(1) a Facilities Location Ballou13

7/31/2019 (1) a Facilities Location Ballou13

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Facility Location Decisions

Experience teaches that men are so muchgoverned by what they are accustomed to see and

practice, that the simplest and most obviousimprovements in the most ordinary occupations areadopted with hesitation, reluctance, and by slowgraduations.

Alexander Hamilton, 1791


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.

Facility Location in Location

Strategy

PLANNING

ORGANIZING

C

ONTROLLING

Transport Strategy Transport fundamentals Transport decisions

Customerservice goals

The product Logistics service Ord . proc. & info. sys.

Inventory Strategy

Forecasting Inventory decisions

Purchasing and supplyscheduling decisions

Storage fundamentals Storage decisions

Location Strategy

Location decisions

The network planning process

PLANNING

ORGANIZING

C

ONTROLLING

Transport Strategy Transport fundamentals Transport decisions

Customerservice goals

The product Logistics service Ord . proc. & info. sys.

Inventory Strategy

Forecasting Inventory decisions

Purchasing and supplyscheduling decisions

Storage fundamentals Storage decisions

Location Strategy

Location decisions

The network planning process


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Location OverviewWhat's located?

Sourcing points Plants Vendors Ports

Intermediate points Warehouses Terminals Public facilities (fire, police, and ambulance

stations)

Service centers Sink points Retail outlets Customers/Users


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Location Overview(Contd)

Key Questions How many facilities should there be?

Where should they be located?

What size should they be?

Why Location is Important Gives structure to the network Significantly affects inventory and

transportation costs Impacts on the level of customer service to

be achieved


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.

The objective is to deliver the firms

products to its customers from a

location or locations that meetcertain criteria such as low shippingcosts, least damaged goods and/or

low manufacturing costs.

Location Overview(Contd)


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Nature of Location Analysis

Manufacturing (plants & warehouses)

Decisions are driven by economics. Relevant costssuch as transportation, inventory carrying, labor, andtaxes are traded off against each other to find goodlocations.

Retail

Decisions are driven by revenue. Traffic flow andresulting revenue are primary location factors, cost isconsidered after revenue.

Service

Decisions are driven by service factors. Responsetime, accessibility, and availability are key dimensionsfor locating in the service industry.


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Types Of Facilities

Heavy manufacturing

Auto plants, steel mills, chemical plants

Light industry

Small components mfg, assembly

Warehouse & distribution centers

Retail & service


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Factors in Heavy ManufacturingLocation

Construction costs

Land costs

Raw material and finished goodsshipment modes

Proximity to raw materials

Utilities

Labor availability


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Factors in Light Industry

Location

Construction costs

Land costs

Easily accessiblegeographic region

Education & training capabilities


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Factors in Warehouse

Location

Transportation costs

Proximity to markets


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Factors in Retail Location

Proximity tocustomers

Location iseverything


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Some Location Theory/Practice

Early economic analysisBid rent curvesWebers isodapanesWebers classification of industriesHoovers tapered transport ratesAgglomeration

Mathematical approachesLight analysis

-Chart, compass, ruler techniques-Spreadsheets-Checklists

Continuous location methodsMathematical programming


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Bid Rent Curve


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Bid Rent Curve

Thunen recognized that the maximumrent, or profit, that any economicdevelopment could pay for land was the

difference between the price for thegoods in the marketplace and cost oftransporting the goods to the

marketplace.


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CR (2004) Prentice Hall, Inc.

Web

ersIso

dapane

sVariable spacingcan mean

nonlineartransportation

costs


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Webers Classification of

Industries

.

steelmaking

soft drinkbottling

assemblyoperations


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Hoovers Transport Curves

YY

facility should belocated at Y


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Agglomeration

Based on the observation that the output of oneindustry is the input of another. Customers for anindustrys products are the workers of those

industries. Hence, suppliers, manufacturers, and

customers group together, especially wheretransportation costs are high. Historically, thegrowth of the auto industry showed this pattern.Today, the electronics industry (silicon valley) has asimilar pattern although it is less obvious since theproduct value is high and transportation costs are asmall portion of total product price.

Documents

(1) a Facilities Location Ballou13