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Location Decisions: Weeks 6 (Chapter 8)
Location Decisions: Weeks 6 (Chapter 8)
Location Decisions
Weeks 6 (Chapter 8)
Options include
1. Expanding existing facility instead of moving
2. Maintaining current sites while adding another facility
elsewhere
3. Closing the existing facility and moving to another location
Globalization factor:
1. Market economics
2. Better international communications
3. More rapid, reliable travel and shipping
4. Ease of capital flow between countries
5. High differences in labor costs
Labor Productivity:
1. Market economics
2. Better international communications
3. More rapid, reliable travel and shipping
4. Ease of capital flow between countries
5. High differences in labor costs
1. Labor productivity
2. Exchange rates and currency risk
3. Costs
4. Political risk, values and culture
5. Proximity to markets
6. Proximity to suppliers
7. Proximity to competitors (clustering)
© 2014 Pearson Education
methods of evaluating location
ALTERNATIF
The Factor-Rating Method
A location method that instills objectivity into the process of identifying hard to
evaluate costs
ALTERNATIF
Locational Cost-Volume Analysis
A method of making an economic comparison of location alternatives.
.
.
–
–
–
–
–
Annual cost
–
–
–
–
–
–
–
–
–
– Athens Brussels Lisbon lowest
– lowest cost lowest cost cost
–
| | | | | | |
0 500 1,000 1,500 2,000 2,500 3,000
Volume
© 2014 Pearson Education
Location Cost-Volume Analysis
EXPAMPLE
3 Locations:
ALTERNATIF
Center-of-Gravity Method
A mathematical technique used for finding the best location for a single
distribution point that services several stores or areas.
y-coordinate of the
å d Q iy i
= i
center of gravity åQ i
i
30 –
Atlanta (60, 40)
| – | | | | |
East-West
Arbitrary 30 60 90 120 150
origin
© 2014 Pearson Education
methods of evaluating location
ALTERNATIF
Transportation Model
A technique for solving a class of linear programming problems
Although the linear programming (LP) technique can be used to solve this
type of problem, more efficient, special-purpose algorithms have been
developed for the transportation application.