2. Location

3. Strategic Considerations in Facility Location  Access to markets, ie EU  Nissan, Toyota & Honda invested $2.6 billion in UK  Responsiveness to Customers  Access to technology

4. Global Hot Spots East Asia. The Pacific Basin, including Japan, South Korea, China, Taiwan, and Singapore became the fastest-growing and foremost trading region in the world. Japan South Korea Taiwan Singapore Hong Kong Figure 9.1

5. Global Hot Spots Mexico. Thousands of plants have been built by firms across the world in the maquiladoras on Mexico's northern boarder. Figure 9.1 U.S. Sunbelt. The sunbelt is attracting many firms normally entrenched in the industrial heartland of the United States owing to lower labor costs, less unionism, and a more-attractive climate. NAFTA. The North American Free Trade Agreement makes trade easier between Canada, Mexico, and the United States. Other Latin American countries may follow suit.

6. Global Hot Spots Europe. The European Union (EU) encompasses 15 member nations and special arrangements with most other European states. Figure 9.1

7. Global Hot Spots Former Communist Countries. The population of 410 million promises huge market opportunities and attractive possibilities for joint ventures. Figure 9.1 Russia

8. Managing Global Operations Other LanguagesOther Languages Different Norms and CustomsDifferent Norms and Customs Workforce ManagementWorkforce Management Unfamiliar Laws and RegulationsUnfamiliar Laws and Regulations Unexpected Cost MixUnexpected Cost Mix

9. Stages in Facility Location Decisions  Determining the need for a new facility  Identifying the relevant factors in selecting a location  Selecting a general location  Selecting a site

10. Determining the Need for a New Factory  Change in demand, up or down  New product  Changes in the economics of the business, e.g. labour costs, material costs, material sources, supporting industries  Government action, I.e. on environmental grounds

11. Determining the Need for a New Factory Plant Size Cost Production Costs Transport Costs Total Costs Ideal Plant Size

12. - Manufacturing Dominant Decision Factors - Manufacturing  Favorable Labour Climate  Proximity to Markets  Quality of Life  Proximity to Suppliers  Proximity to Parent Company  Utilities, Taxes, and Real Estate Costs

13. - Services Dominant Decision Factors - Services  Proximity to Customers  Transportation Costs and Proximity to Markets  Location of Competitors  Site-specific Factors

14. Locating A Single Facility * Assume no interdependence on facilities Expand onsite Build another facility Relocate to another site

15. Locating a Single Facility  On-site expansion +Keeps management together +Reduces construction time & costs +Avoids splitting up operations -Diseconomies of scale -Poor materials handling -Increasingly complex production control -Lack of space

16. Locating a Single Facility  Building a new plant +Reduced risk of complete loss of production due to accident +Escape unproductive labour +Modernise with new machinery +Reduce transport costs

17. Locating a Facility – Comparing Sites 1.Determine dominant and secondary location factors 2.Develop alternative regions  communities  sites 3.Collect data lots of statistical data 4.Analyze quantitative factors down to a single measurer and compare alternatives 5.Analyze qualitative factors to compare remaining alternatives

18. Comparison Tools Weighted scoring model using a preference matrix Load-Distance Model –Euclidean distance d ab = √((x a -x b ) 2 +(y a -y b ) 2 ) –Rectilinear distance d ab = |x a -x b | + |y a -y b | –Load-Distance Score ld –Center of gravity x*= ∑ i (l i x i ) / ∑ l i & y*= ∑ i (l i y i ) / ∑ l i Break-Even Analysis

19. Location Health-Watch A new medical facility Health-Watch is targeted to serve seven census tracts in Erie, Pennsylvania. Customers will travel from the seven census tract centers to the new facility when they need health care.

20. Location Health-Watch North

21. Location Health-Watch Location FactorWeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105

22. Location Health-Watch North Location Factor WeightScore Total Patient miles per month254 Facility utilization203 Average time per emergency trip203 Expressway accessibility154 Land and construction costs101 Employee preference105 Weighted Score

23. Location Health-Watch North Location Factor WeightScore 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

24. Location Health-Watch North Location Factor WeightScore 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

25. 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

26. 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 x4) + (10 x 1) + (10 x 5) Weighted Score

27. 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

28. Location Health-Watch

29. Location Health-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North 0 50 100 150 200 y (miles) x (miles) 50100150200250300 East State College B (175, 100)

30. Location

31. Location

32. Location

33. Location

34. Location

35. LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North 0 50 100 150 200 y (miles) x (miles) 50100150200250300 East State College B (175, 100) 151.2 miles

36. LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North 0 50 100 150 200 y (miles) x (miles) 50100150200250300 East State College B (175, 100) 151.2 miles Rectilinear distance d AB = | x A - x B | + | y A - y B |

37. LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North 0 50 100 150 200 y (miles) x (miles) 50100150200250300 East State College B (175, 100) 151.2 miles Rectilinear distance d AB = | 50 - 175 | + | 185 - 100 |

38. LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North 0 50 100 150 200 y (miles) x (miles) 50100150200250300 East State College B (175, 100) 151.2 miles Rectilinear distance d AB = | 50 - 175 | + | 185 - 100 |

39. LocationHealth-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North 0 50 100 150 200 y (miles) x (miles) 50100150200250300 East State College B (175, 100) 151.2 miles Rectilinear distance d AB = 210 miles

40. Location Health-Watch Erie A(50, 185) Pittsburgh Harrisburg Philadelphia Scranton Uniontown North 0 50 100 150 200 y (miles) x (miles) 50100150200250300 East State College B (175, 100) 151.2 miles 210 miles

41. Location Figure 9.3 Health-Watch Erie A (50, 185) North Enter the x and y coordinates of the two towns. xy Erie (Point A)50185 State College (Point B)175100 To find the Euclidian distance, subtract the second town’s x value from that of the first town, and square the result. Do the same with the two y values. Then add the two and compute the square root. (Erie x – State College x) 2 15.625Euclidian distance151.16 (Erie y – State College y) 2 7,225 To find the rectilinear distance, get the absolute value of the result of subtracting the second town’s x from the first town’s. Do the same with y. Then add the absolute distances together. (Erie x – State College x)125Rectilinear distance210 (Erie y – State College y)85 Tutor 9.2 - Distance Measures

42. Location Health-Watch

43. Location Health-Watch North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles)

44. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld

45. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)2

46. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)2

47. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)2 5.5 - 2.5 = 3

48. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)2 5.5 - 2.5 = 3 4.5 - 4.5 = 0

49. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)23 + 0 = 3 5.5 - 2.5 = 3 4.5 - 4.5 = 0

50. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)23 + 0 = 36 2 * 3 = 6

51. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)23 + 0 = 36

52. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)23 + 0 = 36 E(8, 5)10

53. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)23 + 0 = 36 E(8, 5)10 2.5 + 0.5 = 3 8 - 5.5 = 2.5 5 - 4.5 = 0.5

54. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)23 + 0 = 36 E(8, 5)102.5 + 0.5 = 330 10 * 3 = 30

55. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census PopulationDistance Tract(x,y)(l)(d)ld A(2.5, 4.5)23 + 0 = 36 E(8, 5)102.5 + 0.5 = 330

56. Location Health-Watch (a) Locate at C (5.5, 4.5) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Tractld A6 B25 C0 D21 E30 F80 G77 Total239

57. Location Health-Watch (b) Locate at F (7, 2) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles)

58. Location Health-Watch (b) Locate at F (7, 2) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles)

59. Location Health-Watch (b) Locate at F (7, 2) North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Tractld A14 B25 C40 D14 E40 F0 G35 Total168

60. Location Health-Watch Alternative Locations North x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles)

61. Location Health-Watch Alternative Locations North x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) 391 355 331 326 283 247 223 233 197 173 253 233 228 168 218

62. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles)

63. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)2 B(2.5, 2.5)5 C(5.5, 4.5)10 D(5, 2)7 E(8, 5)10 F(7, 2)20 G(9, 2.5)14

64. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)25 B(2.5, 2.5) C(5.5, 4.5) D(5, 2) E(8, 5) F(7, 2) G(9, 2.5)

65. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2) E(8, 5) F(7, 2) G(9, 2.5)

66. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) Census Population Tract(x,y)(l)lxly A(2.5, 4.5)259 B(2.5, 2.5) C(5.5, 4.5) D(5, 2) E(8, 5) F(7, 2) G(9, 2.5)

67. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) 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

68. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) 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

69. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) 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 x * = y * =

70. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) 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 x* = y* = 453.5 68 205.5 68

71. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) 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 x * = y * = 453.5 68 205.5 68

72. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) 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 x* = 6.67 y* = 2.96

73. Location Health-Watch Center of Gravity Approach North B A C E G F D (2.5, 4.5) [2] (2.5, 2.5) [5] (5, 2) [7] (7, 2) [20] (9, 2.5) [14] (8, 5) [10] (5.5, 4.5) [10] x (miles) East 12345678910 1 2 3 4 5 6 0 y (miles) x* = 6.67 y* = 2.96

74. Location Health-Watch Center of Gravity Approach Figure 9.6

75. Location Break-Even Analysis

76. Location 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

77. 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

78. 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)

79. 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

80. 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

81. 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

82. 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

83. Location Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 Annual cost (thousands of dollars) 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

84. Location Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 Annual cost (thousands of dollars) 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 A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980)

85. Location A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) A best Break-even point Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 Annual cost (thousands of dollars) 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

86. Location Break-Even Analysis 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) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 Annual cost (thousands of dollars) 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 14.3

87. C best (20, 980) B best Break-even point Location A D B C (20, 1390) (20, 1200) (20, 1060) A best 6.25 Break-even point Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 Annual cost (thousands of dollars) Break-Even Analysis 14.3 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

88. Location Break-Even Analysis Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 A best B bestC best Break-even point 6.2514.3 A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) Annual cost (thousands of dollars) Break-even point

89. Location Break-Even Analysis Q (thousands of units) 0 200 400 600 800 1000 1200 1400 1600 246810121416182022 A best B bestC best Break-even point 6.2514.3 A D B C (20, 1390) (20, 1200) (20, 1060) (20, 980) Annual cost (thousands of dollars) Break-even point Example 9.5 (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

90. Locating a facility in a Network Location of each facility in the network Allocation of work throughout the network Capacity may be affected by allocations Transportation Method

91. Locating a faclitiy within a network of facilities. Facilities may work independently (chain of restaurants) or interact (warehouses). Interaction between facilities requires solving of: - location - allocation (allocating work between facilities) - capacity (reallocationg of work affect the capacity)

92. Transportation Model 1.Create a row for each plant 2.Create a column for each warehouse 3.Create a single column for plant capacity 4.Create a single row for warehouse demand. 5.Split cells where plant and warehouse, rows and columns intersect 6.Place price per unit in half of each split cell 7.Place estimated capacities and demand figures for each plant and warehouse.

93. Transportation Model 8.Create a dummy warehouses if total capacity is greater than total demand. 8.1 Demand for the dummy warehouse should equal Total capacity – Total demand so as to raise total demand to equal total capacity. 8.2 Split the new intersection cells as in step 5 for dummy column 8.3 use a price of $ 0.00 per unit in the split cells 9.Create a dummy plant if total demand is greater than total capacity 9.1 Capacity for the dummy plant should equal Total demand – Total capacity so as to raise Total capacity to equal total demand 9.2 Split the new intersection cell as in step5 for the dummy row 9.3 Set the price per unit to the cost to the company for stock outs. If unknown or all stock out cost are equal allow price to be $0.00

94. Transportation Model 10. Solve model by placing the amount each plant should send each warehouse in the unused half of the split cells where 10.1 Total capacity of each plant is fully used 10.2 Total demand for each warehouse is fully met 10.3 Where total cost to met 10.1 and 10.2 is at a minimum.

95. Tools to solve Transportation Model Trial and Error Linear Programming (supplement I) –Simplex Method Max. non Zero shipments = Sum of plants + sum of warehouse -1

96. Location Transportation Method

97. Location Setting up the Initial Tableau Example 9.6

98. Location Transportation Method Setting up the Initial Tableau Plant Warehouse 1 2 3 Phoenix Atlanta Create a row for each plant and a column for each warehouse Example 9.6

99. 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 Example 9.6

100. Location Transportation Method Setting up the Initial Tableau Plant Warehouse Capacity 1 2 3 Requirements Phoenix Atlanta 5.0 6.0 5.4 7.0 4.6 6.6 400 500 900 200 400 300 Figure 9.8 Insert costs into the shipping route option cells

102. Location Transportation Method

103. Location Interpreting the Optimal Solution Figure 9.9

104. Mile-High Beer— Solved Problem 2 Boulder Break- even point Fort Collins 2.67 Break-evenpoint Barrels of beer per year (in hundred thousands) 10 8 6 4 2 0 123456123456 Location cost (in millions of dollars) Figure 9.10 Denver Golden

105. Arid Company— Solved Problem 4 Figure 9.11 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