Lesson 5 - Location Planning Flashcards
(18 cards)
Goal Profit-oriented firms
base decision on profit potential
Non-Profit Firms
balance between cost and level of customer service
Options in location planning
- Expand an existing facility
- Add new location while retaining existing ones
- Shut down at one location and move to the other
- Do nothing/maintain status quo
Facilitating factors
Trade agreements: Numerous barriers to international trade have
been dropped, Technology advancements were helpful
Benefits of operating globally
expand markets, Cost savings, less restrictive and
favorable regulations, financial incentives provided by local governemnts, new
sources for ideas, new solutions to problems
Drawbacks
Transportation costs, security costs, unskilled labor, import restrictions
in some countries, criticism through unfair/unethical practices, low labor productivity
Risks
protecting intellectual property (outsourcing risk), political instability,
terrorism, economic instability might impact profitability, laws and regulations may change, ethical and cultural differences, management style conflicts, and quality issues
microfactory
small factory with narrow product focus
located near major markets
plant manufacturing strategy - Product Plant Strategy
entire products-, lines are produced in separate plants and
supplies entire domestic market, decentralized approach
plant manufacturing strategy - Market Area Plant Strategy
Plants are designed to serve particular geographic
segment, desirable when shipping costs are high, requires centralized coordination
plant manufacturing strategy - Process Plant Strategy
plants concentrate on different aspects of process, requires highly centralized administration to ensure coordination throughout the system
plant manufacturing strategy - General-Purpose Plant Strategy
Plants flexible and capable of handling a range of
products, learning opportunities and quick response time, but might be less productive
Geographic Information System
computer-based tool for collecting, storing, retrieving and displaying geographic data (population age, density, education, traffic patterns, utilities) on
maps. (could help in decision)
Clustering
When businesses locate near each other, often the case for service/retail business
Evaluation Techniques - Locational Cost-Profit-Volume Analysis
economic comparison numerically or graphically, compute total costs for each location: FC + v*Q or total revenue (Q(R-v) - FC. Graph will show for what levels of output which location is more suited
Evaluation Techniques -Transportation model
Cost-volume analysis while incorporating transportation costs
per unit to the variable costs
Evaluation Techniques - Factor Rating
general approach which could also be used for buying a car for example and provides rational basis for evaluation. It establishes a composite value for each alternative that summarize all related factors (assign weight to each factor depending on importance, use a common scale and then sum points for the different factors, choose highest unless it fails to meet minimum acceptable scores)
Evaluation Techniques - Center-of-Gravity Method
determine location that will minimize shipping costs or
travel time to VARIOUS locations (distribution centers: min distribution costs, fire station: min travel time) Method includes use of a map that shows locations (needs to be accurate): center of gravity is weighed average based on quantities
