module 5 location operations management as a competitive weapon
TRANSCRIPT
Module 5
Location
Operations Management as a Competitive Weapon
2Module 5: Location
OM Course Framework
TOC
JIT
MRP
Operational Issues
AggregatePlanning
Inventory
Location
Capacity
Tactical Issues
Manufacturing Design & Selection
Process Analysis
Operations Strategy
Strategic Issues
3Module 5: Location
Learning Objectives
At the end of this module, each student will be able to:
1. Describe factors affecting location decisions
2. Discuss facility location sequence
3. Explain some methods of evaluating
location alternatives
4Module 5: Location
1. Overall - Global
Other Languages Different Norms
and Customs Work-Force
Management Unfamiliar Laws
and Regulations Unexpected Cost Mix
5Module 5: Location
Type of Facility
Product-focused (55%)
Market-focused (30%)
Process-focused (10%)
General purpose (5%)
6Module 5: Location
Product-focused
Produces one family or type of product
Usually for a large market
Transportation costs are low
Scale economies are high
7Module 5: Location
Market-focused
Located in the markets they serve
Service operations, since services
cannot be transported
Require quick response,
customized products, high
transportation costs
8Module 5: Location
Process-focused
Have one technology
Produce components or parts that
are shipped to other facilities for
further processing or assembly
Can make a wide variety of products with the given process technology
9Module 5: Location
General-purpose
Produce several types of products and use several different processes
10Module 5: Location
2. Location Decision Sequence
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CountryCountry
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Region/CommunityRegion/Community
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Site
11Module 5: Location
Location Decision Example
BMW decided to build its first major mfg. plant outside Germany in Spartanburg, South Carolina.
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12Module 5: Location
Country Decision Factors
Market location
Labor
Manufacturing labor costs
Labor productivity
13Module 5: Location
Country Decision Factors
Other
Shipping cost New plant & equipment
14Module 5: Location
Region Decision Factors
Labor
Wages in South Carolina (SC)
Government incentives
Free-trade zone
15Module 5: Location
3. Location Methods
Factor
weighting
method
Center of
gravity method© 1995 Corel Corp.
16Module 5: Location
Factor Rating Method
Most widely used location
technique
Useful for service & industrial
locations
Rates locations using factors
17Module 5: Location
Factor Rating Method Steps
List relevant factors
Assign importance weight to each factor
Develop scale for each factor (0-1, etc.)
Score each location using factor scale
Multiply scores by weights for each factor & total
Select location with maximum total score
18Module 5: Location
Factor Rating Method Example
You’re an analyst for John Deere. You’re considering locating a new mfg. plant in Omaha (NE) or Denver (CO).
Factor Wgt NE CO Mfg. costs .7 .8 .9Cost of living .1 .6.8 Labor avail. .2 1 .8 Where should you locate?
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19Module 5: Location
Factor Rating Method Solution
.56 .63
.06 .08
.20 .16
0.82 0.87
.7
.1
.2 .2
.1
.7.7
.1
.2
1.0
.6
1
.8
.8
.8
.9
Omaha DenverFactor Wgt Score
(0-1)Wgt
ScoreScore(0-1)
WgtScore
Wgt Wgt
Mfg.Cost $
CostLivingLaborAvail.
TOTAL
20Module 5: Location
Center of Gravity Method
Finds location of single
distribution center serving
several destinations
Used primarily for services
21Module 5: Location
Center of Gravity Method Steps
Place existing locations on a
coordinate grid
Calculate X & Y coordinates for
‘center of gravity’
22Module 5: Location
Center of Gravity Equations
C
d W
Wx
ix ii
ii
X Coordinate
C
d W
Wy
iy ii
ii
Y Coordinate
dix = x
coordinate of location i
Wi = Volume
of goods moved to or from location i
diy = y
coordinate of location i
23Module 5: Location
Center of Gravity Example
You’re an analyst for Home Depot. You want to find the best location of a warehouse serving retail stores in Lincoln (coord. 90, 60), Columbia (coord. 150, 30), & Austin (coord. 90, 10). Monthly demand is 2k, 3k, 5k units respectively.
Columbia, SC
Austin, TX
Lincoln, NE
WarehouseWarehouse?
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24Module 5: Location
Center of Gravity Example
00 3030 6060 9090 120120 150150
3030
6060
9090
00
Lincoln Store(90,60)2k demand
Austin Store(90,10)5k demand
Columbia Store (150,30)3k demand
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25Module 5: Location
Center of Gravity Solution
C
d W
Wy
iy ii
ii
(60)(2) (30) (3) (10)(5)
2 3 526
C
d W
Wx
ix ii
ii
(90)(2) (150)(3) (90)(5)
2 3 5108
26Module 5: Location
COG Method Solution
00 3030 6060 9090 120120 150150
3030
6060
9090
00
AustinStore
Columbia Store
Lincoln
Store
XX
Warehouse at
(108, 26): Little Rock
Warehouse at
(108, 26): Little Rock
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