1. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 1 Location, Layout, and Physical Facilities

2. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 2 Choosing a Location The right region of the country The right region of the country The right state in the region The right state in the region The right city in the state The right city in the state The right site in the city The right site in the city

3. Logic of Choosing a Location

4. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 4 Choosing the Region: Sources of Information U.S. Census Bureau - http://www.census.gov/ U.S. Census Bureau - http://www.census.gov/http://www.census.gov/  American Community Survey  Economic Census

5. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 5 American Demographics American Demographics AmeriStat AmeriStat STAT-USA STAT-USA Demographics USA Demographics USA Lifestyle Market Analyst Lifestyle Market Analyst Markets of the U.S. for Business Planners Markets of the U.S. for Business Planners Choosing the Region: Sources of Information

6. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 6 Rand McNally's Commercial Atlas and Marketing Guide Rand McNally's Commercial Atlas and Marketing Guide Sourcebook of County Demographics Sourcebook of County Demographics Sales and Marketing Management’s Survey of Buying Power Sales and Marketing Management’s Survey of Buying Power Editor and Publisher Market Guide Editor and Publisher Market Guide Small Business Development Centers Small Business Development Centers Choosing the Region: Sources of Information

7. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 7 Geographic Information Systems (GIS) Computerized programs combining map- drawing with database management capability. Computerized programs combining map- drawing with database management capability. Census Bureau’s TIGER file. Census Bureau’s TIGER file. Search through a database and then plot the results on a map. Search through a database and then plot the results on a map. Visual display reveals otherwise hidden trends. Visual display reveals otherwise hidden trends.

8. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 8 Selecting the State Factors to consider: Proximity to markets Proximity to markets Proximity to needed raw materials Proximity to needed raw materials Labor supply needs Labor supply needs Wage rates Wage rates Business climate Business climate Tax rates Tax rates Internet access Internet access

9. Sample State Evaluation Matrix Location Criterion Weight 10-high 1-low Score 5-high 1-low Weighted Score (weight x score) Total ScoreFlorida Georgia South Carolina Quality of labor force Wage rates Union activity Energy costs Tax burden Educational/ Training Assistance Start-up incentives Quality of life Availability of raw materials Other Assign to each location criterion a weight that reflects its relative importance (10 high to 1 low). Then score each state on a scale of 1 (low) to 5 (high). Calculate the weighted score (weight x score) for each state. Finally, add up the total weighted score for each state. The state with the highest total weighted score is the best location for your business.

10. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 10 Selecting the City Population trends and density Population trends and density Competition Competition  Clustering  Index of Retail Saturation (IRS)

11. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 11 Index of Retail Saturation A measure of the potential sales per square foot of store space for a given product within a specific trading area. w here C = Number of customers in the trading area RE = Average expenditure per person for the product RF = Total square feet of selling space allocated to the product

12. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 12 Selecting the City Population trends and density Population trends and density Competition Competition  Clustering  Index of Retail Saturation (IRS)  Reilly’s Law of Retail Gravitation

13. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 13 Reilly’s Law of Retail Gravitation An estimate of a site’s ability to attract customers. w here BP = Distance in miles from location A to break point d = Distance in miles between locations A and B P a = Population surrounding location A P b = Population surrounding location B

14. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 14 Selecting the City Population trends and density Population trends and density Competition Competition  Clustering  Index of Retail Saturation (IRS)  Reilly’s Law of Retail Gravitation Costs Costs Local laws and regulations Local laws and regulations Compatibility with community Compatibility with community

15. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 15 Selecting the City Quality of life Quality of life Transportation networks Transportation networks Police and fire protection Police and fire protection Public services Public services Location’s reputation Location’s reputation

16. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 16 Retail and Service Location Considerations Trade area size Trade area size  Retail compatibility  Degree of competition  Transportation network  Physical, cultural, or emotional barriers  Political barriers

17. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 17 Retail and Service Location Considerations Customer traffic Customer traffic Adequate parking Adequate parking Room for expansion Room for expansion Visibility Visibility continued

18. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 18 Retail and Service Location Options Central Business Districts (CBDs) Central Business Districts (CBDs) Neighborhood locations Neighborhood locations Shopping centers and malls Shopping centers and malls  Neighborhood shopping centers  Community shopping centers  Regional shopping centers  Power centers

19. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 19 Shopping Centers and Malls Neighborhood Shopping Centers Neighborhood Shopping Centers  3 to 12 Stores; anchor is supermarket or drugstore Community Shopping Centers Community Shopping Centers  12 to 50 stores; anchor is department or variety store Regional Shopping Malls Regional Shopping Malls  50 to 100 stores; anchor is one or more major department stores Power Centers Power Centers  Combines drawing power of a mall with convenience of neighborhood shopping center

20. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 20 Retail and Service Location Options Near competitors Near competitors Outlying areas Outlying areas Home-based businesses Home-based businesses continued

21. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 21 Manufacturing Locations Foreign trade zones Foreign trade zones

22. Figure 16.2. How a Foreign Trade Zone (FTZ) Works. Without FTZ Imported Parts and Materials Store Assemble Package Manufacture Process Mix With FTZ DutyPaid NoDutyPaid U.S.Sales Exports U.S.Sales Exports Small Company No Duty Paid Duty Paid No Duty Paid

23. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 23 Manufacturing Locations Foreign trade zones Foreign trade zones Empowerment zones Empowerment zones Business incubators Business incubators

24. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 24 Business Incubators Organizations that combine low-cost, flexible rental space with a multitude of support services for their small business residents. Organizations that combine low-cost, flexible rental space with a multitude of support services for their small business residents. Have spawned more than 20,000 successful businesses across four decades. Have spawned more than 20,000 successful businesses across four decades. More than 950 in operation across the U.S., and a new one opening, on average, every week. More than 950 in operation across the U.S., and a new one opening, on average, every week. They work!! Firms that “graduate” from incubators have a success rate of 87%. They work!! Firms that “graduate” from incubators have a success rate of 87%.

25. Source: National Business Incubation Association

26. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 26 Layout: External Factors Adequate size to accommodate business needs. Adequate size to accommodate business needs. Create the proper image or “personality” for the business in the customer's eyes. Create the proper image or “personality” for the business in the customer's eyes. Entrances must invite customers to come in. Entrances must invite customers to come in.

27. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 27 Layout: External Factors Create effective window displays and change them often; they can be powerful sales tools. Create effective window displays and change them often; they can be powerful sales tools. Must comply with Americans with Disabilities Act. Must comply with Americans with Disabilities Act. Pay attention to the business sign, the most direct method of reaching potential customers. Pay attention to the business sign, the most direct method of reaching potential customers. continued

28. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 28 A Business Sign Tells potential customers who you are and what you're selling. Tells potential customers who you are and what you're selling. Must comply with local sign ordinances. Must comply with local sign ordinances. Should be visible, simple, and clear. Should be visible, simple, and clear. Should be changed periodically to avoid becoming part of the background. Should be changed periodically to avoid becoming part of the background. Should be legible both day and night. Should be legible both day and night. Must be maintained properly. Must be maintained properly.

29. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 29 Building Interiors Ergonomics is an integral part of any design. Ergonomics is an integral part of any design. Proper layout and design pays off in higher productivity, efficiency, or sales. Proper layout and design pays off in higher productivity, efficiency, or sales. Careful selection of colors can create the desired impressions among customers and employees. Careful selection of colors can create the desired impressions among customers and employees. Proper lighting is measured by what is ideal for the job being done. Proper lighting is measured by what is ideal for the job being done.

30. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 30 Layout for Retailers The arrangement of merchandise and fixtures. The arrangement of merchandise and fixtures. “The stage on which a retail company functions” – Paco Underhill. “The stage on which a retail company functions” – Paco Underhill. Well-designed layout takes customers past plenty of displays of items they may buy on impulse. Well-designed layout takes customers past plenty of displays of items they may buy on impulse.  65% to 70% of purchase decisions are made after a customer enters a store.

31. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 31 Three Layout Patterns Grid Grid  Rectangular with parallel aisles; formal; controls traffic flow; uses selling space efficiently.  Supermarkets and self-service discount stores.

32. Grid Layout

33. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 33 Free-Form Free-Form  Free-flowing; informal; creates “friendly” environment; flexible.  Small specialty shops. Three Layout Patterns

34. Free-form Layout

35. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 35 Boutique Boutique  Divides store into a series of individual shopping areas, each with its own theme; unique shopping environment.  Small department stores. Three Layout Patterns

36. Boutique Layout

37. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 37 Layout Guidelines Know your customers buying habits and plan your layout accordingly. Know your customers buying habits and plan your layout accordingly. Display merchandise as attractively as your budget will allow. Display merchandise as attractively as your budget will allow. Display complementary items together. Display complementary items together. Use music to set the mood. Use music to set the mood. Recognize the value of floor space; never waste valuable selling space with non- selling functions. Recognize the value of floor space; never waste valuable selling space with non- selling functions.

38. Rent and Sales Allocation by Floor

39. Rent Allocated by Traffic Aisle

40. Space Values for a Small Store

41. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 41 Factors to Consider in Manufacturing Layouts Type of product Type of product Type of production process Type of production process Ergonomic considerations Ergonomic considerations Economic considerations Economic considerations Space availability within the facility Space availability within the facility

42. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 42 Manufacturing Layouts Product layout Product layout

43. Product Layout

44. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 44 Manufacturing Layouts Product layout Product layout Process layout Process layout

45. Process Layout

46. Chapter 16 Location & Layout Copyright 2006 Prentice Hall Publishing Company 46 Manufacturing Layouts Product layout Product layout Process layout Process layout Fixed position layout Fixed position layout Functional layout Functional layout