8-1

Location Planning and Analysis

LECTURE

Location Planning and Analysis

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Location Planning and Analysis

Marketing Strategy Cost of Doing Business Growth

Depletion of Resources

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Location Planning and Analysis

Strategic Importance

Long term commitment/costs Impact on investments, revenues, and operations Supply chains Profit potential No single location may be better than others Identify several locations from which to choose Expand existing facilities Add new facilities Move

Objectives

Options

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Location Planning and Analysis

Decide on the criteria Identify the important factors

Develop location alternatives

Evaluate the alternatives Make selection

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Location Planning and Analysis

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Location Planning and Analysis

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Location Planning and Analysis

Regional Factors

Community Considerations

Multiple Plant Strategies

Site-related Factors

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Location Planning and Analysis

Location of raw materials

Location of markets Labor factors

Climate and taxes

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Location Planning and Analysis

Quality of life Services

Attitudes
Taxes Environmental regulations

Utilities
Developer support

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Land
Transportation Environmental

Legal

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Product plant strategy

Market area plant strategy Process plant strategy

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Table 8.2 Manufacturing/Distribution

Cost Focus Transportation modes/costs Energy availability, costs Labor cost/availability/skills Building/leasing costs

Service/Retail
Revenue focus Demographics: age,income,etc Population/drawing area Competition Traffic volume/patterns

Customer access/parking

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Cost-Profit-Volume Analysis

Determine fixed and variable costs

Plot total costs

Determine lowest total costs

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Assumptions
Fixed costs are constant

Variable costs are linear

Output can be closely estimated Only one product involved

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Fixed and variable costs for four potential locations

Location A B C D

Fixed Cost Rs250,000 100,000 150,000 200,000

Variable Cost Rs11 30 20 35

8-16 Location Planning and Analysis

Fixed Costs

Variable Costs

Total Costs

A Rs.250,000 Rs11(10,000) Rs360,000 B 100,000 30(10,000) 400,000 C 150,000 20(10,000) 350,000 D 200,000 35(10,000) 550,000

8-17 Location Planning and Analysis

Rs(000) 800 700 600 500 400 300 200 100 0 0

D B C A
A Superior C Superior B Superior

10

12

14

16

Annual Output (000)

8-18 Location Planning and Analysis

Transportation Model

Decision based on movement costs of raw materials or finished goods Decision based on quantitative and qualitative inputs

Factor Rating

Center of Gravity Method

Decision based on minimum distribution costs