1. STUDENTS MARKET Is their GRADE In a classroom industry Now staying in this classroom for a semester

2. Near source Near market Near rivals Far from rivals WHERE would you like to sit?? Now that is what we call And why? 3. Location Planning and Analysis 4. List some of the main reasons organizations need to make location decisions Explain why location decisions are important Discuss the options that are available for location decisions Describe some of the major factors that affect location decisions Outline the decision processes for making these kinds of decisions Use the techniques presented to solve typical problems 5. 3 most important determinants of the value of a property (according to a well-known real estate broker) Location Location Location Location Decisions represent a key part of the strategic planning process of virtually every organization one-time problems stake: existing > new 6. Marketing Strategy help expand markets reflect addition of new locations Growth in demand for its products and/or services Depletion of Resources Shift in Markets Cost of Doing Business 7. Strategic Importance Objectives Supply Chain Considerations Location Options 8. Closely tied to orgs strategies Impact on Capacity and Flexibility Others: Long term commitment/costs Impact on investments, revenues, and operations Supply chains 9. Near to my supplier = less transportation cost convenience for customer Near competitors = concentration of potential customers MONOPOLY yeah! 1 23 Near to my market 10. Profit potential Identify several locations from which to choose No single location may be better than others Additional awareness as to position of org in Supply Chain Beginning, middle 11. Number and location of Suppliers Production facilities Warehouses Distribution centers Centralized or decentralized? 12. Expand existing facilities Add new facilities Move Do nothing 13. Facilitating Factors Trade Agreements Technology Benefits Markets Cost Savings Legal and Regulatory Financial Other New sources of product ideas new problem and solution perspectives 14. Disadvantages High Transportation Costs Security Costs/Risks/Threats Unskilled Labor Import Restrictions Criticisms Risks Political Terrorism Economic Legal Ethical Cultural Managing Global Operations 15. Decide criteria to use Identify important factors Develop location alternatives Identify a COUNTRY Identify a REGION Identify a COMMUNITY Identify a SITE Evaluate alternatives & Make a selection 16. Level Factors Considerations COUNTRY Government Policies on foreign ownership of production facilities Local content requirements Import restrictions Currency restrictions Environment regulations Local product standards Liability laws Stability issues Cultural differences Living circumstances for foreign workers and their dependents Religious holidays/traditions Customer Preferences Possible buy locally sentiments 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 Financial Financial incentives, tax rates, inflation rates, interest rates Technological Rate of technological change Market Market potential, competition Safety Crime, terrorism threat 17. Broad alternative Encompass es the other three alternatives factors 18. Near raw materials Necessity Perishability Transportation cost Near market Part of competitive strategy Competitive pressures of retail stores Perishabilty ofproduct Customer contact Locations of govt services Labor Factors Availability of labor Wage rates Skills of workers Climate ,taxes 19. Community attitude to org Availabilitty of utilities Community size Envi regulations 20. Land Transportation Zoning Other restrictions Industrial parks 21. Level Factors Considerations REGION Location of raw materials/supply Proximity, modes and costs of transportation, quantity available Location of markets Proximity, distribution costs, target market, trade practices/restrictions Labor Availability (gen and spec), age distribution of workforce, work attitudes, union or nonunion, productivity, wage scales, unemployment compensation laws COMMUNITY Quality of Life Schools, churches, shopping housing, transportation, entertainment, recreation, cost of living Services Medical, fire, police Attitudes Pro/con Taxes State/local, direct or indirect Environmental regulations State/local Utilities Cost and availability Development and Support Bond issues, tax abatement, low cost loans, grants SITE Land Cost, degree of development required, soil characteristics and drainage, room for expansion, parking Transportation Type (access roads, rail spurs, air freight) Environmental/Legal Zoning restrictions 22. Product Plant Strategy Market Area Plant Strategy Process Plant Strategy General Purpose Plant Strategy 23. Nearness to raw material is not a factor Customer acces sometimes a prime consideration Near center of markets they serve Prioritizes traffic volume and convenience Good transportation and parking facilities is vital Competitors location is significant 24. 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 25. Locational Cost-Profit-Volume Analysis Decision based on fixed and variable costs Factor Rating Decision based on quantitative and qualitative inputs Center of Gravity Method Decision based on minimum distribution costs Transportation Model Decision based on movement costs of raw materials or finished goods 26. Steps: Determine fixed and variable costs Plot total costs Determine lowest total costs Assumptions: Fixed costs are constant Variable costs are linear Output can be closely estimated Only one product involved 27. Formula: Total Cost = FC + V * Q Where: FC = Fixed Cost V = Variable Cost per Unit Q = Quantity or Volume of Output 28. Example: Fixed and variable costs for four potential locations L o c a t i o n F i x e d C o s t V a r i a b l e C o s t A B C D $ 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 3 0 2 0 3 5 29. Solution: Fixed Costs Variable Costs Total Costs A B C D $250,000 100,000 150,000 200,000 $11(8,000) 30(8,000) 20(8,000) 35(8,000) $338,000 340,000 310,000 480,000 30. Fixed Costs Variable Costs Total Costs A B C D $250,000 100,000 150,000 200,000 $11(14,000) 30(14,000) 20(14,000) 35(14,000) $404,000 520,000 430,000 690,000 31. Solution: 800 700 600 500 400 300 200 100 0 Annual Output (000) $(000) 8 10 12 14 166420 A B C B Superior C Superior A Superior D 32. Decision based on quantitative and qualitative inputs Procedure: Determine which factors are relevant Assign a weight to each factor that indicates its relative importance compared with all other factors. Decide on a common scale for all factors Score each location alternative Calculate weighted factor sum for each alternative Choose the alternative that has the highest composite score 33. Example: A photo-processing company intends to open a new branch store. The following table contains information on 2 potential locations. Which is the better alternative? Factor Weight Scores(100 pts) Weighted Scores Alt. 1 Alt. 2 Alt. 1 Alt. 2 Proximity to existing store .10 100 60 .10(100)=10 .10(60)=6 Traffic Volume .05 80 80 .05(80)=4 .05(80)=4 Rental Costs .40 70 90 .40(70)=28 .40(90)=36 Size .10 86 92 .10(86)=8.6 .10(92)=9.2 Layout .20 40 70 .20(40)=8 .20(70)=14 Operating Costs .15 80 90 .15(80)=12 .15(90)=13.5 1.00 70.6 82.7 34. Method for locating a distribution center that minimizes distribution costs Treats distribution costs as a linear function of the distance and the quantity shipped The method includes the use of a map that shows the locations of destinations The map must be accurate and drawn to scale A coordinate system is overlaid on the map to determine relative locations 35. Formulas: If quantities to be shipped are equal: X = xi / n y = yi / n Where: xi = x coordinate of destination i yi = y coordinate of destination i If quantities to be shipped are not equal: X = xiQi / Qi Xy= yiQi / Qi Where: Qi = quantity to be shipped to destination i xi = x coordinate of destination i yi = y coordinate of destination i 36. Example: equal Destination x y D1 2 2 D2 3 5 D3 5 4 D4 8 5 18 16 Answer: X = 4.5 Y = 4 Center of Gravity is at (4.5, 4) 37. Example: unequal Destinati on x y Qty D1 2 2 800 D2 3 5 900 D3 5 4 2 D4 8 5 200 18 16 1002000 Answer: X = 3 Y = 3.7 Center of Gravity is at (3, 3.7) Graph and illustration refer to pp.389-390 38. List some of the main reasons organizations need to make location decisions Explain why location decisions are important Discuss the options that are available for location decisions Describe some of the major factors that affect location decisions Outline the decision processes for making these kinds of decisions Use the techniques presented to solve typical problems 39. BUTIL, Jessa Marie ABARQUEZ, Arianne June SERILO, Trzetrzelewska RUIZ, Arlene Maersk