Title: Location Planning and Analysis
1Chapter 8
- Location Planning and Analysis
2Need for Location Decisions
- Marketing Strategy Penetration
- Auto Industry
- Developing counties require it. (China / Ont.
Hydro) - Growth
- Depletion of Resources
- Australian forester finished ravaging their
forests and now in BC. - Fish stocks off east and west coasts
- Cost of Doing Business
- Labour / taxes too high
3Nature of Location Decisions
- Importance
- Long term commitment/costs
- Objectives
- Profit potential
- Dylex
- Options
- Expand existing facilities- SBE -gt Segal building
- Add new facilities Brad wafer production
- Move eg. Local Catholic school closings
4Location Decision Factors
Community Considerations
Regional Factors
Site-related Factors
Multiple Plant Strategies
5Location Decision Factors
Regional Factors
- Location of raw material
- Ernie, ore and water.
- Location of Markets
- Locate near customers
- Eg.Pawn and camera shops, auto-malls
- Labour Factors
- Why would you locate in Waterloo?
- Does lower wages in countries mean labour
savings? - Banking in Brazil.
- Sending BU100 text to Taiwan for printing
- Quality considerations
- USR modems
- Tolerances of parts in Mexico
- Supplier location (JIT)
Community Considerations
Local taxes, housing, education, snowmobiling etc.
6Location Decision Factors
Site-related Factors
- Land costs parking, sewers, expansion
- Transportation to site
- Industrial parks (already set up)
- Local incentives e.g., for doctors
- Entrepreneurs locate near home
Multiple Plant Strategies
- Product plant strategy
- Market area plant strategy
- Process plant strategy
7Trends in Locations
- Foreign producers locating in North America
- Made in North America
- Currency fluctuations
- Just-in-time manufacturing techniques
- Domestic producers moving back to North America
- Information highway
- Software production
- located near knowledge
- - Geoff testing firewalls
8Criteria to make location Decision
9Evaluating Locations
- Based on Demographics
- Dylex model for its XX XY stores
- Cost-volume Analysis
- Determine fixed and variable costs
- Plot total costs
- Determine lowest total costs
- Transportation Model
- Decision based on movement costs of raw materials
or finished goods. - Business 275.
- Factor Rating
- Decision based on quantitative and qualitative
inputs. - Center of Gravity Method
- Decision based on minimum distribution costs.
10Example 1 Cost-Volume Analysis
- Fixed and variable costs for four potential
locations
Calculate and Plot the TC lines, eg. For Location
A TC 11Q 250,000
11Example 1 Solution
12Example 1 Solution
(000)
800 700 600 500 400 300 200 100 0
D
B
C
A
A Superior
C Superior
B Superior
8
10
12
14
16
6
4
2
0
Annual Output (000)
13Evaluating Locations
- Transportation Model
- Decision based on movement costs of raw materials
or finished goods. - Business 275.
- Factor Rating
- Decision based on quantitative and qualitative
inputs. - Center of Gravity Method
- Decision based on minimum distribution costs.
14Center of gravity method
x
15In Class Example 8-14
16Factor Rating Method
17In Class Example 8-9
18Table 8-2