Week 6 / Location Planning and Analysis Flashcards
Location Planning and Analysis is also known as
Facility Location Problem (FLP)
Importance of Location
Decisions made infrequently in response to:
•Growth marketing strategy
•Shifts in market or in business costs
•Reduction of resources.
Important design decision
•Long term commitment/costs
•Large impact on capital and operating costs
•Poor choice detrimental to operations
Location Decisions in the Supply Chain
Suppliers: Near source of raw materials
Middle: Close to supplier or customer
Retail:•Accessibility
•Demographics
•Traffic patterns
Formal Location Decision Process (5 steps)
1) Identify the important factors
2) Gather information on appropriate sites
3) Eliminate some to obtain a short list
4) Site visits and meetings
5) Evaluate and make selection
Location Decision Factors
Country factors
Regional factors
Community consideration factors
Site-related factors
Regional Factors
1) Location of raw materials
2) Location of markets
3) Labour factors
4) Other factors
Regional Factors (4)
1) Location of raw materials
•Necessity, perishability and transportation costs
•Utilities
2) Location of markets
•Competition/convenience factor
•Perishability and transportation
•Need for closeness to customer
3) Labour factors
•Availability, skills, costs, attitudes, presence of unions
4) Other costs
•Taxes and incentives
•Land and building costs
Foreign Locations
Political stability
Attitude toward foreign companies
Language and cultural differences (eg. corruption)
Exchange rates and currency risks
Community Considerations
Availability of skilled workers
Liveability: Facilities and services available
Attitudes: Taxes and incentives, and environmental regulations
Economics: Land and building costs, Transportation infrastructure
Site Related Factors
Site size and room for expansion
Utility
Parking and road access
Zoning restrictions
Service and Retail Locations
Customer access and market size
Demographics
Traffic volume
Transportation systems and “clustering”
Clustering
When businesses locate near similar businesses
Example: Competitors’ locations can be important. In some cases, services and retailers will want to locate near competitors to benefit from the concentration of potential customers. Mall stores and auto dealers are good examples
Manufacturing/Distribution
Cost Focus Distribution modes/costs Energy availability, costs Labour cost/availability/skills Material availability/costs
Service/Retail
Revenue focus Demographics: age, income, etc. Population/drawing area Competition Traffic volume / patterns Customer access / parking
Why Should Foreign Companies Locate in Canada?
Shortened delivery time and reduced delivery costs Access to natural resources Skilled labour, educated workers Politically very stable, tax incentives, Safe and secure Good telecommunication infrastructure Low cost for energy, health care Lower wage and exchange rates
Evaluating Location Alternatives
1) Locational Break-Even Analysis
2) Transportation Model: Consider costs of moving raw materials or finished goods
3) Factor Rating: Decision based on quantitative and qualitative inputs
4) Centre of Gravity Method: Decision based on minimum distribution costs
5) Location Analysis Software: Geographic information system
Locational Break-Even Analysis Steps
- Determine fixed and variable costs
- Plot total costs lines
- Determine location with lowest total costs
Locational Break-Even Analysis Assumptions:
- Fixed costs and variable costs are constant for the range of probable output
- Only one product is involved
Transportation Model
Determines the shipments of raw materials and finished goods in order to minimize total transportation cost:
Considers demand and capacity constraints
For multi-facility conditions
A special –purpose algorithm of linear programming
Break even only uses
1 facility
Binary varaible?
Variable with a value of 0 or 1
If it is 1: facilities are installed and the capacity is 100
If it is 0: Than the capacity is equal to 0 and there are no facilities and it is a closed factory. Therefore, no transportation. All numbers will be equal to 0
Multiple
MCDM
