Professional Documents
Culture Documents
MO CH08
MO CH08
INDONESIA
Disiplin, Bermutu, Kreatif, dan Inovatif
Location Strategies
Cost focus.
Revenue varies little between locations.
Revenue focus.
Costs vary little between market areas.
Production/service together with
consumption.
Location is a major revenue factor.
Affects amount of customer contact.
Affects volume of business.
Organizations That Locate Close to
Markets/Customers
8-7
Government agencies.
Police & fire departments, post offices, public
libraries.
Retail sales and Services.
Fast food restaurants, supermarkets, gas stations.
Doctors, lawyers, barbers, banks, auto repair, etc.
When transporting finished goods is more
expensive than transporting materials.
Bottling plants, breweries.
Electricity production.
Organizations That Locate Close to Suppliers or
Materials
8-8
By necessity.
Mining, fishing, farming, etc.
Country Region/Community
Site
Factors Affecting8-10Country Decision
Government rules, attitudes, stability, incentives.
Labor availability, attitudes, productivity, cost.
Availability of supplies, communications, energy.
Culture & economy.
Location of markets.
Exchange rate.
Labor Costs - Figure 8.2
8-
11
Ranking of the Business Environment in 20
Countries, 8-1997 - 2001
12
1 Netherlands 11 Finland
2 Britain 12 Belgium
3 Canada 13 New Zealand
4 Singapore 14 Hong Kong
5 U.S. 15 Austria
6 Denmark 16 Australia
7 Germany 17 Norway
8 France 18 Ireland
9 Switzerland 19 Italy
10 Sweden 20 Chile
Factors Affecting Region/Community
Decision
8-
13
Attractiveness of region (culture, taxes, climate,
etc.).
Labor availability, costs, attitudes towards
unions.
Environmental regulations of state and town.
Corporate desires.
Costs and availability of utilities.
Government incentives.
Land/construction costs.
Factors Affecting Site Decision
8-
14
Access to air, rail, highway, and waterway
systems.
Proximity to needed services/supplies.
Zoning restrictions.
.
Location Decision Example - BMW
8-
15
Government incentives.
$135 million in state & local tax breaks.
Free-trade zone from airport to plant.
No duties on imported components or on exported cars.
Location Evaluation Methods
8-
18
Factor-rating method.
Locational break-even analysis.
Center of gravity method.
Transportation model.
Factor-Rating Method
8-
19
Most widely used location technique.
Factor weight A B C
Cost 0.3
Proximity to trans. 0.2
Taxes 0.1
Labor 0.4
Factor Rating Example
8-
24
Three locations: A, B and C; Four factors.
Factor weight A B C
Cost 0.3 10 9 7
Proximity to trans. 0.2 7 3 10
Taxes 0.1 7 5 10
Labor 0.4 6 8 5
7.5 7 7.1
A is best; B and C are similar.
Note that if the labor score for A was 5, not 6, then all locations are similar.
Locational Break-Even
8-
25
Analysis
Cost-volume analysis used for location.
Steps:
Determine fixed & variable costs for each location.
Find break-even point.
Plot cost for each location.
Select location with lowest total cost for expected
production volume.
Must be above break-even.
Locational Break-Even Analysis Example
8-
26
You’re an analyst for AC Delco. You’re
considering a new manufacturing plant in Akron,
Bowling Green, or Chicago. Fixed costs per
year are $30k, $60k, & $110k respectively.
Variable costs per case are $75, $45, & $25
respectively. The price per case is $120.
At x=2000 cases/year: B is
Best
A: Profit = 240,000 - (30,000 + 150,000) = 60,000
B: Profit = 240,000 - (60,000 + 90,000) = 90,000
C: Profit = 240,000 - (110,000 + 50,000) = 80,000
Locational Break-Even Analysis Example
8-
28
You’re an analyst for AC Delco. You’re
considering a new manufacturing plant in Akron,
Bowling Green, or Chicago. Fixed costs per
year are $30k, $60k, & $110k respectively.
Variable costs per case are $75, $45, & $25
respectively. The price per case is $120.
A is best at x=0.
A < B for x < 1000/yr and A < C for x < 1600/yr, so
A is best over range 0<x<1000/yr.
B < C for x < 2500/yr so,
B is best over range 1000<x<2500/yr.
C is best over range 2500/yr < x
Locational Crossover Chart
8-
200,000 30
ro n
Ak
150,000
Chicago
$
100,000 reen
n g G
B owli
0
0 500 1000 1500 2000 2500 3000
Volume
Locational Crossover Chart
8-
200,000 31
e
nu
ro n
Ak
ve
Re
150,000
Chicago
$
100,000
g G reen
n
B owli
0
0 500 1000 1500 2000 2500 3000
Volume
Locational Break-Even Analysis Example
8-
32
A is unprofitable for low volumes.
Use break-even analysis with A to find
break-even point = 666.67/yr.
Requires:
Location of existing destinations (Markets, retailers
etc.)
Volume to be shipped.
Shipping distance (or cost).
Center of Gravity Method Steps
8-
34
Find X and Y coordinates for all destinations.
Can use an arbitrary coordinate grid.
Calculate center of gravity location for facility
as weighted average of X & Y coordinates.
Approximately minimizes transportation cost.
Location is not necessarily optimal, but is
usually close.
Center of Gravity Method
8-
35
Equations
X Coordinate
dix = x coordinate of location i
d ix Wi
Cx i
Wi
i
Wi = Volume of goods
Y Coordinate moved to or from location i
d iy Wi
Cy i
Wi diy = y coordinate of location i
i
Center of Gravity
8- Example
36
Given 4 cities with volume demanded and (x,y) coordinates. Find
location for one warehouse to minimize total distance to supply
these cities.
New York (130,130)
Chicago (30,120)
120
Location Volume
Pittsburgh (90,110)
Chicago 200
Pittsburgh 100
New York 100 60
Atlanta 200
Atlanta (60,40)
0
0 60 120
Center of Gravity
8- Example
37
X coordinate of warehouse:
Cx=(200x30+100x90+100x130+200x60)/(200+100+100+200) = 66.7
Y coordinate of warehouse:
Cy=(200x120+100x110+100x130+200x40)/(200+100+100+200) = 93.3
Center of Gravity
8- Example
38
Atlanta (60,40)
0
0 60 120
Transportation Model
8-
39
Finds amount to be shipped from several sources
to several destinations.
Used primarily for industrial locations.
900 Atlanta
300