Presentation on theme: "Facility Location Operations Management Dr. Ron Lembke."— Presentation transcript:
Facility Location Operations Management Dr. Ron Lembke
Location Decisions Long-term decisions Difficult to change Affect fixed & variable costs Transportation costs (25% of price) Other costs: taxes, wages, rent Affect revenues: customers know you where you are Objective: find best location for firm
What factors should we consider? Skilled workforce Environmental laws / cost of compliance Cost of utilities, labor, taxes Freeport Law in NV – no inventory tax Suppliers close by – fast & cheap access Customers close by Competitors close by? Skilled labor pool International - control issues?
Service Facilities – Traffic focus Revenue changes a huge amount, depending on the location. Old Navy in Stead because of cheap land? Location, location, location: you need traffic Make it convenient! vitamins: need enough, but it has to be the right kind people who would want to buy your products when they are there. Cost probably doesn’t change nearly as much, by location All malls have high rent
Northtowne Center Wal-Mart WinCo Office Max Toys Party
Cost Focus Revenue does not vary much, depending on the location. Customers don’t care if your warehouse is in Sparks or Sacramento Location is a major cost driver Impacts shipping, labor, production costs Varies greatly by location
Cost Minimization Identify the costs that will vary most with the location you choose. Transportation, taxes, labor, Facility construction cost, utilities Other considerations Proximity of services, suppliers Quality of life Government incentives
Cost Focus Process Overview 1. Identify general region to locate in Usually based on mostly on transp. costs 2. Identify a list of candidate cities Choose cities with good transp. Access Estimate labor cost & availability, facilities costs 3. Select metro area, identify candidate properties. Find cost of building or leasing individual properties Estimate costs of the facilities How good will the service to our customers be?