Week 6 / Location Planning and Analysis

Question 1

Location Planning and Analysis is also known as

Answer 1

Facility Location Problem (FLP)

Question 2

Importance of Location

Answer 2

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

Question 3

Location Decisions in the Supply Chain

Answer 3

Suppliers: Near source of raw materials

Middle: Close to supplier or customer

Retail:•Accessibility
•Demographics
•Traffic patterns

Question 4

Formal Location Decision Process (5 steps)

Answer 4

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

Question 5

Location Decision Factors

Answer 5

Country factors
Regional factors
Community consideration factors
Site-related factors

Question 6

Regional Factors

Answer 6

1) Location of raw materials
2) Location of markets
3) Labour factors
4) Other factors

Question 7

Regional Factors (4)

Answer 7

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

Question 8

Foreign Locations

Answer 8

Political stability
Attitude toward foreign companies
Language and cultural differences (eg. corruption)
Exchange rates and currency risks

Question 9

Community Considerations

Answer 9

Availability of skilled workers

Liveability: Facilities and services available

Attitudes: Taxes and incentives, and environmental regulations

Economics: Land and building costs, Transportation infrastructure

Question 10

Site Related Factors

Answer 10

Site size and room for expansion

Utility

Parking and road access

Zoning restrictions

Question 11

Service and Retail Locations

Answer 11

Customer access and market size

Demographics

Traffic volume

Transportation systems and “clustering”

Question 12

Clustering

Answer 12

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

Question 13

Manufacturing/Distribution

Answer 13

Cost Focus
Distribution modes/costs
Energy availability, costs
Labour cost/availability/skills
Material availability/costs

Question 14

Service/Retail

Answer 14

Revenue focus 
Demographics: age, income, etc.
Population/drawing area
Competition
Traffic volume / patterns
Customer access / parking

Question 15

Why Should Foreign Companies Locate in Canada?

Answer 15

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

Question 16

Evaluating Location Alternatives

Answer 16

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

Question 17

Locational Break-Even Analysis Steps

Answer 17

1. Determine fixed and variable costs
2. Plot total costs lines
3. Determine location with lowest total costs

Question 18

Locational Break-Even Analysis Assumptions:

Answer 18

• Fixed costs and variable costs are constant for the range of probable output
• Only one product is involved

Question 19

Transportation Model

Answer 19

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

Question 20

Break even only uses

Answer 20

1 facility

Question 21

Binary varaible?

Answer 21

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

Question 22

Multiple

Answer 22

MCDM