Lecture 7 (2) Flashcards
Logistics driven location decisions (2)
Free trade zones
Political risk
Government barriers
trading blocks
Environmental regulation
Host community
Competitiev advantage
Free trade zones
A closed facility into which foreign goods can be brought without being subject to customs requirements
Political risk
The fast changing geopolitical scenes in numerous nations present challenging opportunities
Government barriers
Barriers to enter and locate in many countries are being removed through legislation
Trading blocs
Agreement that inlfuence location decisions, both within and outside trading bloc countries
Environmental regulation
The environmental regulations that impact a certain industry in a given location should be included
Host community
The host community interest in having the plant in its midst in a necessary part of the evaluation process
Competitive advantage
The base location should provide the company with a competitive advantage
Plant location methods
Factor rating system
Transportation method of linear programming
Centroid method
Factor rating system
Most widely used
List of factors is developed
Range of possible points assigned to each factor
Each site is rated against each factor
The sums of assigned points for each site are computed
The site with the most points is selected
Transportation method
Transportation method is a special linear programming method
It seeks to minimize cost of shipping n units to m destinations or it seeks to maximize profit of shipping n units to m destinations
Min(5xA1 + 7xA2 + 9xA3 + 8xB1 + 6xB2 + 4xB3)
minimize the cost of shipping along all these things (could be lowest time to go through)
centroid method
Used for locating single facilities that considers existing facilities, the distances between them, and the volumes of goods to be shipped between them
Assumes inbound an outbound transportation costs are equal
Does not include special shipping costs for less than a full load
This methodology involves formulas used to compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above
Centroid method formula
Cx = SUM dix Vi/SUM Vi
Cy= SUM diy Vi/SUM Vi
Cx - x coordinate of the centroid
Cy - y coordinate of centroid
dix - X coordinate of the ith location
diy - y coordinate of the ith location
Vi - volume of goods moved to or from the ith location
service facility location
Service facilities
New service facilities are far more common than new factories and warehouses
Much less expensive
Multiple sites close to customers
Location decision closely tied to the market selection decision
Decision more about maximizing profits than minimizing costs
