Professional Documents
Culture Documents
Operations Management
William J. Stevenson
8th edition
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CHAPTER
McGraw-Hill/Irwin
Operations Management, Eighth Edition, by William J. Stevenson Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Fishing and Logging operations Mining and petroleum operations , they generally have a longer time horizon Shift in Markets Nature of Location Decisions Infrequent But have a significant impact
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Strategic Importance
Objectives of LD
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Location Options
Expand existing facilities, if there is adequate room for expansion Add new facilities, e.g retail operations . This can be a defensive startegy to increase mkt presence and share . Take care that it dosent cannibalise the existing ones Move: Shut down at one and move to another e.g US to China , Nortel Networks , canada to China , Comdev. Status Quo : if the alternatives do not yield anything substantial , maintain the present status
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Decide on the criteria e.g inc revenue or customer service Identify the important factors in the supply chain Develop location alternatives Evaluate the alternatives Make selection
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Regional Factors
Site-related Factors
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Regional Factors
Location of raw materials Location of markets Labor factors Climate and taxes
Raw Materials
Three reasons for proximity to RM Neccessity: Mining , farming, forestry & fishes Perishability : Canning & freezing of food products Transportation Costs
Energy in Mfr Water Supply Cooling for Nuclear Reactors Traffic Patterns in Service Industry Convenience in service e.g car rental near airport Competitor location in Service
Community Considerations
Quality of life Services Attitudes Taxes Environmental regulations Utilities Developer support
Product plant strategy Market area plant strategy Process plant strategy
Customer access/parking
Trends in Locations
Table 8.3
Foreign Government a. Policies on foreign ownership of production facilities Local Content Import restrictions Currency restrictions Environmental regulations Local product standards b. Stability issues Living circumstances for foreign workers / dependents Religious holidays/traditions Possible buy locally sentiment
Resources
Level of training and education of workers Work practices Possible regulations limiting number of foreign employees Language differences Availability and quality of raw materials, energy, transportation
Evaluating Locations
Cost-Profit-Volume Analysis
Determine fixed and variable costs Plot total costs Determine lowest total costs
Assumptions
Fixed costs are constant Variable costs are linear Output can be closely estimated Only one product involved
0 0 0 0
Example 1: Solution
Variable Costs $11(10,000) 30(10,000) 20(10,000) 35(10,000) Total Costs $360,000 400,000 350,000 550,000
Example 1: Solution
D B C A
A Superior C Superior B Superior
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Evaluating Locations
Transportation Model
Decision based on movement costs of raw materials or finished goods Decision based on quantitative and qualitative inputs
Factor Rating