Professional Documents
Culture Documents
OPM
OPM
DECISION
longterm
decision
LOCATION
DECISION
key
decision
geograp
hic
The Nature of
Location
Decision
Makes a
business more
attractive
Entails longterm
commitment
Can impact
capacity and
flexibility
Location Options
1. Expand existing facility
2. Add new locations while
retaining existing ones
3. Shut down at one location
and move to another
4. Do nothing
Controllable Factors
1.Government Policy
1. Proximity to Markets
2.Climatic Conditions
2. Supply of Materials
3.Supporting
3. Transportation
Industries
4.Community Attitude
5.Community
Infrastructure
Facilities
4. Infrastructure
Availability
5. Proximity to Source
of Labor
Globalization
and Location Decision
Globalization has opened
new markets, and it has meant
increasing dispersion of
manufacturing and service
operations around the world.
Facilitating Factors
1. Trade Agreement
a formal agreement between two or more
countries about improving trade with each
other
Barrier to international trade such as
tariffs and quotas have been reduced or
eliminated
2. Technology
Technological advances in communication
and information have been very helpful
Include faxing capability, e-mail, cell
Benefits of Locating
Globally
1.Markets
2.Cost savings
3.Legal and regulatory
4.Financial
Disadvantages
1. Transportation costs
2. Security costs
3. Unskilled labor
4. Import restrictions
5. Criticisms
ISSUES TO
CONSIDER IN
LOCATING GLOBALLY
1. Different Culture
- each culture has different set of values,
norms, ethics, and standards.
2. Language Barriers
- engaging in discussions, following
instructions, and understanding exactly
what is being said can become difficult
when employees speak different languages.
General
Procedures for
Making Location
Decisions
> Depends on the size and
nature or scope of the
business or organization
operations
Steps
1.Decide on the criteria to use for evaluating
location alternatives, such as increased
revenues or community service.
2.Identify important factors, such as location of
markets or raw materials.
3.Develop location alternatives:
identify a country or countries for location
identify the general region for a location
identify a small number of community
alternatives
identify site alternatives among the community
alternatives
Service
1. Proximity to
Customers
2. Proximity to Markets
3. Transportation Costs
4. Location of
Competitors
Geographic Information
System
- It is a computer based tool
for collecting, storing,
retrieving and displaying
demographic data on maps.
Multiple Plant
Manufacturing Strategies
Product Plant Strategy
Entire products or product lines are
produced in separate plants, and each plant
usually supplies the entire domestic market.
Market Area Plant Strategy
Plants are designed to serve a particular
geographic
segment of market.
Desirable when shipping costs are high due
to
volume, weight, and other factors
Multiple Plant
Manufacturing Strategies
Process Plant Strategy
Different plants concentrate on
different
aspects of a process
Best suited to products that have
numerous
components
General Purpose Plant Strategy
Plants are flexible and capable in
EVALUATING
LOCATION
ALTERNATIVES
Locational Cost-Profit-Volume
Analysis
technique for evaluating location
choices in economic terms
This method assumes the following:
1.Fixed costs are constant for the range
of probable output.
2.Variable costs are linear for the range
of probable output.
3.The required level of output can be
closely estimated.
4.Only one product is involved.
Total cost = FC + (v x Q)
Where
FC = fixed cost
v = variable cost per unit
Q = quantity or volume of
output
Procedure
1.Determine the fixed and variable costs
associated with each location alternative.
Locatio
FC per
n
Year
A
P 250,000
v
P 11
100,000
30
C700
150,000
20
D600
200,000
35
500
400
300
200
100
0
6
8
10
12
Annual output (000 units)
14
16
Total
Cost
P 360,000
400,000
350,000
550,000
A
B
C
D
Blue
Orange
Green
Violet
3.
For A and C:
+ (Q) = + (Q)
P250,000 + P11Q = 150,000 + P20Q
Q = 11,111 units per year
700
600
A
B
C
D
500
400
300
200
100
0
6
8
10
12
Annual output (000 units)
14
16
Blue
Orange
Green
Violet
THE TRANSPORTATION
METHOD
used to determine the minimum
transportation cost that would result
if a potential new location were to be
added to an existing system.
used to analyze each of the
configurations considered and it
reveals the minimum costs each
would provide.
Factor Rating
General approach to evaluating
locations that includes
quantitative and qualitative
inputs.
Its value is to provide a rational
basis for evaluation and
facilitates comparison among
alternative by establishing a
composite value for each
PROCEDURE USED TO
DEVELOP A FACTOR
RATING:
1.Determine which factors are relevant.
Proximity to existing store, traffic
volume, rental costs, size, layout,
operating costs
2.Assign a weight to each factor that
indicates its relative importance
compared with all other factors.
3.Decide on a common scale for all
factors and set a minimum
acceptable score if necessary.
Where:
= x coordinate of destination i
= y coordinate of destination
i
n= number of destinations
Appropriate Formula
Where:
= Quantity to be shipped to
destination i
= x coordinate of destination i
= y coordinate of destination i
6
D2
D4
D1
D2
D3
D4
18
16
D3
4
3
D1
2
1
0
1
= = 4.5
10
= ?
= =4
DESTINATI
ON
WEEKLY
QUANTITY
D1
800
D2
900
D3
200
D4
100
2000
= = = 3.05
= = = 3.7
DESTINATION
Coordinates (X,Y)
Examples:
Catanduanes
(11,22)
15
Masbate
(10,7)
12
Sorsogon
(9,8)
10
Camarines Sur
(4,1)
Camarines Norte
(3,1)
where ld = load-distance
= load between locations a and b
= distance between locations a and b
Steps
1. Identify distances.
Rectilinear distance =
Place x y
Naga
3
1
Buhi
7
4
Legaz 12 9
pi
Iriga
5 5.5
Bato
10 8
Place
Naga
Buhi
Legazpi
Distance to Iriga
|3-5| + |1-5.5| = 2 + 4.5 = 6.5
|7-5| + |4-5.5| = 2 + 1.5 = 3.5
|12-5|+ | 9-5.5| = 7+ 4.5 = 11.5
Place
Naga
Buhi
Legazpi
Distance
|3-10| + |1-8| = 7
|7-10| + |4-8| = 3
|12-10| + | 9-8| =
to Bato
+7
= 14
+4
=7
2+ 1
=3
2.Identify loads.
Place
Naga
Buhi
Legazpi
3.
Place
Naga
Buhi
Legazpi
Total
Total
Place
Naga
Buhi
Buhi
Legazpi
Legazpi
Total
Total
Load (
15
10
12
Distance (
6.5
97.5
3.5
35
11.5
138
Load-Distance
Load-Distance Score:
Score: 270.5
270.5