Chapter 8- Location Planning and Analysis PDF

Preview

Summary

Book summary from chapter 8...

Description

HST 400- OPERATIONS CHAPTER 8- LOCATION PLANNING AND ANALYSIS Importance of Location   

Expand into new markets Depletion of their basic input Shifts in the market (cost of business it cheaper somewhere else)

Reasons that location decisions are important:   

They entail a long term commitment that makes mistakes difficult to over come Location decisions impact investment requirements, operating costs, and revenues A poor choice in location might result in a shortage of qualified labour, inadequate supplies of raw materials, or other

Location factors can depend on where a business is in the supply chain   

Retail- sit selection tends to focus on accessibility Beginning (raw materials) located near these Middle- located near suppliers or customers

Location Decision Process   

The way an organization approached location decisions often depends on its size and the nature and scope of its operations New or small orgs tend to adapt a information approach- like living close to the owner Large orgs take a more formal approach

Factors that Affect Location Decisions Regional/Country Factors   

Primary: raw materials, markets, and labour considerations Positive: natural resources, cheap labour and new markets Companies locate near or at the source of their raw materials because: o Necessity, perishability and transportation costs

Location of Markets   

Retailers and service providers are generally found near the center of the markets they provide to Some companies must locate close to their markets because of the perishability of their products Location of many government services should be near the center of the markets tey are designed to serve

Labour Factors   

Availability of workers, the wage rates and labour productivity, attitudes toward work, and whether unions are a potential problem Some companies target regions with high unemployment in order to draw from the large pool of unemployed workers Labour costs are very important for labor-intensive companies and they can differ significantly across regions

Community/Site Related Considerations 

 

Usually workers live close to their place of work- blue collar workers tend not to relocate to find a job o Therefore, companies ensure that there are sufficient numbers of potential applicants living near a site Factors to determine livability for workers: o Education, shopping, recreation, transportation, entertainment and medical Primary considered related to sites are land and access o Others: room for future expansion, utility and sewer capacities, sufficient parking space

Service/Retail Locations  

Customer access is primary Tend to be profit or revenue focuses, concerned with demographics like: income, education population, competition, traffic, volume

Why Should Foreign Companies Locate in Canada?     

Shorten delivery time and reduce delivery costs to markets in Canada US Exploit Canadian natural resources and use Canadian skilled labour Canadian workers are educated, basic health care is free, and the country is politically stable with little corruption Generally safe and secure, energy costs are low and government provides R&D tax incentives Canada is one of 9 cheapest major industrialized countries

Evaluating Location Alternatives  

Locational break even analysis- identifies the least (fixed and variable) cost location choice based on quantity to be produced Can be done numerically or graphically

The procedure: 1. 2. 3. 

2

Determine the fixed and variable costs associated with each location alternative Plot the total cost lines for all location alternatives on the same graph Determine which location will have the lowest total cost for the expected level of output This method assumes that fixed and variable costs are constant for the range of probable output, and only one product is involved

Factor Rating 

Involves scoring the factors(both quantitative and qualitative) and determining the waited score for each location, and choosing the location with the highest score

The procedure: 1. 2. 3. 4. 5. 6.

Determine which factors are relevant Assign a weight to reach factor that indicates it relative importance compared to all other factors Decide on a common scale for all factor scores Score all factors for each location Multiply the factor weight by the score for each factor, and sum the results for reach location Choose the location that has the highest composite score

Centre of Gravity Method   

3

Determines the location of center that will minimize the total distribution cost It treats distribution cost as a linear function of the distance and the quantity shipped The method uses a map that shows the locations of the destinations o Must be accurate and drawn to scale o A coordinate system is overlaid on the map to determine relative locations o If the quantities transported to every destination are the same, you can obtain the coordinated of the center of gravity by finding the average of the x coordinated and the average of the y coordinates...