1. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-1 Factors Affecting Country  Government rules, attitudes, political risk, incentives  Culture & economy  Market location  Labor availability, attitudes, productivity, and cost  Availability of supplies, communications, energy  Exchange rates and currency risks © 1995 Corel Corp.

2. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-2 Region Location Decisions  Corporate desires  Attractiveness of region (culture, taxes, climate, etc.)  Labor, availability, costs, attitudes towards unions  Costs and availability of utilities  Environmental regulations of state and town  Government incentives  Proximity to raw materials & customers  Land/construction costs © 1995 Corel Corp.

3. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-3 Factors Affecting Site  Site size and cost  Air, rail, highway, and waterway systems  Zoning restrictions  Nearness of services/supplies needed  Environmental impact issues © 1995 Corel Corp.

4. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-4 Location Decision Sequence Country © 1995 Corel Corp. Region/Community © 1995 Corel Corp. Site © 1995 Corel Corp.

5. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-5 Factors That Affect Location Decisions

6. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-6 Location Decision Example BMW decided to build its first major manufacturing plant outside Germany in Spartanburg, South Carolina. © 1995 Corel Corp.

7. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-7 Country Decision Factors  Market location  U.S. is world’s largest luxury car market  Growing (baby boomers)  Labor  Lower manufacturing labor costs  $17/hr. (U.S.) vs. $27 (Germany)  Higher labor productivity  11 holidays (U.S.) vs. 31 (Germany)  Other  Lower shipping cost ($2,500/car less)  New plant & equipment would increase productivity (lower cost/car $2,000-3000)

8. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-8 Region/Community Decision Factors  Labor  Lower wages in South Carolina (SC)  Government incentives  $135 million in state & local tax breaks  Free-trade zone from airport to plant  No duties on imported components or on exported cars

9. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-9 CSF in Location Analysis Critical Success Factors Country 1 2 3 4 Technology Rate of technology change Innovations in process design 3 5 5 3 2 1 1 5 Level of education Number of skilled workers National education rate 5 4 4 1 3 1 4 2 Political and Legal Aspects Stability of government Product liability laws Export restrictions 5 4 4 5 3 3 2 3 3 5 5 1

10. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-10 CSF in Location Analysis - Continued Critical Success Factors Country 1 2 3 4 Total Rating Points 50433548 Social and Cultural Aspects Similarity in language Work ethic 5 4 1 2 5 3 4 1 Economic factors Tax rates Inflation Availability of raw materials Interest rates 3 3 2 3 3 5 4 4 2 5 3 2 5 5 5 5

11. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-11 Global Competitiveness of Countries  Finland…..……………………….  United States ………………..….  Netherlands……………………...  Germany….………………….….  Canada ………………………….  …  Japan ……..………………….….  …  Brazil ………….. ………………..  …  Russia ……………………….….  …  Ecuador …………………….....…  Bangladesh ……………………...  Honduras ………………………..  Bolivia………………………..…... 1 2 3 4 11 15 35 58 72 73 74 75 2001 Ranking

12. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-12 Ranking Corruption RankScore 1 Finland9.9 2 Denmark9.5 3 New Zealand9.4 4 Singapore9.2 16 Israel & U.S.A (Tied) 7.6 21 Japan7.1 57 China3.5 79 Russia2.3 90 Nigeria1.0 91 Bangladesh0.4 A score of 10 represents corruption free

13. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-13 Organizations That Need To Be Close to Markets  Government agencies  Police & fire departments  Post Office  Retail Sales and Service  Fast food restaurants, supermarkets, gas stations  Drug stores, shopping malls  Bakeries  Services  Doctors, lawyers, accountants, barbers  Banks, auto repair, motels

14. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-14 Industrial Location Decisions  Cost focus  Revenue varies little between locations  Location is a major cost factor  Affects shipping & production costs (e.g., labor)  Costs vary greatly between locations © 1995 Corel Corp.

15. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-15 Service Location Decisions  Revenue focus  Costs vary little between market areas  Location is a major revenue factor  Affects amount of customer contact  Affects volume of business

16. PowerPoint presentation to accompany Heizer/Render - Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 8-16 In General - Location Decisions  Long-term decisions  Difficult to reverse  Affect fixed & variable costs  Transportation cost  As much as 25% of product price  Other costs: Taxes, wages, rent etc. Objective: Maximize benefit of location to firm