Location Planning and Analysis

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• Location Planning and Analysis

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Need for Location Decisions

• Marketing Strategy
• Cost of Doing Business
• Growth
• Depletion of Resources

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Nature of Location Decisions

• Strategic Importance of location decisions
• Long term commitment/costs
• Impact on investments, revenues, and operations
• Supply chains
• Objectives of location decisions
• Profit potential
• No single location may be better than others
• Identify several locations from which to choose
• Location Options
• Expand existing facilities
• Add new facilities
• Move

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Making Location Decisions

• Decide on the criteria
• Identify the important factors
• Develop location alternatives
• Evaluate the alternatives
• Identify general region
• Identify a small number of community alternatives
• Identify site alternatives
• Evaluate and make selection

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Location Decision Factors
Community Considerations
Regional Factors
Site-related Factors
Multiple Plant Strategies
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Regional Factors

• Location of raw materials, e.g. transportation,
  perishability, necessity
• Location of markets, e.g, customers, distrib.
  costs
• Labor factors
• Climate and taxes

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Community Considerations

• Quality of life
• Services
• Attitudes
• Taxes
• Environmental regulations
• Utilities
• Developer support

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Site Related Factors

• Land
• Transportation
• Zoning, Environmental
• Legal

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Multiple Plant Strategies

• Product plant strategy
• Market area plant strategy
• Process plant strategy (e.g. engine)

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Service and Retail Locations

• Manufacturers cost focused
• Service and retail revenue focused (customer)
• Traffic volume and convenience most important
• Demographics
• Age
• Income
• Education
• Location, location, location
• Good transportation
• Customer safety

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Comparison of Service and Manufacturing
Considerations
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Trends in Locations

• Foreign producers locating in U.S.
• Made in USA
• Currency fluctuations
• Just-in-time manufacturing techniques
• Microfactories
• Information Technology

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Global Locations

• Reasons for globalization (i.e., low cost and
  growing markets)
• Benefits (markets, cost, legal, financial)
• Disadvantages (transportation, security,
  unskilled labor, import restrictions, criticism)
• Risks (political, terrorism, economic, legal,
  cultural)
• Global operations issues

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Globalization

• Disadvantages
• Transportation costs
• Security
• Unskilled labor
• Import restrictions
• Criticisms
• Risks
• Political
• Terrorism
• Legal
• Cultural

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Evaluating Locations

• Cost-Profit-Volume Analysis
• Determine fixed and variable costs
• Plot total costs
• Determine lowest total costs

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Example 1 Cost-Volume Analysis

• Fixed and variable costs for four potential
  locations

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Example 1 Solution
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Example 1 Solution
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Evaluating Locations

• Transportation Model
• Decision based on movement costs of raw materials
  or finished goods
• Factor Rating
• Decision based on quantitative and qualitative
  inputs
• Center of Gravity Method
• Decision based on minimum distribution costs

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Porters International Diamond
Firms Strategy, Structure Rivalry
Factor Conditions
Competitive Advantage
Demand Conditions

Support Industries