EXECUTIVE

SUMMARY
The purpose of this term paper is to discover the planning of location of
Shwapno superstore in Bangladesh. We primed our term paper on Shwapno
Superstore and found out the Location Planning in their company. This term
paper contains how Shwapno Superstore Plan their location for outlet,
method of choosing location, hypothetic example of choosing place for outlet
etc.
Shwapno Superstore is a Dhaka based chain super shop. It has a location
planning. But, here we assume some factors about Shwapno Superstore
and analyzed four method of choosing location alternatives. Every method
gave different outcome according to our assumptions. It is a demonstration
of choosing location alternatives.

INRODUCTION
Origin of the Term Paper
Location planning is one of the most important activity in an organization.
From the time an organization beings began forming operations to
accomplish aims and objectives they could not accomplish without a location
or outlet. In addition, for a service-oriented organization, for example
Shwapno Superstore, location planning and proper outlet selection are very
important activities.
Here, we have shown the location planning methods for Shwapno
Superstore with a hypothetical example. Our course instructor Motahar
Hossain assigned us to make a standard term paper on Location Planning or
Capacity Planning or Process Selection and Facility Layout of an Organization.
For that, He told us to choose organization as our base institution for
analyzing one of the processes. Moreover, we selected the Location
Planning on Shwapno Superstore to conduct our Term Paper.

Background of the Study

This Term Paper has been made as a part of our course Operations
Management (BUS- 650). Our course instructor Dr. Md. Motaher Hossain has
assigned us to develop a report based on Location Planning of Shwapno
Superstore.
Location planning is very important for a service oriented organization.
Shwapno superstore is a service oriented organization and a popular
2

superstore. To accomplish their goal they have to do location planning for

their outlet. So, we have to consider three things:
What is Location Planning?
Whether the Organization has location planning?
How they can add a new location (Hypothetical example)?

Objective of the Study

The objectives of the study are as follows:

To
To
To
To

know the location planning of an organization.

know the importance of location planning.
identify the proper method of selecting location plan.
know the various method of location planning.

Methodology
To make the term paper on location planning of Shwapno Superstore, we had
to give our full effort. It is not an easy job to get all the proper information
and make them fill survey paper. But we tried our best.

Sources of data: We collected the most important information from the

internet about the term paper. Our course instructor provided us with
all the helpful information to make the term paper.

Secondary Data: The secondary sources were Website

PDF files
Brochures of the Organization

Limitations of Study
3

Collecting information from corporate level is very tough, so we faced

several problems while preparing this term paper.
Time Constraint: The first limitation was time constraint. We didnt do
surveys among large number of managers because of time constraints.
Accuracy of the Information: We could not do any survey. So, we assume
data and analyze them. For this reason, there is no accuracy in the
information.
Unavailability of Secondary Information: The institutions that we
selected, their website were not very much informative.

THEORETICAL BACKROUND

Location Planning
Location plays an important role for every business whether new or existing.
Location planning decisions are not limited to one time strategic planning
decisions for building a new manufacturing or service facility rather most of
the organizations face the challenge of increasing their capacity through
selection of new locations or extension of existing locations. It is very
important

for

any organization

through

various

departments

of the

organization. Accounting, which prepares cost estimates for changing

locations as well as operating at new locations. Distribution, which seeks
warehouse layouts to makes material handling easier and customer response
shorter. Importance of Location Engineering, considers the impact of product
or service location choices for the company. Finance Department, which
helps to perform the financial analysis for investing in new locations. Human
Resources Management, which hires and trains employees to support new
locations or relocations of operations. Management Information Systems,
which provide information technologies that link operations at different
locations. Importance of Location Marketing which assesses new locations
and revised locations that is popular with the customers. Operations
Management, which seeks and finalizes locations that create, sustains,
protect and project the best performance criteria for the whole organization.

Procedure of making Location Decision

Location decisions play an integral part of the strategic planning process of
every organization. It is important to learn about the need and nature of
location decisions. As a part of his routine responsibilities a senior Operations

Manager often carries out the evaluation of different available locations. By

following steps location decision can be made.

Decide on the criteria

Identify the important factors
Develop location alternatives
Evaluate the alternatives
Evaluate and make selection

Need for making Location Decision

Quite often MNC's move to a host country with a lot of hype and propaganda
of bringing jobs to the local labor but the reality is its own need to increase
its revenue and profits. Most of the time the need for location decision
focuses on
Marketing Strategy
Cost of Doing Business
Growth
Depletion of Resource

Factors that Affect Location Decision

The process of determining a geographic site for firms operations takes into
account both manufacturing and marketing aspects. We just focus on the
manufacturing

aspects

as

its

more

closely

related

to

Operations

Management. Following factors can affects the location decision:

Regional factors.
Community consideration.
Multiple plan strategies
Site-related factors

Evaluating Location Alternatives

There are three specific analytical techniques available to aid in evaluating
location alternatives:
1. Location Cost-Profit-Volume Analysis:
The

Cost-Volume-Profit

(CVP)

Analysis

can

be

represented

either

mathematically or graphically. It involves following three steps:

For each location alternative, determine the fixed and variable costs,
For all locations, plot the total-cost lines on the same graph, and
Use the lines to determine which alternatives will have the highest and
lowest total costs for expected levels of output.
Additionally, there are four assumptions one must keep in mind when using
this method:
1. Fixed costs are constant.
2. Variable costs are linear.
3. Required level of output can be closely estimated.
4. There is only one product involved.
Total cost = FC = V (Q)
Where, FC=Fixed Cost, v=Variable Cost per Unit, Q=Number of Units
2. The Transportation Model:
The transportation model uses the principle of 'transplanting' something, like
taking a hole from one place and inserting it in another without change. First,
it assumes that to disturb or change the idea being transported in any way
will damage and reduce it somehow. It also assumes that it is possible to
7

take an idea from one person's mind into another person's so that the two
people will then understand in exactly the same way.
The model requires a few keys pieces of information, which include the
following:

Origin of the supply

Destination of the supply

Unit cost to ship

The transportation model can also be used as a comparative tool providing

business decision makers with the information they need to properly balance
cost and supply. The use of this model for capacity planning is similar to the
models used by engineers in the planning of waterways and highways.
3. Factor Rating:
This method involves qualitative and quantitative inputs, and evaluates
alternatives based on comparison after establishing a composite value for
each alternative. Factor Rating consists of following six steps:
Determine relevant and important factors
Assign a weight to each factor, with all weights totaling 1.00
Determine common scale for all factors, usually 0 to 100
Score each alternative.
Adjust score using weights; add up scores for each alternative
The alternative with the highest score is considered the best
option
Minimum scores may be established to set a particular standard, though this
is not necessary.
8

4. The Center Of
Gravity Method:

OVERVIW OF THE ORGANIZATION

Either this technique is used in determining the location of a facility that will
reduce travel time or lower shipping costs. Distribution cost is seen as a
linear function of the distance and quantity shipped. The Center of Gravity
Method involves the use of a visual map and a coordinate system; the
coordinate points being treated as the set of numerical values when
calculating averages. If the quantities shipped to each location are equal, the
center of gravity is found by taking the averages of the x and y coordinates;
if the quantities shipped to each location are different, a weighted average
must be applied.

SHWAPNO SUPERSTORE
ACI Logistics Ltd. is launched with the dream to change the life of
Bangladeshi Consumers with the Brand Name SHWAPNO in the form of
retail chain in 2008. It opened the first outlet in Postogola Dhaka in 28
October 2008. Now, Shwapno has 59 outlets in 16 districts (Dhaka,
Narayangonj, Mymensing, Chittagong, Feni, Sylhet, Moulvi bazar, Bogra,
Nator, Rangpur, Khulna, Jessore, Jhinaidah, Narshingdi, Barishal, Pabna).
More than 1300 people are working in this retail chain shop. They are making
varieties of products day by day that we call it little Walmart in Bangladesh.
The opening hours of this superstores outlets varies place to place. You can
get the idea of opening hours from our listing information of outlets.
Shwapno Ltd. is an enterprise that combines industry and trade, mainly
engages in retailing the quality products at the most lowest price in the
market. The management of Shwapno, was an enthusiastic advocate of
trading stamps as an inducement for shoppers to patronize their stores: They
9

signed up with all types

of

quality

manufacturer,

ASSUMPTIONS

products
and

became one of the companys largest clients. But the management was a fan
of pile it high and sell it cheap, and in the mid-2000 Shwapno faced many
cost problems associated with not properly integrating its purchased chains
of stores. When the firm overstretched itself opening few more outlets
throughout the city, management consultants were called in to sort out the
mess.
In 2001 Shwapno launched Operation Checkout, an across the board price
cutting campaign aimed at countering the threat from the new breed of
discounters

such

as

quick

Save.

Facing the world and looking beyond, Shwapno will always maintain the purehearted,

enterprising,

quality

and

struggling

spirit

make

efforts

to

scrupulously abide by our goodwill, create splendid future together with you
in management vision of joint development, joint prosperity and mutual
benefits.

We choose some assumption to easily analyze those methods of locationplanning. Following assumptions can be made for the analysis:
Number of customers visit in Shwapno in a month:

Location

Name of Branch

Selling price per unit (tk)

Uttara
Dhanmondi

Uttara Branch
Dhanmondi Branch

100
100
10

Mirpur
Gulshan

Mirpur Branch
Gulshan Branch

100
100

Fixed Cost and Variable Cost of Shwapno per year:

Location

Name of the

Fixed Cost

Variable Cost

Uttara
Dhanmon

Branch
Uttara Branch
Dhanmondi Branch

(tk)
1,50,000
2,00,000

(tk)
30
20

di
Mirpur
Gulshan

Mirpur Branch
Gulshan Branch

1,00,000
1,80,000

50
25

No. of unit
(per yr)
10,500
10,500
10,500
10,500

Shwapno Superstore is introducing a new branch in Bashundhara and

Banani.

Hypothetically taken some data like factor, weight and scores:

Factors

Weight

Customer Visit
Traffic Volume
Rental Cost
Size
Layout
Operating Cost

.35
.05
.30
.50
.15
.10

Scores (Out of 100)

Bashundhara
Banani
100
70
80
65
90
55
75
80
65
70
50
60

Hypothetically taken some data to analyze the center of gravity

method:
Destination
D1

X
2

Monthly

Quantity
700
11

D2
D3
D4

3
7
4

2
3
9

750
900
800
3150

LOCATION PLANNING

Every firm must use location planning techniques. There are many options
for location planning. Corporations choose from expanding an existing
location, shutting down one location and moving to another, adding new
locations while retaining existing facilities, or doing nothing. There are a
variety of methods used to decide the best location or alternatives for the
corporation. Methods are such as identifying the country, general region,
small number of community alternatives, and site alternatives. Several
factors that influence location positioning include the location of raw
materials, proximity to the market, climate, and culture. Models for
evaluating whether a location is best for an organization consist of cost-profit
analysis for locations, the center of gravity model, the transportation model,
and factor rating.

12

As an operations management student, we can focus on the importance of

location

for

any

organization

through

various

departments

of

the

organization. We got different results from the four methods and we interpret
these results according to our assumptions.

Procedure

of

making

Location

Decision

of

Shwapno

Superstore
We assume that Shwapno Superstore is going to introduce a new layout at
Boshundhora or Banani. They need to follow five steps to choose one place.
By following steps they can make the decision:
1. They need to setup the criteria. What type of layout they want, target
customers, transportation facility, others facilities could be considered?
2. They have to find out the important factor. What factor would be
affecting the layout of the Shwapno superstore?
3. We assume they develop two alternatives. One is Basundhara and
another is Banani.
4. They need to evaluate the alternatives. Whether Bashundhara is better
or Banani is better.
5. Lastly they need to choose one location for their layout.

Factors that affect Shwapnos Location Planning Decision

A business will have to consider many factors when determining where to
locate a new branch or operation. Usually, it will have to balance several
factors in making a decision.

1. Regional Factor:
a) Location of Raw Materials:

Shwapno, a retail chain superstore in

Bangladesh. As Shwapno is a retail chain, it does not need to purchase

raw materials for further production or for sell. In the case of Shwapno,
its raw materials are suppliers. It is a crucial point for Shwapno to
choose a favorable location where it can get its entire supplier closely
13

and operate business smoothly as there are different products in

Shwapno and most of those have different suppliers. To get quality
products Shwapno chose to establish their outlet near the geographical
center of the business.
b) Location of Markets: Location of market is one of the, major factor for
us. Shwapno chose their market on the basis of their customer
response. As we saw the outlet situated in the place from where they
can easily capture the whole market and develops their own existing
market.
c) Labor Factor: As Shwapno is one of the best retail chains in our
country, it needs more labor to operate the business smoothly. They
need to business. Per day Shwapno need at least 40 sales persons.
d) Quality of life: Shwapno will set in such a place where it can gets all
the suppliers who provide fresh fish, Vegetables, handy-craft etc, As
long as they are fresh, it will be sold at a nominal price, and customers
will be satisfied. If the place is not near of the suppliers than it would
be difficult for Shwapno to provide qualitiful products as most of the
products are perishable.

2. Site related factors:

Shwapno is very efficient in their supply chain. And they are very much
concern about it. For this reason they consider the fact of choosing the site of
outlet. They prefer to take the outlet at ground floor because of customers
concern. Usually Shwapno chose those locations where the roads have
enough space, Buildings are well constructed with enough parking space.
Besides that they keep some space for further expansion.
Utility factors of the location: In Bangladesh Load-shedding
problem is at its peak. In every area there is this problem. Like other super
14

shop Shwapno mitigate this problem by installing generators with high

capacity. And for that they chose the building with installed generator.
Environment

factor:

All

of

Shwapnos

location

is

chose

by

considering the external and internal environment of the area. As the

maximum customers of Shwapno are from upper-middle class to higher class
(in terms of income) people, Shwapno chose pleasant and little bit glamorous
area where customers can satisfy themselves.

4.

SEVERAL METHODS OF LOCATION

PLANNING FOR SHWAPNO
SUPERSTORE

Hypothetical Example for selecting location-planning

method for Shwapno Superstore:
4.1
Location Cost-Profit-Volume Analysis: We assume
following data to analyze the location cost-profit-volume analysis.
From the table we can calculate Cost-Volume by (Fixed Cost + Variable Cost=
Total Cost)
Location

Initial

Fixed
Cost (tk)

Variable Cost
Per Unit(tk)

No. of
unit(per yr)

Variable Cost Per

Year

Total Cost
(FC+VC)
15

Uttara
Dhanmondi
Mirpur
Gulshan

A
B
C
D

1,50,000
2,00,000
1,00,000
1,80,000

30
20
50
25

10,500
10,500
10,500
10,500

30*10,500=3,15,000
20*10,500=2,10,000
50*10,500=5,25,000
25*10,500=2,62,500

4,65,000
4,10,000
6,25,000
4,42,500

C
1,000,0
00

800,00
0

TO
TA
L
CO
ST

600,00
0
400,00
0
200,00
0
C
0

6,000

Interpretation:

8,000

10,000

12,000

14,000

OUTPUT
(UNITS)

To conclude we can say that if the units limit is within 6,000 then Mirpur (C)
will be the most suitable choice then for 6,000 to 7,500 units, Gulshan (D) is
the most preferred choice and finally for units more than 7,500 units is
Dhanmondi (B) will preferable. For 10,500 units location Dhanmondi (B) is
providing lowest cost.
The approximate ranges for which the various alternatives will yield the
lowest cost are shown on the graph. Here, location Uttara (A) is never be
superior. The exact ranges can be determined by finding the output level at
which lines C and D and lines D and B. To do this, we need to set their total

16

cost equations equal and solve for Q, the break-even output level. Thus for C
and D:
(C)

(D)

50Q + 100,000 = 25Q + 180,000

Q = 3,200 units per year
For D and B
(D)

(B)

25Q + 180,000 = 20Q + 200,000

Q = 4,000 units per year
For the profit analysis, we need to compute the total profit for each location.
Formula: Total profit= Q (R-V) - FC
Location

Revenue
(100*10,500)

Fixed Cost
(tk)

Variable
Cost (tk)

Monthly
Profit

Uttara

1,050,000

1,50,000

3,15,000

5,85,000

Dhanmondi

1,050,000

2,00,000

2,10,000

6,40,000

Mirpur

1,050,000

1,00,000

5,25,000

4,25,000

Gulshan

1,050,000

1,80,000

2,62,500

6,07,500

Hence, Dhanmondi is expected to yield the higher monthly profit.

4.2 The Transportation Model: Supply chain of Shwapno is not a

lengthy process. It is mainly warehouse based. Shwapno has a very big
warehouse which makes its transportation model easier. At first, they store
the entire product from different manufacturers into their warehouse. The
transportation cost is fully given by the manufacturing company. Then the
stored products are distributed through Shwapno's own vehicles to its
several outlets. There is no intermediary between warehouse of Shwapno
and its manufacturing companies like Unilever. No product directly comes to
the outlet without being at the warehouse. Some perishable goods are
17

especially taken care of in the transportation process. Shwapno has contract

with some agricultural firms, hatchery, poultry farms, mushroom firms, dairy
and meat firms (beef, mutton, etc.). These firms supply fresh agricultural
items as daily, 2 days, 3 days, weekly, fortnightly or even on a monthly basis
to Shwapno. Huge quantities of goods are being taken. The transportation
cost is taken by the producers. All the products are first taken to the
warehouse, then to the outlets. Though all the products at first are kept in
their warehouse, still Shwapno have very low transportation cost. Hence, the
nearer the warehouse IS better for them.

4.3 Factor Rating: We assume following data to analyze factor rating

method of Shwapno Superstore.
Factors

Weight

Scores (Out of 100)

Bashundh
Banani
ara
100
70

Customer Visit

.35

Traffic Volume

.05

80

65

Rental Cost

.30

90

55

Size
Layout

.50
.15

75
65

80
70

.10
1.00

50

60

Operating Cost
Total

Weighted Scores
Bashundhar
Banani
a
100*(.35)=35 70*(.35)=24.
5
80*(.05)=4
65*(.05)=3.2
5
90*(.30)=27 55*(.30)=16.
5
75*(.50)=37.5 80*(.50)=40
65*(.15)=9.75 70*(.15)=10.
5
50*(.10)=5
60*(.10)=6
118.25
102.75

Interpretation:
Here Shwapno Superstores manager may prefer to establish maximum thresholds.
So, alternative 1 (Bashundhora) is better because it has higher composite score.

4.4 The Center Of Gravity Method: We assume Shwapno

Superstore wants to introduce a new layout at Bashundhara or Banani to
analyze center of gravity method of Shwapno Superstore.
Y

N
18

10

E
S

D4(4,9)
8

7
6

D1(1,6)

D1=Mirpur
D2=Dhanmo
ndi
D3=Gulshan
D4= Uttara

Banani

Bashundhara
4
3

D3(7,3)

D2(3,2)

13

0
15

10

Destination

D1
D2
D3
D4

2
3
7
4
15

6
2
3
9
20

^
xi
X = ------- =15/4=3.75
n

11

12
X

^
yi
Y= ------- =20/4=5
n

Y
11
10
9
D4
8

D5=

Banani

D6=
Bashundhara

19

7
6
D1

D5 (3.75, 5)

D6

4
3
D3
2
D2
1
13

0
14

2
15

10

11

12

Interpretation:
From this graph it can be derived that center of gravity of all four of our locations is
(3.75, 5). And D5 is the Banani. As per this graph they should go for location Banani.

If there is monthly quantities varies, the center of gravity will results

different. We assume that.

Destination

D1
D2
D3
D4

2
3
7
4

6
2
3
9

Monthly
Quantity
700
750
900
800
3150

^
xiQi
X = -------- = 2(700)+3(750)+7(900)+4(800) / 3150 = 4.1 Round to 4
n
^
yiQi
Y= --------- = 6(700)+2(750)+3(900)+9(800) / 3150 = 4.9 Round to 5
n

20

Graph: Y

CONCLUSION

11
10
9
D4
8

D5=

Banani

D6=
Bashundhara

6
D1

D5 (4, 5)

5
4

D6

3
D3
2
D2
1
13

0
14

2
15

10

11

12

Interpretation:
As per this graph, they also need to go for location Banani for setting their
new outlet.

Location planning decisions are major decisions for a company. The owner
should be very attentive to evaluate location for their outlet and warehouse.
Shwapno superstore is the largest super chain shop in Bangladesh.
Moreover, they need to take location planning decision very carefully.
Because on this decision, there will be many things including profit and

21

income dependent. They need to evaluate above discussed four methods of

choosing the best location for their outlet and warehouse.

From this report we can state some recommendation of choosing appropriate

location for Shwapno superstore. Following recommendation can be made
from our assumption based report:
From the cost-profitvolume analysis, we

RECOMMENDATION

can say, they should

go for Location Dhanmondi, if they have increased their sales. Profit is
also generated more from location Dhanmondi.
In factor rating analysis, we can recommend to go for Bashundhara for
their new outlet. Because, location Bashundhara has higher composite
score.
From the center of gravity method, we can recommend to go for
Banani. If there is a variation in monthly quantity or same quantity, as
per center of gravity method location Banani is the best place for new
outlet.

REFERENCES

22

J. Stevenson, W. (n.d.). Location planning and analysis. In Operations

Management (8th ed., p.872). New York, 1221 Avenue of the Americas, New
York: McGraw-Hill/Irwin.
Retrieved from http://ids355.wikispaces.com/Ch.+8s+Transportation+Model
Retrieved from http://ids355.wikispaces.com/Ch.
+8+Location+Planning+and+Analysis
Retrieved from http://www.reportbd.com/articles/149/1/Shwapno--Supermarket-Chain-ampSuperstore-in-Bangladesh/Page1.html
Retrieved from http://www.zeepedia.com/read.php?
location_planning_and_analysis_managing_global_operat

ions_regional_factors_production_operations_management&b=55&c=22

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