1. Chapter 18 Location, Facilities, and Layout
Entrepreneurship and Small Business Management
Chapter 18
Location, Facilities, and Layout

2. Ch. 18 Performance Objectives
Understand the importance of the physical location of a business.
Know the key factors to consider in the location decision.
Learn how location needs differ by business type.
Determine locations via multiple methods.

3. Ch. 18 Performance Objectives (continued)
Explore the design of facilities and their layouts.
Recognize the special considerations for home-based businesses.
Describe location factors for Web-based businesses.

4. Why Is Location Important?
Determines access to markets
Affects essential portions of your cost structure including transportation and distribution
Impacts customer satisfaction and overall levels of risk and profitability
Can make the difference between business success and failure

5. Factors in Location Decision
Demographics
Regulations & laws
Labor pool
Proximity to competitors
Visibility
Access for customers
Access to suppliers
Climate & geography
Convenience
Cost of facilities
Economic conditions & business incentives

6. Location Needs Differ by Business Type
Wholesalers
Manufacturers
Economical distribution costs
Proximity to customers and suppliers
Tangible costs of facilities
Incentives and regulations
Customer service
Facilities and distribution costs
Skilled labor pool
Access to suppliers
Laws and regulations

7. Location Needs Differ by Business Type (continued)
Service and Professional
Retailers
Needs vary considerably
Customer convenience and accessibility
Demographics
Image/positioning
Safety/security factors
Drawing power
Demographics
Traffic generators
Competitor locations
Selling space needed
Rental costs

8. Evaluating Locations Simplest way—select location you know
Factor-rating method—prioritize and weight criteria with these steps:
Develop a list of critical factors.
Determine “weight” of each factor relative to importance.
Create a measurement scale.
Score each location for each factor using scale.
Multiply factor weight times factor score (for each factor in each location).
Compare sums of locations’ weighted factors.

9. Evaluating Locations (continued)
Use geographic information systems which include demographic data, maps, topographic data, major transportation routes, and so on.
Use market research to gather demographic, psychographic, geographic, and competition data.

10. Evaluating Locations (continued)
Location breakeven analysis—calculates and compares fixed and variable costs of each location
Center-of-gravity method—used to locate a distribution center by judging:
Locations of the destinations
How much product will ship to destinations
Frequency of delivery
Cost of delivery

11. Facilities Design and Layout
Manufacturing, warehousing, and distribution facilities need space to operate cost effectively.
Retail facilities must draw maximum revenue from design and layout.
Service and professional firms have individual facility requirements based on business type.

12. Facilities Factors for Manufacturers/Distributors
Capacity for efficient movement of materials, equipment, and people
Flexibility to adapt to changing needs
Loading docks for deliveries and shipments
Environment conducive to work requirements
Ability to include vital control regulators
Parking for commercial, employee, and visitor vehicles
Adequate utility services to the building
Security and safety

13. Types of Manufacturing Layouts
Product layouts—appropriate for continuous, mass-production processes
Process layouts—functional layouts that work well where there are common procedures for varied products
Fixed-position layouts—used for production of large objects where materials and teams are brought to a single location

14. Facilities Factors for Retailers
Appropriate selling area and configuration of that space
Permission to complete necessary changes (or improvements to be done by landlord)
Space for offices, storage, restrooms, deliveries, special needs, etc.
Signage for rules/regulations
Adequate customer parking
Lighting and security

15. Retail Store Design and Layout
Building exterior, window displays and cleanliness, and signage all send messages to customers.
Inside layout should be designed to entice customers to purchase.
Product placement
Type of shopping experience desired for the customer

16. Considerations for Home-Based Businesses
Investigate zoning ordinances, deed restrictions, and civic association rules.
Determine how to divide your business area from your family’s living area.
Plan for appropriate business furnishings and a separate telephone line.
Consider if customers will prefer to visit an office building or store, instead of a home.

17. Location Factors for Web-Based Businesses
The physical space needed for operations could be as small as a one-room office.
Location is more a function of personal preference, cost, or proximity of vendors.
Location, facility, and layout decisions should minimize distribution costs and time.
Some technology-based companies prefer to cluster with similar firms.