Chapter 18 Location, Facilities, and Layout Entrepreneurship and Small Business Management

Chapter 18Location, Facilities, and Layout

Entrepreneurship and Small Business Management

© 2012 Pearson Education, Upper Saddle River, NJ 07458.

All Rights Reserved.2

Entrepreneurship and Small Business Management, 1/eBy Steve Mariotti and Caroline Glackin

Ch. 18 Performance Objectives

Understand the importance of the physical location of a business.

Know the key factors to consider in the location decision.

Learn how location needs differ by business type.

Determine locations via multiple methods.




Ch. 18 Performance Objectives(continued)

Explore the design of facilities and their layouts.

Recognize the special considerations for home-based businesses.

Describe location factors for Web-based businesses.




Why Is Location Important?

Determines access to markets

Affects essential portions of your cost structure including transportation and distribution

Impacts customer satisfaction and overall levels of risk and profitability

Can make the difference between business success and failure




Factors in Location Decision Access for customers Access to suppliers Climate & geography Convenience Cost of facilities Economic conditions

& business incentives

Demographics Regulations &

laws Labor pool Proximity to

competitors Visibility




Location Needs Differ byBusiness Type

Manufacturers

Customer service Facilities and

distribution costs Skilled labor pool Access to suppliers Laws and

regulations

Wholesalers Economical

distribution costs Proximity to

customers and suppliers

Tangible costs of facilities

Incentives and regulations




Location Needs Differ byBusiness Type (continued)

Retailers

Drawing power Demographics Traffic generators Competitor locations Selling space

needed Rental costs

Service and Professional

Needs vary considerably

Customer convenience and accessibility

Demographics Image/positioning Safety/security factors




Evaluating Locations Simplest way—select location you know Factor-rating method—prioritize and

weight criteria with these steps:1. Develop a list of critical factors.2. Determine “weight” of each factor relative to

importance.3. Create a measurement scale.4. Score each location for each factor using

scale.5. Multiply factor weight times factor score (for

each factor in each location).6. Compare sums of locations’ weighted factors.




Evaluating Locations (continued)

Use geographic information systems which include demographic data, maps, topographic data, major transportation routes, and so on.

Use market research to gather demographic, psychographic, geographic, and competition data.




Evaluating Locations (continued) Location breakeven analysis—

calculates and compares fixed and variable costs of each location

Center-of-gravity method—used to locate a distribution center by judging: Locations of the destinations How much product will ship to destinations Frequency of delivery Cost of delivery




Facilities Design and Layout

Manufacturing, warehousing, and distribution facilities need space to operate cost effectively.

Retail facilities must draw maximum revenue from design and layout.

Service and professional firms have individual facility requirements based on business type.




Facilities Factors forManufacturers/Distributors Capacity for efficient movement of materials,

equipment, and people Flexibility to adapt to changing needs Loading docks for deliveries and shipments Environment conducive to work requirements Ability to include vital control regulators Parking for commercial, employee, and

visitor vehicles Adequate utility services to the building Security and safety




Types of Manufacturing Layouts

Product layouts—appropriate for continuous, mass-production processes

Process layouts—functional layouts that work well where there are common procedures for varied products

Fixed-position layouts—used for production of large objects where materials and teams are brought to a single location




Facilities Factors for Retailers Appropriate selling area and configuration

of that space Permission to complete necessary

changes (or improvements to be done by landlord)

Space for offices, storage, restrooms, deliveries, special needs, etc.

Signage for rules/regulations Adequate customer parking Lighting and security




Retail Store Design and Layout

Building exterior, window displays and cleanliness, and signage all send messages to customers.

Inside layout should be designed to entice customers to purchase. Product placement Type of shopping experience desired

for the customer




Considerations forHome-Based Businesses

Investigate zoning ordinances, deed restrictions, and civic association rules.

Determine how to divide your business area from your family’s living area.

Plan for appropriate business furnishings and a separate telephone line.

Consider if customers will prefer to visit an office building or store, instead of a home.




Location Factors forWeb-Based Businesses

The physical space needed for operations could be as small as a one-room office.

Location is more a function of personal preference, cost, or proximity of vendors.

Location, facility, and layout decisions should minimize distribution costs and time.

Some technology-based companies prefer to cluster with similar firms.

Documents

Chapter 18 Location, Facilities, and Layout Entrepreneurship and Small Business Management