Choosing the Right
Location and Layout
a decision is the action an executive
must take when he has information so
incomplete that the answer does not
suggest itself…Admiral Radford
SCORE Business Plan
I.
Marketing Plan
Market research
Economics
Product
Customers
Competition
Niche
Strategy
Promotion
Promotional Budget
Pricing
Sales Forecast
SCORE Business Plan
II. Operational Plan
Production
Location
Legal Environment
Personnel
Inventory
Suppliers
Credit Policies
Managing Your Accounts Receivable
Managing Your Accounts Payable
Location- Source of
Competitive Advantage
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Choosing the Region
Choosing the State
Proximity to markets
Proximity to needed
Raw materials
Wage Rates
Labor Supply Needs
Business Climate
Tax Rates
Internet Access
Total Operating Costs
Location (cont’d)
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Choosing the City
Population Trends
Competition
Clustering (concentrations of
interconnected companies,
specialized suppliers, and service
providers)
Compatibility with the community
Local laws and regulations (zoning:
a system that divides a city into
small cells or districts to control the
use of land, buildings and sites)
Transportation networks
Police and fire protection
Cost of utilities and public services
Quality of life
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Choosing the Site
Location (cont’d)
Criteria for Retail
and Service
Businesses
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Trade area size
Retail compatibility
Degree of competition
Index of retail
saturation
Reilly’s Law of Retail
Gravitation
Transportation
network
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Physical, racial, or
emotional barriers
Political barriers
Customer traffic
Adequate parking
Reputation
Room for
expansion
Visibility
Location (cont’d)
Retail compatibility:
the benefits a
company receives
by locating near
other businesses
that sell
complementary
products and
services or
generate high
volumes of traffic
Location (cont’d)
Index of retail saturation: a measure of the
potential sales per square foot of store
space for a given product within a specific
trading area: ratio of a trading area’s sales
potential for a product or service to its
sales capacity
IRS= (CxRE)/RF, where
IRS is index of retail saturation
C is number of customers in trading area
RE is average retail expenditure per person
for the product in the trading area
RF is total square feet of selling space
allocated to the product in the trading area
Location (cont’d)
Reilly’s Law of Retail Gravitation: a
business’ ability to draw customers is
directly related to the extent to which
customers see it as a ‘destination’ and is
inversely related to the distance
customers must travel to reach it.
BP=d/1+SQRPb/Pa, where
BP, distance from location A to break pt
d, distance between locations A and B
Pb, population surrounding B
Pa, population surrounding A
Location (cont’d)
Location Options for Retail
and Service Businesses
Central Business District
Neighborhood locations
Shopping Centers and Malls
Near Competitors
Outlying Areas
Home-Based Businesses
Location
(cont’d)
Shopping
Centers and
Malls
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Neighborhood
shopping centers
Community
shopping centers
Power centers
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Theme or
festival centers
Outlet centers
Lifestyle centers
Regional
shopping malls
Super regional
shopping malls
Location (cont’d)
Evaluation criteria for mall:
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Is there a good fit with other products sold in the
mall?
Who are other tenants? Which are anchor stores?
Demographically, is the center a good fit for your
products/services?
How much foot traffic does the mall generate?
The specific site?
How much vehicle traffic does the mall generate?
(major population center, volume of tourists,
volume of drive-by traffic)
What is mall’s vacancy rate? Turnover rate?
How much is rent and how is it calculated?
Is the mall successful?
Location (cont’d)
Location Decision For Manufacturers
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Foreign Trade Zones: specially designated area in
or near a customs port of entry that allows
resident companies to import materials and
components from foreign countries; assemble,
process, manufacture or package them and then
ship the finished product back out while either
reducing or eliminating tariffs and duties.
Empowerment Zones: an area designated as
economically disadvantaged in which businesses
get tax breaks on the investments they make
within zone boundaries.
Business Incubators: an organization that
combines low-cost, flexible rental space with a
multitude of support services for its small
business residents
Layout and Design
Considerations
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Size
Construction and External Appearance
(simple, clean and current, variety)
Entrances
Americans with Disabilities Act
Signs
Building Interiors-ergonomics: the science of
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Lighting and Scent
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adapting work and the environment to complement
employees’ strengths and to suit customers’ needs
Layout:
Maximizing Revenues,
Increasing Efficiency or
Reducing Costs
Retailers
grid
layout
Layout (cont’d)
Retailers
freeform
layout
Layout (cont’d)
Retailers
boutique
layout
Layout (cont’d)
Retailers
Space
Values
for a
Small
Store
Layout for
Manufacturers
Factors in Manufacturing
Layout:
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Type of product
Type of production process
Ergonomic considerations
Economic considerations
Space availability within the facility
Layout (cont’d)
Types of Manufacturing Layouts
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Product Layouts: according to the sequence of
operations performed on a product
Process Layouts: according to the general function
they perform, without any regard to the particular
product or customer
Fixed-Position Layouts: in which materials do not
move down a production line but rather, because
of size or bulk, are assembled on the spot
Functional Layouts: combinations
Layouts (cont’d)
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Principles of Lean
Manufacturing
Planned materials flow
pattern
Straight-line layout whenever
possible
Straight, clearly marked aisles
Backtracking kept to a
minimum
Related operations located
close together
Minimum amount of inprocess inventory on hand
Easy adjustment to changing
conditions
Minimum materials handling
distances
Minimum of manual handling
of materials and products
Ergonomic work centers
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Minimum distances between
work stations and processes
No unnecessary rehandling of
materials
Minimum handling between
operations
Minimum storage
Materials delivered just in
time
Materials efficiently removed
from the work area
Maximum visibility to spot
problems and improve safety
Orderly materials handling
and storage
Good housekeeping; minimum
clutter
Maximum flexibility
Maximum communication
Dell
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Layout (cont’d)
Heavy lifting
Flexible
manufacturing
Teamwork
Speed testing
Lean inventory
Victoria’s
Secret
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‘Landing Strip’
Central hub
Classier color scheme
Bring catalog to life
A menu of choices