Major factors affecting decisions , major methods of evaluating location , Examples , Location options ,

1. Location Decisions
By: Omar Iqnaibi
Kefah AlJabari
Supervision of :
Dr. Yousif AbuFara

2. Introduction
• Critical element in determining revenue for
service , retail or professional firm.
• A book of AEROTROPLOIS Airport-integration
Region: 60 miles from the inner cluster of hotel,
distribution& logistics facilities .

3. Cases of Location decisions
• Hard Rock Café
3 years in Russia food supply
chain Moscow.
• FedEx , Asian Hub in China
Link Paris, Memphis package
hubs to Asia
• Mercedes -Benz , first major
overseas plant in Alabama.
completed 1 year among 170 sites
in 30 states in two countries .

4. Strategic Importance of Location
• Affects Variable & Fixed Cost
• Major impact on overall risk & profit of CO.
• Important to Economics of Transportation
Airports, Highways, Ports.

5. Location Options
1. Expand an existing facility instead of moving.
1. Maintain current sites while adding another
facility elsewhere.
1. Closing the existing facility and moving to
another location.

6. Location Decisions depends on
• Individual :
Minimizing costs , innovation, creativity.
• Retail & professional Co. :
Maximizing revenues
Objective of Location Strategy
• Maximize the benefit of location to the firm
--Combination of Cost & Speed of delivery.

7. 7 Major Factors affecting Location
Decisions
1. The development of Market Economics.
2. Better International Communications.
3. More rapid , reliable travel & shipping .
4. Ease of capital flow between countries
5. High differences in labor costs
6. Labor productivity , foreign exchange .
7. Changing of attitudes of suppliers, competitors
, and markets.

8. Labor Productivity
• Employees with poor training , poor education
or poor work habits may not be a good buy even
at low wages.
• Employees who cannot or will not always reach
their places of work are not much good even at
low wages.
• Labor cost per unit equation

9. Exchange Rate & Currency risk
• Firms can take advantage of a particularly
favorable exchange rate by relocating or
exporting to a foreign country.

10. Costs
• Location costs can be divided to
1. Tangible Costs :
Are costs that are readily identifiable and precisely
measured . Utilities, labor, material , taxes,
transportation of finished goods.
2. Intangible Costs:
Are less easily quantified , qaulity of education
Public transportation facilities , community
attitudes toward the industry & CO &climate

11. 4 Major Methods of
Evaluating Location
• The factor-Rating Method
• Locational cost-volume analysis
• The center of gravity method
• The transportation model.

12. The Factor-Rating Method
• A location method that instills objectivity into
the process of identifying hard-to- evaluate
costs.
• Popular
• Quantitative and Qualitative info.
• Wide range of variety of factors from education
to recreation to labor skills.

13. 6 steps of the Factor-Rating
1. Develop a list of relevant factors called
(Key Success Factory).
2. Assign a weight to each factor to reflect its relative
in the company`s objectives .
3. Develop a scale for each factor ( 1-10,1-100)
4. Have a management score each location for each
factor
5. Multiply the score by the weights for each factory
and total the score for each location
6. Make a recommendation based on the maximum
point score.

14. Locational Cost –Volume Analysis
• A technique of making economic comparison of location
alternatives by identifying fixed & variable costs and
graphing them for each location.
• The three steps are :
1. Determine the fixed & variable cost for each location.
2. Plot the costs for each location, with costs on the
vertical axis of the graph and annual volume on the
horizontal axis.
3. Select the location that has the lowest total cost for the
expected production volume.

15. Center of Gravity Method
• A mathematical technique used for finding the
location of a distribution center that will
minimize distribution costs.
1. location of markets
2. Shipping costs
3. Volume of goods shipped to those markets.
• Assumes that cost is directly proportional to
both distance and volume shipped .
• Ideal location : minimize the weighted distance
between the warehouse and its retail outlets.

16. Transportation Model
• A technique for solving a class of linear
programming problems.
Objective is to determine the best pattern of
shipments from several points of supply to several
points of demand so to minimize total production
and transportation costs.
More efficient , special- step by step improvement
until an optimal solution is reached.

17. Service Location Strategy
1. Purchasing power of the customer – drawing area.
2. Service and image compatibility with demographic
of the customer drawing area
3. Competition in the are
4. Quality of the competition
5. Uniqueness of the firm
6. Physical qualities of facilities and neighboring
business
7. Operations polices of the firm
8. Quality of management.

18. Geographic Information System
(GIS)
• A system that stores and displays information
that can be linked to a geographic location.
• Used to help firms make successful , analytical
decisions with regard to location.
• By combining population, age , income, traffic
flow and idetify figures with geography.
•

19. Some of data available on GIS
• Maps of every street, highway, bridge
• All rivers, mountings , lakes and forests.
• All major airports, colleges, and hospitals
• Utilize such as electric , water ,& gas Lines.
• Examples:

20. Modern Trends in location
Decisions
• Movement to suburbs
(Trqumia )
• Industrial Parks
Services are provided big areas .
• Competition for industry
Tax free, loans, government permits
• Decentralization
• Globalization of operations

21. Location Example on
Palestine State

22. Applying Location decision
method on Disneyland PS.
Cities selected
1. Hebron
2. Ramallah
3. Nablus
4. Bethlehem
Criteria
• Population rate
• Price of land
• Ease of transportation
• Ease of resources

23. Diseny land CO.

25. Any
Question
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