8-1
Location Planning and Analysis
Chapter 8
Location Planning and Analysis
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-2
Location Planning and Analysis
Need for Location Decisions Mark rket etin ing g Str tra ate tegy gy Co Cost st of Doi Doin ng Bus Busin ines ess s Growth De Depl plet etio ion n of of Res Resou ourc rces es
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-3
Location Planning and Analysis
Nature of Location Decisions Importance ± Lon Long g term commitme commitment/c nt/costs osts
Objectives ± Pro Profit fit po pote tenti ntial al
Options ± Exp Expand and exi existing sting facil facilitie ities s ± Add ne new w facili facilitie ties s ± Move
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-4
Location Planning and Analysis
Location Decision Factors Regional Factors
Community Considerations
Multiple Plant Strategies
Site-related Factors
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-5
Location Planning and Analysis
Regional Factors
Locati Loca tion on of ra raw w mat mater eria ials ls Loc Lo cat atio ion n of mar arke kets ts Labor fa factors Clilim mate and taxes Forreig Fo ign n lo locatio ion ns
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-6
Location Planning and Analysis
Community Considerations
Quality of life Services Attitudes Taxes Envi En viro ronm nmen enta tall regu regula lati tion ons s Deve velloper su support
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-7
Location Planning and Analysis
Site Related Factors
Land Transportation Environmental Legal
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-8
Location Planning and Analysis
Multiple Plant Strategies Pro rodu duc ct plan plantt stra strate teg gy Marke arkett are area a pla plant nt st stra rate tegy gy Pro roce ces ss pla plant nt str strat ateg egy y
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-9
Location Planning and Analysis
Trends in Locations Fo Fore reig ign n pr prod oduc ucer ers s loca locati ting ng in U.S U.S.. ± ³M ³Mad ade e in in USA´ USA´ ± Curre Currency ncy fluct fluctuat uations ions
Ju Just st-in -in-ti -time me manuf manufac actu turin ring g techni techniqu ques es Microfactories In Info form rma ati tio on hig high hway
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-10
Location Planning and Analysis
Comparison of Service and Manufacturing Considerations Manufacturing/Distribution
Service/Retail
Cost Focus
Revenue focus
Tran ansspo port rtaation mod odees/ s/co cossts
Dem De mog ogrrap aphi hiccs: age ge,i ,inc ncom ome, e,eetc
Energy availability, costs
Population/drawing area
Labor cost/availability/skills
Competition
Building/leasing costs
Traffic volume/patterns Customer access/parking
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-12
Location Planning and Analysis
Evaluating Locations Co Cost st-P -Pro rofit fit-V -Vol olum ume e An Anal aly ysi sis s ± Dete Determine rmine fixe fixed d and variab variable le costs ± Plo Plott tot total al cos costs ts ± Dete Determine rmine low lowest est total total costs costs
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-13
Location Planning and Analysis
Example 1: Cost-Volume Analys Analysis is Fixed and variable costs for four potential locations L o c a tio n
F ix e d Cost
A B C D
$250,000 100,000 150,000 200,000
McGraw-Hill/Irwin
Variable Cost
$1 3 2 3
1 0 0 5
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-14
Location Planning and Analysis
Example 1: Solution
ixed ixed Costs
C D
$250, $250,000 100, 00,000 150, 50,000 200, 200,000
McGraw-Hill/Irwin
ariab ariable Costs $11(10 11(10,000) 30(1 30(10 0,000) 20(1 20(10 0,000) 35(1 35(10 0,000)
Total Costs $360, $360,000 400, 400,000 350, 350,000 550, 550,000
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-15
Location Planning and Analysis
Example 1: Solution $(000) 800 700 600 500 400 300 200 100 0
B C A A Superior C Superior
B Superior
0
2
4
6
8
10
12
14
16
Annual Output (000) McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
8-16 Location Planning and Analysis
Evaluating Locations Tra ran nsp spo ort rta ati tion on Mod Model el ± Decisio Decision n based based on movement movement costs costs of raw materials or finished goods
Factor Ra Rating ± Decisio Decision n based based on quan quantita titative tive and qualitative inputs
Ce Cent nter er of Gr Grav avit ity y Met etho hod d ± Decisio Decision n based based on minimum distrib distributio ution n costs
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Companies, Inc. All rights reserved.
