8-1 Location Planning and Analysis
CHAPTER
8

8-2 Location Planning and Analysis
Need for Location Decisions
 Marketing Strategy
 Cost of Doing Business
 Growth
 Depletion of Resources

8-3 Location Planning and Analysis
Nature of Location Decisions
 Strategic Importance
 Long term commitment/costs
 Impact on investments, revenues, and operations
 Supply chains
 Objectives
 Profit potential
 No single location may be better than others
 Identify several locations from which to choose
 Options
 Expand existing facilities
 Add new facilities
 Move

8-4 Location Planning and Analysis
Making Location Decisions
 Decide on the criteria
 Identify the important factors
 Develop location alternatives
 Evaluate the alternatives
 Make selection

8-5 Location Planning and Analysis
Location Decision Factors
Regional Factors
Community
Considerations
Multiple Plant
Strategies
Site-related
Factors

8-6 Location Planning and Analysis
Regional Factors
 Location of raw materials
 Location of markets
 Labor factors
 Climate and taxes

8-7 Location Planning and Analysis
Community Considerations
 Quality of life
 Services
 Attitudes
 Taxes
 Environmental regulations
 Utilities
 Developer support

8-8 Location Planning and Analysis
Site Related Factors
 Land
 Transportation
 Environmental
 Legal

8-9 Location Planning and Analysis
Multiple Plant Strategies
 Product plant strategy
 Market area plant strategy
 Process plant strategy

Table 8.2
Comparison of Service and
Manufacturing Considerations
Manufacturing/Distribution
Cost Focus
Service/Retail
Revenue focus
Transportation modes/costs
Energy availability, costs
Labor cost/availability/skills
Building/leasing costs
Demographics: age,income,etc
Population/drawing area
Competition
Traffic volume/patterns
Customer access/parking

8-11 Location Planning and Analysis
Trends in Locations
 Foreign producers locating in U.S.
 “Made in USA”
 Currency fluctuations
 Just-in-time manufacturing techniques
 Microfactories
 Information Technology

8-12 Location Planning and Analysis
Table 8.3
Foreign
Government
Cultural
Differences a. Policies on foreign ownership of production facilities
Local Content
Import restrictions
Currency restrictions
Environmental regulations
Local product standards b. Stability issues
Living circumstances for foreign workers / dependents
Religious holidays/traditions
Customer
Preferences
Possible buy locally sentiment
Labor
Resources
Level of training and education of workers
Work practices
Possible regulations limiting number of foreign employees
Language differences
Availability and quality of raw materials, energy, transportation

8-13 Location Planning and Analysis
Evaluating Locations
 Cost-Profit-Volume Analysis
 Determine fixed and variable costs
 Plot total costs
 Determine lowest total costs

8-14 Location Planning and Analysis
Location Cost-Volume Analysis
 Assumptions
 Fixed costs are constant
 Variable costs are linear
 Output can be closely estimated
 Only one product involved

8-15 Location Planning and Analysis
Example 1: Cost-Volume Analysis
Fixed and variable costs for four potential locations
L o c a t i o n
A
B
C
D
F i x e d
C o s t
$ 2 5 0 , 0 0 0
1 0 0 , 0 0 0
1 5 0 , 0 0 0
2 0 0 , 0 0 0
V a r i a b l e
C o s t
$ 1 1
3 0
2 0
3 5

8-16 Location Planning and Analysis
Example 1: Solution
A
B
C
D
Fixed
Costs
$250,000
100,000
150,000
200,000
Variable
Costs
$11(10,000)
30(10,000)
20(10,000)
35(10,000)
Total
Costs
$360,000
400,000
350,000
550,000

8-17 Location Planning and Analysis
Example 1: Solution
$(000)
800
700
600
500
400
300
200
100
0
0
A Superior
C Superior
B Superior
2 4 6 8 10
Annual Output (000)
12 14 16
D
B
C
A

8-18 Location Planning and Analysis
Evaluating Locations
 Transportation Model
 Decision based on movement costs of raw materials or finished goods
 Factor Rating
 Decision based on quantitative and qualitative inputs
 Center of Gravity Method
 Decision based on minimum distribution costs

8-19 Location Planning and Analysis
Design/Facility
STA04
Layout choices at St. Alexius Hospital

8-20 Location Planning and Analysis
Flow Charts/Assessment
BP3
Example, Tri State Industries

8-21 Location Planning and Analysis
Team/Visual/System
PI6
Interview at McDonalds