(9, 2.5)1412635 Totals68453.5205.5 Totals68453.5205.5 Example 10.2 x * = y * = 453.5 68 205.5 68

17 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Center of Gravity Approach Census Population Tract(x, y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5)512.512.5 C(5.5, 4.5)105545 D(5, 2)73514 E(8, 5)108050 F(7, 2)2014040 G(9, 2.5)1412635 Totals68453.5205.5 Totals68453.5205.5 Example 10.2 x * = y * = 453.5 68 205.5 68

18 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Center of Gravity Approach Census Population Tract(x, y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5)512.512.5 C(5.5, 4.5)105545 D(5, 2)73514 E(8, 5)108050 F(7, 2)2014040 G(9, 2.5)1412635 Totals68453.5205.5 Totals68453.5205.5 Example 10.2 x * = 6.67 y * = 3.02

19 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Center of Gravity Approach Figure 10.1

20 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis

21 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30 Example 10.3

22 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30 for 20,000 units Total Variable Costs Example 10.3

23 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30 for 20,000 units Total Variable Costs $62 (20,000) Example 10.3

24 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62 B$300,000$38 C$500,000$24 D$600,000$30 for 20,000 units Total Variable Costs $62 (20,000) = $1,240,000 Example 10.3

25 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62$1,390,000 B$300,000$38 C$500,000$24 D$600,000$30 for 20,000 units Total Variable Costs $62 (20,000) = $1,240,000 Example 10.3

26 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62$1,390,000 B$300,000$38 C$500,000$24 D$600,000$30 for 20,000 units Total Variable Costs $62 (20,000) = $1,240,000 Example 10.3

27 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Fixed CostsVariable CostsTotal Costs Communityper Yearper Unit(Fixed + Variable) A$150,000$62$1,390,000 B$300,000$38$1,060,000 C$500,000$24$ 980,000 D$600,000$30$1,200,000 for 20,000 units Example 10.3

28 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Q (thousands of units) Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 Annual cost (thousands of dollars) Location Break-Even Analysis Fixed CostsTotal Costs Communityper 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 Example 10.3

29 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Q (thousands of units) Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) Annual cost (thousands of dollars) Location Break-Even Analysis Fixed CostsTotal Costs Communityper 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 Example 10.3

30 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) A best Break-evenpoint Q (thousands of units) Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 Annual cost (thousands of dollars) Location Break-Even Analysis Fixed CostsTotal Costs Communityper 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 Example 10.3

31 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. B best Break-even point A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) A best 6.25 Break-even point Q (thousands of units) Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 14.3 Annual cost (thousands of dollars) Location Break-Even Analysis Fixed CostsTotal Costs Communityper 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 Example 10.3

32 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. 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) Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 14.3 Annual cost (thousands of dollars) Location Break-Even Analysis Fixed CostsTotal Costs Communityper 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 Example 10.3

33 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Break-Even Analysis Figure 10.2 Q (thousands of units) Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 A best B best C best Break-even point 6.2514.3 A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) Break-even point Annual cost (thousands of dollars)

34 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Q (thousands of units) Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 A best B best C best Break-even point 6.2514.3 A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) Break-evenpoint Annual cost (thousands of dollars) Location Break-Even Analysis Example 10.3 (A)(B) $150,000+$62Q=$300,000 + $38Q Q=6,250 units $300,000+$38Q=$500,000 + $24Q Q=14,286 units (B)(C) Break-Even Quantities

35 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Transportation Method Setting up the Initial Tableau Create a row for each plant and a column for each warehouse Plant Warehouse 1 2 3 Phoenix Atlanta

36 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Transportation Method Setting up the Initial Tableau Add a column for plant capacities and a row for warehouse demand Plant Warehouse Capacity 1 2 3 Requirements Phoenix Atlanta 400 500 900 200 400 300

37 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Transportation Method Setting up the Initial Tableau Plant Warehouse Capacity 1 2 3 Requirements Phoenix Atlanta $5.00 $6.00 $5.40 $7.00 $4.60 $6.60 400 500 900 200 400 300 Figure 10.3 Insert costs into the shipping route option cells

38 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location Transportation Method Interpreting the Optimal Solution Figure 10.4

39 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Mile-High Beer – Solved Problem 2 Figure 10.5 Boulder Break- even point Fort Collins 2.67 Break-evenpoint Barrels of beer per year (in hundred thousands) 1086420 123456123456123456123456 Location cost (in millions of dollars) Denver Golden

40 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Arid Company – Solved Problem 4 Figure 10.6 Source Destination Capacity $4.37 $4.25 $4.89 12,000 10,000 18,000 40,0006,000 22,000 12,000 $4.00 $5.00 $5.27 $4.13 $4.50 $3.75 Demand Battle Creek Cherry Creek Dee Creek 12,000 6,000 4,000 6,00012,000 Worchester Rochester Dorchester

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