location analysis logistic management

1. 8-1
Location Planning and Analysis
CHAPTER
5
Location Planning
and Analysis

2. 8-2
Location Planning and Analysis
Need for Location Decisions

Marketing Strategy

Cost of Doing Business

Growth

Depletion of Resources

3. 8-3
Location Planning and Analysis
Nature of Location Decisions

Strategic Importance
 Long term commitment/costs
 Impact on investments, revenues,
 Supply chains

Objectives
and operations
 Profit potential
 No single location may be better than others
 Identify several locations from which to choose

Options
 Expand existing facilities
 Add new facilities
 Move

4. 8-4
Location Planning and Analysis
Making Location Decisions





Decide on the criteria
Identify the important factors
Develop location alternatives
Evaluate the alternatives
Make selection

5. 8-5
Location Planning and Analysis
Location Decision Factors
Regional Factors
Community
Considerations
Multiple Plant
Strategies
Site-related
Factors

6. 8-6
Location Planning and Analysis
Regional Factors




Location of raw materials
Location of markets
Labor factors
Climate and taxes

7. 8-7
Location Planning and Analysis
Community Considerations







Quality of life
Services
Attitudes
Taxes
Environmental regulations
Utilities
Developer support

8. 8-8
Location Planning and Analysis
Site Related Factors




Land
Transportation
Environmental
Legal

9. 8-9
Location Planning and Analysis
Multiple Plant Strategies



Product plant strategy
Market area plant strategy
Process plant strategy

10. 8-10 Location Planning and Analysis
Comparison of Service and
Manufacturing Considerations
Table 8.2
Manufacturing/Distribution
Service/Retail
Cost Focus
Revenue focus
Transportation modes/costs
Demographics: age,income,etc
Energy availability, costs
Population/drawing area
Labor cost/availability/skills
Competition
Building/leasing costs
Traffic volume/patterns
Customer access/parking

11. 8-11 Location Planning and Analysis
Trends in Locations

Foreign producers locating in INDIA
 “Made
in INDIA”
 Currency fluctuations



Just-in-time manufacturing techniques
Microfactories
Information Technology

12. 8-12 Location Planning and Analysis
Table 8.3
Foreign
Government
Cultural
Differences
a. Policies on foreign ownership of production facilities
Local Content
Import restrictions
Currency restrictions
Environmental regulations
Local product standards
b. Stability issues
Living circumstances for foreign workers / dependents
Religious holidays/traditions
Customer
Preferences
Possible buy locally sentiment
Labor
Level of training and education of workers
Work practices
Possible regulations limiting number of foreign employees
Language differences
Availability and quality of raw materials, energy,
transportation
Resources

13. 8-13 Location Planning and Analysis
Evaluating Locations

Cost-Profit-Volume Analysis
 Determine
 Plot
fixed and variable costs
total costs
 Determine
lowest total costs

14. 8-14 Location Planning and Analysis
Location Cost-Volume Analysis

Assumptions
Fixed costs are constant
Variable costs are linear
Output can be closely estimated
Only one product involved

15. 8-15 Location Planning and Analysis
Example 1: Cost-Volume Analysis
Fixed and variable costs for
four potential locations
L o c a tio n
A
B
C
D
F ix e d
C o s t
$ 2 5 0 ,0 0
1 0 0 ,0 0
1 5 0 ,0 0
2 0 0 ,0 0
0
0
0
0
V a r ia b le
C o s t
$ 1 1
3 0
2 0
3 5

16. 8-16 Location Planning and Analysis
Example 1: Solution
F ix e d
C o s ts
A
B
C
D
V a r ia b le
C o s ts
T o ta l
C o s ts
$ 2 5 0 ,0 0 0
1 0 0 ,0 0 0
1 5 0 ,0 0 0
2 0 0 ,0 0 0
$ 1 1 (1 0 ,0 0 0 )
3 0 (1 0 ,0 0 0 )
2 0 (1 0 ,0 0 0 )
3 5 (1 0 ,0 0 0 )
$ 3 6 0 ,0 0 0
4 0 0 ,0 0 0
3 5 0 ,0 0 0
5 5 0 ,0 0 0

17. 8-17 Location Planning and Analysis
Example 1: Solution
$(000)
800
700
600
500
400
300
200
100
0
0
D
B
C
A
A Superior
C Superior
B Superior
2
4
6
8
10
Annual Output (000)
12
14
16

18. 8-18 Location Planning and Analysis
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

19. 8-19 Location Planning and Analysis
Design/Facility
STA04
Layout choices at St. Alexius Hospital

20. 8-20 Location Planning and Analysis
Flow Charts/Assessment
BP3
Example, Tri State Industries

21. 8-21 Location Planning and Analysis
Team/Visual/System
PI6
Interview at McDonalds