module 5 location operations management as a competitive weapon

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Module 5 Location Operations Management as a Competitive Weapon

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Page 1: Module 5 Location Operations Management as a Competitive Weapon

Module 5

Location

Operations Management as a Competitive Weapon

Page 2: 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

Page 3: Module 5 Location Operations Management as a Competitive Weapon

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

Page 4: Module 5 Location Operations Management as a Competitive Weapon

4Module 5: Location

1. Overall - Global

Other Languages Different Norms

and Customs Work-Force

Management Unfamiliar Laws

and Regulations Unexpected Cost Mix

Page 5: Module 5 Location Operations Management as a Competitive Weapon

5Module 5: Location

Type of Facility

Product-focused (55%)

Market-focused (30%)

Process-focused (10%)

General purpose (5%)

Page 6: Module 5 Location Operations Management as a Competitive Weapon

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

Page 7: Module 5 Location Operations Management as a Competitive Weapon

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

Page 8: Module 5 Location Operations Management as a Competitive Weapon

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

Page 9: Module 5 Location Operations Management as a Competitive Weapon

9Module 5: Location

General-purpose

Produce several types of products and use several different processes

Page 10: Module 5 Location Operations Management as a Competitive Weapon

10Module 5: Location

2. Location Decision Sequence

© 1995 Corel Corp.

CountryCountry

© 1995 Corel Corp.

Region/CommunityRegion/Community

© 1995 Corel Corp.

Site

Page 11: Module 5 Location Operations Management as a Competitive Weapon

11Module 5: Location

Location Decision Example

BMW decided to build its first major mfg. plant outside Germany in Spartanburg, South Carolina.

© 1995 Corel Corp.

Page 12: Module 5 Location Operations Management as a Competitive Weapon

12Module 5: Location

Country Decision Factors

Market location

Labor

Manufacturing labor costs

Labor productivity

Page 13: Module 5 Location Operations Management as a Competitive Weapon

13Module 5: Location

Country Decision Factors

Other

Shipping cost New plant & equipment

Page 14: Module 5 Location Operations Management as a Competitive Weapon

14Module 5: Location

Region Decision Factors

Labor

Wages in South Carolina (SC)

Government incentives

Free-trade zone

Page 15: Module 5 Location Operations Management as a Competitive Weapon

15Module 5: Location

3. Location Methods

Factor

weighting

method

Center of

gravity method© 1995 Corel Corp.

Page 16: Module 5 Location Operations Management as a Competitive Weapon

16Module 5: Location

Factor Rating Method

Most widely used location

technique

Useful for service & industrial

locations

Rates locations using factors

Page 17: Module 5 Location Operations Management as a Competitive Weapon

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

Page 18: Module 5 Location Operations Management as a Competitive Weapon

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?

© 1995 Corel Corp.

Page 19: Module 5 Location Operations Management as a Competitive Weapon

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

Page 20: Module 5 Location Operations Management as a Competitive Weapon

20Module 5: Location

Center of Gravity Method

Finds location of single

distribution center serving

several destinations

Used primarily for services

Page 21: Module 5 Location Operations Management as a Competitive Weapon

21Module 5: Location

Center of Gravity Method Steps

Place existing locations on a

coordinate grid

Calculate X & Y coordinates for

‘center of gravity’

Page 22: Module 5 Location Operations Management as a Competitive Weapon

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

Page 23: Module 5 Location Operations Management as a Competitive Weapon

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?

© 1995 Corel Corp.

Page 24: Module 5 Location Operations Management as a Competitive Weapon

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

© 1995 Corel Corp.

Page 25: Module 5 Location Operations Management as a Competitive Weapon

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

Page 26: Module 5 Location Operations Management as a Competitive Weapon

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

© 1995 Corel Corp.