Week 5 - Facilities Location Planning & Analysis

Question 1

What are the decisions made on location based on? (5)

Answer 1

• Corporate strategy
• Marketing strategy
• Customer and supplier locations
• Relative costs (optimisation of total supply chain costs and investment)
• Customer service considerations

Question 2

What is the nature of location decisions

Answer 2

Decision are strategic with the focus of it being a long term investment

Question 3

What are the three options when making decisions on location?

Answer 3

• Expanding existing facilities
• Addition of capacity e.g outsourcing
• Relocation

Question 4

Define strategy (Johnson, Scholes and Whittington, 2006)

Answer 4

Is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations

Question 5

Define business strategy

Answer 5

Is a cohesive entity of programmes, projects and policies that concentrate and fuse corporate resources to enable an organisation to gain and sustain its competitiveness and capabilities for self renewal

Question 6

Characteristics of centralised warehousing (5)

Answer 6

• One warehouse to serve the market
• Tends to be large and accommodates the complete range of products
• Require sophisticated inventory management systems
• May need to cater for customers in different countries/markets
• Requires cooperation of other supply chain members

Question 7

Characteristics of decentralised warehouses (4)

Answer 7

• Several regional warehouses
• Located closer to customers and/or suppliers
• May have been built up over time - legacy/organic growth/acquisition
• Require larger financial outlays

Question 8

How are centralised and decentralised warehouses different for the following factors:
- Product value
- Order size
- Special warehousing
- Product line
- Customer service

Answer 8

Question 9

What are the differences between decentralised and centralised warehouses in terms of: delivery times, distribution costs vs inventory costs and demand volatility

Answer 9

• Regional warehouses: shorter delivery time, distribution costs more important than inventory costs, lower demand volatility
• Centralised warehouses: longer delivery time, inventory costs more important than distribution costs, greater demand volatility

Question 10

Transport cost relationship with having few/one warehouse

Answer 10

Low cost for inward transport but high cost for outward transport

Question 11

Transport cost relationship with having numerous warehouses

Answer 11

Gives high cost for inward transport, but low cost for outward transport

Question 12

What is the location decision making process? (5)

Answer 12

1 - Criteria identification
2 - Assessment of relative importance of criteria
3 - Identification of location alternatives
4 - Evaluation of alternatives
5 - Decide on location(s)

Question 13

6 General factors impacting location decision making

Answer 13

• Proximity to markets, raw materials and customers
• Infrastructure and access
• Capital costs (e.g land)
• Operating costs (e.g labour - gotta factor in labour availability and labour access to warehouse)
• Government policy/political stability
• Environment, community, amenities (away from flood plains and severe weather)

Question 14

What are the different levels of location decision making? (5)

Answer 14

• International
• Country
• Regional
• Community
• Site

Question 15

Location decision making considerations at an international level (4)

Answer 15

• Customer location
• Market opportunities
• Current trade barriers and agreements
• Changes in economic and business environment

Question 16

Location decision making considerations at a country level (7)

Answer 16

• Logistics performance index (LPI)
• Political and economic stability
• Exchange rate risks
• Regulatory environment
• Taxation/incentives
• Labour availability
• Cultural considerations

Question 17

Location decision making considerations at a regional level (5)

Answer 17

• Regulatory environment
• Taxation/incentives
• Labour availability
• Infrastructure (e.g transport, utilities, IT)
• Attractiveness of region

Question 18

Location decision making considerations at a community level (5)

Answer 18

• Local regulatory environment (e.g. planning)
• Labour availability
• Infrastructure (e.g. transport, utilities, IT, education)
• Developer/supplier support
• Quality of life

Question 19

Location decision making considerations at a site level (3)

Answer 19

• Land availability
• Access and transportation (people and product)
• Environmental/heritage/legal

Question 20

How does cost/volume analysis work for location evaluation? (3)

Answer 20

• Determine the fixed costs e.g land and buildings
• Determine variable costs (e.g. labour)
• Identify most cost effective location

Question 21

What are the assumptions in cost/volume analysis? (4)

Answer 21

• Constant fixed costs
• Linear variable costs
• Volumes can be accurately forecast
• Single product

Question 22

How does the factor rating method for location evaluation work? (6)

Answer 22

1 - Develop a list of CSFs
2 - Assign weight to each factor
3 - Develop scale for each factor
4 - Score alternative locations for each factor
5 - Multiply score by weight for each factor and location
6 - Recommend location