8-1 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis

8-2 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Chapter 8 Location Planning and Analysis

8-3 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Need for Location Decisions Marketing Strategy Cost of Doing Business Growth Depletion of Resources

8-4 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Nature of Location Decisions Importance –Long term commitment/costs Objectives –Profit potential Options –Expand existing facilities –Add new facilities –Move

8-5 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Location Decision Factors Regional Factors Site-related Factors Multiple Plant Strategies Community Considerations

8-6 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Location of raw materials Location of markets Labour factors Climate and taxes Foreign locations Regional Factors

8-7 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Quality of life Services Attitudes Taxes Environmental regulations Developer support Community Considerations

8-8 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Land Transportation Environmental Legal Site Related Factors

8-9 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Product plant strategy Market area plant strategy Process plant strategy Multiple Plant Strategies

8-10 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Why Should Foreign Companies Locate in Canada? Shortened delivery time and reduced delivery costs Access to natural resources Lower wage and exchange rates Skilled labour Auto industry Computer companies Pharmaceutical companies

8-11 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Comparison of Service and Manufacturing Considerations Manufacturing/DistributionService/Retail Cost FocusRevenue focus Transportation modes/costsDemographics: age,income,etc Energy availability, costsPopulation/drawing area Labour cost/availability/skillsCompetition Building/leasing costsTraffic volume/patterns Customer access/parking

8-12 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis

8-13 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Evaluating Locations Cost-Profit-Volume Analysis –Determine fixed and variable costs –Plot total costs –Determine lowest total costs

8-14 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Example 1: Cost-Volume Analysis Fixed and variable costs for four potential locations

8-15 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Example 1: Solution

8-16 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Example 1: Solution Annual Output (000) $(000) A B C B Superior C Superior A Superior D

8-17 McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Location Planning and Analysis Evaluating Locations Transportation Model –Decision based on movement costs of raw materials or finished goods Factor Rating –Decision based on quantitative and qualitative inputs Centre of Gravity Method –Decision based on minimum distribution costs