Location Planning and Analysis

1
Chapter 8

• Location Planning and Analysis

2
Need for Location Decisions

• Marketing Strategy Penetration
• Auto Industry
• Developing counties require it. (China / Ont.
  Hydro)
• Growth
• Depletion of Resources
• Australian forester finished ravaging their
  forests and now in BC.
• Fish stocks off east and west coasts
• Cost of Doing Business
• Labour / taxes too high

3
Nature of Location Decisions

• Importance
• Long term commitment/costs
• Objectives
• Profit potential
• Dylex
• Options
• Expand existing facilities- SBE -gt Segal building
• Add new facilities Brad wafer production
• Move eg. Local Catholic school closings

4
Location Decision Factors
Community Considerations
Regional Factors
Site-related Factors
Multiple Plant Strategies
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Location Decision Factors
Regional Factors

• Location of raw material
• Ernie, ore and water.
• Location of Markets
• Locate near customers
• Eg.Pawn and camera shops, auto-malls
• Labour Factors
• Why would you locate in Waterloo?
• Does lower wages in countries mean labour
  savings?
• Banking in Brazil.
• Sending BU100 text to Taiwan for printing
• Quality considerations
• USR modems
• Tolerances of parts in Mexico
• Supplier location (JIT)

Community Considerations
Local taxes, housing, education, snowmobiling etc.
6
Location Decision Factors
Site-related Factors

• Land costs parking, sewers, expansion
• Transportation to site
• Industrial parks (already set up)
• Local incentives e.g., for doctors
• Entrepreneurs locate near home

Multiple Plant Strategies

• Product plant strategy
• Market area plant strategy
• Process plant strategy

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Trends in Locations

• Foreign producers locating in North America
• Made in North America
• Currency fluctuations
• Just-in-time manufacturing techniques
• Domestic producers moving back to North America
• Information highway
• Software production
• located near knowledge
• - Geoff testing firewalls

8
Criteria to make location Decision

• E.G. Dylex

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Evaluating Locations

• Based on Demographics
• Dylex model for its XX XY stores
• Cost-volume Analysis
• Determine fixed and variable costs
• Plot total costs
• Determine lowest total costs
• Transportation Model
• Decision based on movement costs of raw materials
  or finished goods.
• Business 275.
• Factor Rating
• Decision based on quantitative and qualitative
  inputs.
• Center of Gravity Method
• Decision based on minimum distribution costs.

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Example 1 Cost-Volume Analysis

• Fixed and variable costs for four potential
  locations

Calculate and Plot the TC lines, eg. For Location
A TC 11Q 250,000
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Example 1 Solution
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Example 1 Solution
(000)
800 700 600 500 400 300 200 100 0
D
B
C
A
A Superior
C Superior
B Superior
8
10
12
14
16
6
4
2
0
Annual Output (000)
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Evaluating Locations

• Transportation Model
• Decision based on movement costs of raw materials
  or finished goods.
• Business 275.
• Factor Rating
• Decision based on quantitative and qualitative
  inputs.
• Center of Gravity Method
• Decision based on minimum distribution costs.

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Center of gravity method
x
15
In Class Example 8-14
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Factor Rating Method
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In Class Example 8-9
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Table 8-2