Facility Location Strategies http:www'managementsupport'com

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Facility Location Strategies
http//www.managementsupport.com
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Importance of Location

• Up to 25 of the products selling cost
• Once a company commits to a location, many costs
  are fixed and difficult to change
• Energy
• Labor
• Location depends on the type of business
• Manufacturing minimizing cost
• Retail and professional services maximizing
  revenue
• Warehouse cost and speed of delivery

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Location Decision Example BMW Country Decision
Factors

• Market location
• U.S. is worlds largest luxury car market
• Growing (baby boomers)
• Labor
• Lower manufacturing labor costs
• 17/hr. (U.S.) vs. 27 (Germany)
• Higher labor productivity
• 11 holidays (U.S.) vs. 31 (Germany)
• Other
• Lower shipping cost (2,500/car less)
• New plant equipment would increase productivity
  (lower cost/car 2,000-3000)

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Costs Tangible Vs. Intangible

• Tangible costs those that are readily
  identifiable and precisely measured
• Utilities
• Labor
• Material
• Taxes
• Depreciation
• Other costs that accounting can easily identify
• Intangible costs not easily quantifiable
• Quality of education
• Public transportation facilities
• Community attitudes toward the industry and the
  company
• Quality and attitude of prospective employees
• Climate

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Steps in Factor Rating Method