Chapter 8: Location Planning and Analysis – Flashcards
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Identify some of the main reasons organizations need to make locations decisions...
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Part of a marketing strategy to expand markets Growth in demand that cannot be satisfied by expanding existing facilities Depletion of basic inputs requires relocation
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Explain why location decisions are important?
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Low cost convenience to attract market share represent a long term commitment of resources
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Discuss the options that are available for location decisions?
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expand an existing facility add new locations while retaining existing facilities do nothing
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Give examples of the major factors that affect locations decision
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Trade agreements - NAFTA, GATT Technology
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Outline the decision the decision process for making these kinds of decision?
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1 Decide on the criteria to use for evaluating location alternatives 2. Identify the country or countries for location 3 Identify a small number of community alternatives
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Global location: Benefits
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markets, cost savings, legal and regulatory, financial,
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Disadvantages of Global ......
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transportation costs, security costs, unskilled labor, import restrictions
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Risks involved in Global ......
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political instability and unrest, terrorism, economic instability, legal regulation, ethical considerations
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Global operations......
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risk of communication, development of trust, different management styles, corruption and bribery, increased travel costs
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How to identify a region ....
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location of raw materials is necessity, perishability, transportation costs, location of markets, attitude toward work, labor productivity
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How to identify a community.....
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quality of life, services, taxes
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Identifying a site.....
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land, zoning, other restrictions
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Multiple plant manufacturing strategies.....
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organizing operations, market area plant strategy, process plant strategy, general purpose, plant strategy
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geographic information systems....
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GIS - computer based tool for collecting storing, retrieving and displaying demographic data on maps, portraying relevant information on a map makes it easier for decision makers to understand
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Service and Retail locations.....
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nearness to raw materials is not usually a consideration, customer access is a prime consideration for some restaurants, hotels, etc Tend to be profit or revenue driven and so are clustering
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Evaluating location alternatives....
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transportation model, factor rating, center of gravity method
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Locational cost profit volume analysis....
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Determine the fixed and variable costs for each alternative Plot the total cost lines for all alternatives on the same graph
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Location cost profit volume analysis...
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Assume that fixed cost are constant for the range of probable output variable costs are linear for the range of probably output Only one product is involved
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Location cost profit volume analysis......continues
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Total cost = FC + V * Q
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Factor Rating .........
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general approach to evaluating locations that includes quantitative and qualitative inputs Procedure: determine which factors are relevant, assign a weight to each factor that indicates its relative importance compared with all other factors, decide on a common scale for all factors and set a minimum acceptable score
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Center of gravity method....
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treats distribution cost as a linear function of the distance and quantity shimmed the quantity to be shipped to each destination is assumed to be fixed the method includes the use of a map that shows the locations of destinations
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COG continues....
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when the quantities to be shipped to every location are unequal, you can obtain the coordinates of the center of gravity by finding the weighted average of the x coordinates and the average of the y coordinates.
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A "micro" factory is a small automated facility with a narrow product focus located near major markets.
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True
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Retail businesses generally prefer locations that are not near other retailers, as this reduces their competition.
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False
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Location choice I has monthly fixed costs of $100,000 and per-unit variable costs of $10. Location choice J has monthly fixed costs of $150,000 and per-unit variable costs of $9. At what volume would these locations have equal total costs?
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50000
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In location planning, the location of raw materials, the location of markets, and labor factors are:
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regional factors
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Global Positioning Systems (GPS) use the Center of Gravity method to establish starting grid co-ordinates.
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False
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Nearness to raw materials would be most important to a ...
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manufacturing company
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You can't make a mistake by locating where labor costs are low.
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False
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For service organizations, the dominant factors in location analysis usually are market-related
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True
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Which of the following is the last step in the procedure for making location decisions?
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evaluate alternatives and make a selection
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For service and retail stores, a prime factor in location analysis is customer access
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True
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Location choice I has monthly fixed costs of $100,000 and per-unit variable costs of $10. What would its total cost be at a monthly volume of 550 units?
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105500
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The method for evaluating location alternatives which minimizes shipping costs between multiple sending and receiving locations is
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transportation model analysis
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One of the reasons for the importance of location decisions is its strategic importance to the supply chains.
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true
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Some communities offer financial and other incentives to ______ new businesses.
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attract
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Which of the following is not a location option that management can consider in location planning?
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e) all are possible options
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The fact that most types of firms are located in every section of the country suggests that in many cases, location decisions are not overly important; one location typically is as good as another.
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False
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Location decisions are closely tied to an organization's strategies.
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true
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Location decisions are basically one-time decisions usually made by new organizations.
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false
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Advanced communications has aided globalization.
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true
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The center of gravity method is a location planning technique that determines a composite score from weighted factor evaluation.
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false
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Which of the following circumstances would be least likely to lead to a need for a new location?
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Growth in demand that is leading to greater utilization of existing capacity.
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Facilities, personnel and operations that are located around the world are called:
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globalization
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The lower cost of foreign labor is often offset by lower levels of productivity.
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true
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Web-based, retail businesses should be located near the customer to reduce their long distance phone charges.
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false
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Location choice I has monthly fixed costs of $100,000 and per-unit variable costs of $10. What would its total cost be at a monthly volume of 250 units?
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102500
