productive quality - location and logistics

Question 1

what is the main aim of choosing a location?

Answer 1

to achieve a balance between three related objectives:
- the cost of the operation
- the customer service that the business wants to provide
- the potential revenues that can be achieved from the location

Question 2

what are supply factors to do with location?

Answer 2

• labour costs
• land costs
• energy costs
• transport costs
• community factors

Question 3

what is the supply factor of labour costs?

Answer 3

• Labour costs vary from region to region, but the biggest difference is between the UK and low labour cost countries overseas

Question 4

what is the supply factor of land costs?

Answer 4

• Sometimes the land will be purchased, but more often it will be rented along with the business buildings and facilities
• Rentals can vary enormously depending on the location and the facilities provided
• Government grants and other incentives are also often available to reduce the land costs of locating in poorer regions.

Question 5

what is the supply factor of energy costs?

Answer 5

Some businesses use substantial amounts of energy (e.g. gas, electricity) but they should be able to negotiate a good price for their energy needs regardless of location in the UK

Question 6

what is the supply factor of transport costs?

Answer 6

• Transport includes the cost of getting inputs into the business and also the cost of getting products delivered to customers
• Need to be close to its source of supply if the cost of transporting raw materials is high or difficult

Question 7

what is the supply factors of community?

Answer 7

The costs of a business location can be influenced by many non-financial factors, but which can still be significant when making the choice. These include:
* Local amenities & services (e.g. schools, professional services)
* Local government attitude to supporting business (including financial assistance)
* Language
* Political stability

Question 8

what are the demand factors?

Answer 8

• customer convenience
• labour skills
• site suitability
• image
• expansion potential

Question 9

what is the demand factor of customer convenience?

Answer 9

Many businesses need to be located where customers find it quick, easy and cheap to access the service being provide

Question 10

what is the demand factor of labour skills?

Answer 10

Where specialist skills are required, this can be a big issue. For example, technology firms tend to locate themselves in areas where there is well-established expertise (e.g. M4 corridor and Cambridge in the UK)

Question 11

what is the demand factor of site suitability?

Answer 11

A site may need to have some particular characteristics to maximise customer satisfaction and revenues

Question 12

what is the demand factor of image?

Answer 12

This is more intangible, but often important.
Some customers associate a product with a certain area and prefer to buy from there

Question 13

what is the demand factor of expansion potential?

Answer 13

• Future production capacity often has to be taken into account
• A location might tick many other boxes, but if it provides limited scope for expansion then it might be rejected
• If a location restricts output, then revenues are potentially damaged

Question 14

what is supply chain management?

Answer 14

The integration of the procurement of supplies, production, warehousing and transportation

Question 15

what are the key factors in logistics?

Answer 15

• Warehousing-Storage depots (do firms have their own?)
• Customer requirements (are products perishable?)
• Information systems (ICT system that connects departments and other businesses)
• Transportation - how should products be delivered? (road, rail, air etc.)

Question 16

what is restoring?

Answer 16

a business returns production/operations to the host country that had previously been moved to a different international location

Question 17

what are the reasons for restoring?

Answer 17

• Greater certainty around delivery times (including shorter delivery times)
• Minimising risk of supply chain disruptions
• Reducing the complexity of the supply chain
• Making it easier to collaborate with home-based suppliers
• Getting greater certainty about the quality of inputs and components
• Recognising that the cost advantage of producing or sourcing overseas is not as significant as it used to be

Question 18

what is offshoring?

Answer 18

relocation of business activities from the home country to a different international location

Question 19

reasons for offshoring?

Answer 19

• To access lower manufacturing costs (particularly in emerging markets which enjoy the advantage of lower labour costs)
• To access potentially better skilled & higher quality supply
• To makes use of existing capacity overseas
• To take advantage of free trade areas and avoid protectionism
• To make it easier to supply target international markets (where it is important to be located in, or near to, those markets)

Question 20

drawbacks to offshoring?

Answer 20

• Longer lead times for supply & risks of poorer quality
• Implications for CSR (harder to control aspects of operating long distances away from the home country)
• management costs (time, travel)
• Impact of exchange rates
• Communication- language & time zones

Question 21

what is outsourcing?

Answer 21

• A business does not have to do everything that is required to produce its products and services.
• There are other businesses that are specialised in the tasks required and can do it better and cheaper. This process is called outsourcing.

Question 22

how can we define outsourcing?

Answer 22

the delegation of one or more business processes to an external provider, who then owns, manages and administers the selected processes to an agreed standard

Question 23

what does outsourcing involve?

Answer 23

getting another business to provide the service for you

Question 24

what is the main reason for outsourcing?

Answer 24

• Reducing costs
• However, there can also be some significant gains in the quality and flexibility of the service or product offered

Question 25

what is subcontracting?

Answer 25

The production of a particular part of the product is undertaken by another firm