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8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
1/19
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
2/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,
MBA,MPA,BSCS,ACS
H
APTER
8
Location Planningand Analysis
MELJUNELJUN
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
3/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,
MBA,MPA,BSCS,ACS
Need for Location DecisionsNeed for Location Decisions
Marketing Strategy Cost of Doing Business
Growth Depletion of Resources
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
4/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,
MBA,MPA,BSCS,ACS
Nature of Location DecisionsNature 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
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
5/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,
MBA,MPA,BSCS,ACS
Making Location DecisionsMaking Location Decisions
Decide on the criteria Identify the important factors
Develop location alternatives
Evaluate the alternatives Make selection
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
6/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,
MBA,MPA,BSCS,ACS
Location Decision FactorsLocation Decision Factors
Regional Factors
Site-relatedFactors
Multiple PlantStrategies
CommunityConsiderations
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
7/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Location of raw materials Location of markets
Labor factors
Climate and taxes
Regional FactorsRegional Factors
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
8/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Quality of life Services
Attitudes
Taxes Environmental regulations
Utilities
Developer support
Community ConsiderationsCommunity Considerations
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
9/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Land Transportation
Environmental
Legal
Site Related FactorsSite Related Factors
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
10/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Product plant strategy Market area plant strategy
Process plant strategy
Multiple Plant StrategiesMultiple Plant Strategies
CO S
SCS CS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
11/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACSComparison of Service andComparison of Service and
Manufacturing ConsiderationsManufacturing Considerations
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
Table 8.2
MELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
12/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Trends in LocationsTrends in Locations
Foreign producers locating in U.S. Made in USA
Currency fluctuations
Just-in-time manufacturing techniques
Microfactories
Information Technology
MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
13/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
ForeignGovernment
a. Policies on foreign ownership of production facilitiesLocal ContentImport restrictionsCurrency restrictionsEnvironmental regulationsLocal product standards
b. Stability issuesCulturalDifferences
Living circumstances for foreign workers / dependentsReligious holidays/traditions
CustomerPreferences
Possible buy locally sentiment
Labor Level of training and education of workersWork practicesPossible regulations limiting number of foreign employeesLanguage differences
Resources Availability and quality of raw materials, energy,transportation
Table 8.3
MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
14/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Evaluating LocationsEvaluating Locations
Cost-Profit-Volume Analysis Determine fixed and variable costs
Plot total costs
Determine lowest total costs
MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
15/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Location Cost-Volume AnalysisLocation Cost-Volume Analysis
Assumptions Fixed costs are constant
Variable costs are linear
Output can be closely estimated Only one product involved
MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
16/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Example 1: Cost-Volume AnalysisExample 1: Cost-Volume Analysis
Fixed and variable costs forfour 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 tA
BC
D
$ 2 5 0 , 0 0 0
1 0 0 , 0 0 01 5 0 , 0 0 0
2 0 0 , 0 0 0
$ 1 1
3 02 0
3 5
MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
17/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Example 1: SolutionExample 1: Solution
F i x e dC o s t s
V a r i a b l eC o s t s
T o t a lC o s t s
ABCD
$ 2 5 0 , 0 0 01 0 0 , 0 0 01 5 0 , 0 0 02 0 0 , 0 0 0
$ 1 1 ( 1 0 , 0 0 0 )3 0 ( 1 0 , 0 0 0 )2 0 ( 1 0 , 0 0 0 )3 5 ( 1 0 , 0 0 0 )
$ 3 6 0 , 04 0 0 , 03 5 0 , 05 5 0 , 0
MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
18/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Example 1: SolutionExample 1: Solution
800700600
500400300200100
0
Annual Output (000)
$(000)
8 10 12 14 166420
A
B
C
B SuperiorC Superior
A Superior
D
MELJUN CORTES MBA MPA BSCS ACSMELJUN CORTES
MBA MPA BSCS ACS
8/9/2019 MELJUN CORTES - Operations Management 8th Lecture (MARKETING STRATEGY)
19/19
MELJUN CORTES,MBA,MPA,BSCS,ACSMELJUN CORTES,MBA,MPA,BSCS,ACS
Evaluating LocationsEvaluating 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