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1. O P E R A T I O N S M A N A G E M E N T
L E C T U R E 6 B
Location Planning and Analysis

2. Global Locations
 Reasons for globalization
 Benefits
 Disadvantages
 Risks
 Global operations issues

3. Globalization
 Facilitating Factors
 Trade agreements
 Technology
 Benefits
 Markets
 Cost savings
 Legal and regulatory
 Financial

4. Globalization
 Disadvantages
 Transportation costs
 Security
 Unskilled labor
 Import restrictions
 Criticisms
 Risks
 Political
 Terrorism
 Legal
 Cultural

5. Global Operational Issues
Foreign
Government
a. Policies on foreign ownership of production facilities
Local Content
Import restrictions
Currency restrictions
Environmental regulations
Local product standards
Liability laws
b. Stability issues
Cultural
Differences
Living circumstances for foreign workers / dependents
Religious holidays/traditions
Customer
Preferences
Possible buy locally sentiment
Labor Level of training and education of workers
Work ethic
Possible regulations limiting number of foreign employees
Language differences
Resources Availability and quality of raw materials, energy,
transportation infrastructure

6. Global Location Factors
 Government stability
 Government regulations
 Political and economic
systems
 Economic stability and
growth
 Exchange rates
 Culture
 Climate
 Export/import regulations,
duties and tariffs
 Raw material availability
 Number and proximity of
suppliers
 Transportation and
distribution system
 Labor cost and education
 Available technology
 Commercial travel
 Technical expertise
 Cross-border trade
regulations
 Group trade agreements

7. Evaluating Locations
 Center of Gravity Method
Decision based on minimum distribution costs
The Center of movement in a geographic area
based on transport weight and distance.
This technique is a quantitative method for
locating a facility such as a warehouse

8. Center of Gravity Model
Linear transportation cost issue
Weighted center of gravity model locates facility closest to demand &
supply sites with heaviest annual shipments (reducing distribution costs)
where,
x, y = coordinates of new facility at center of gravity
xi, yi = coordinates of existing facility i
Wi = annual weight shipped from facility i (Quantity)
n = number of facilities
n
x
x i
n
y
y i


i
ii
W
Wx
x


i
ii
W
Wy
y

9. Center of Gravity Technique: Example
 A burger restaurant purchases ingredients from four
different food suppliers. The company wants to construct a
new central distribution center to process and package the
ingredients before shipping them to their various
restaurants. The locations of the four suppliers A, B, C and
D, and annual numbers of trailers load (quantity) that will
be transported to the distribution center are shown:

10. Center of Gravity Technique: Example
A B C D
x 200 100 250 500
y 200 500 600 300
Wt 75 105 135 60
y
700
500
600
400
300
200
100
0 x700500600400300200100
A
B
C
D
(135)
(105)
(75)
(60)
Miles
Miles

11. Center of Gravity Technique: Example
238
6013510575
)60)(500()135)(250()105)(100()75)(200(
1
1








n
i
i
i
n
i
i
W
Wx
x
444
6013510575
)60)(300()135)(600()105)(500()75)(200(
1
1








n
i
i
i
n
i
i
W
Wy
y

12. Center of Gravity Technique: Example
 Thus, the suggested coordinates for the new distribution
center location are x = 238 and y = 444. However, it should
be kept in mind that these coordinates are based on
straight-line distances, and in real situation actual roads
might follow more circuitous routes.

13. Center of Gravity Technique: Example
A B C D
x 200 100 250 500
y 200 500 600 300
Wt 75 105 135 60
y
700
500
600
400
300
200
100
0 x700500600400300200100
A
B
C
D
(135)
(105)
(75)
(60)
Miles
Miles
Center of gravity (238, 444)

14. Thank you
THAT’S THE END OF
LECTURE 6B