1. Importance of Location 1.Accounting which prepares cost estimates for changing locations as well as operating at new locations. 2.Distribution which seeks warehouse layouts that make material handling easier and customer response shorter.

2. Importance of Location 3.Engineering which considers the impact of product /service location choices. 4.Finance which performs the financial analysis for investments in new locations. 5.Human Resources, which hires and trains employees to support new locations or relocations of operations. 6.Management Information Systems which provide information technologies that link operations at different locations.

3. Importance of Location 7.Marketing which assesses new locations and revised locations that are popular with the customers. 8.Operations Management which seeks and finalizes locations that create, sustain, protect and project the best performance criteria for the whole organization.

4. DISADVANTAGES TO GLOBALIZATION The common disadvantages which lead to a MNC forgoing globalization includes. 1.Handing over proprietary Technology to host countries. 2.Political risks. 3.Poor Employee ( Managers and worker ) skills. 4.Slow customer response time. 5.Effective communication between interfaces difficult

5. MANAGING GLOBAL OPERATIONS Host country languages Host Country Norms and Customs. Workforce management Unfamiliar laws and regulations. Unexpected Cost mix.

6. Need for Location Decisions 1.Marketing Strategy 2.Cost of Doing Business 3.Growth 4.Depletion of Resources

7. Nature of Location Decisions 1.Strategic Importance – Long term commitment/costs – Impact on investments, revenues, and operations – Supply chains 2.Objectives – Profit potential – No single location may be better than others – Identify several locations from which to choose 3.Options – Expand existing facilities – Move – Add new facilities

8. Making Location Decisions 1.Decide on the criteria 2.Identify the important factors 3.Develop location alternatives 4.Evaluate the alternatives 5.Make selection

9. Manufacturing 1.Favorable Labor Climate. 2.Proximity to markets. 3.Quality of Life. 4.Proximity of Suppliers and Resources. 5.Proximity to the Parent Company’s facilities. 6.Utilities, Taxes and Real estate costs. 7.Other factors ( expansion, construction costs, and location near the highway or main railways).

10. Dominant Factors in Services 1.Proximity to Customers. 2.Transportation costs and proximity to markets. 3.Location of competitors. 4.Site specific factors.

11. Comparison of Service and Manufacturing Considerations Manufacturing/DistributionService/Retail Cost FocusRevenue focus Transportation modes/costsDemographics: age,income,etc Energy availability, costsPopulation/drawing area Labor cost/availability/skillsCompetition Building/leasing costsTraffic volume/patterns Customer access/parking Table 8.2

12. Evaluating Locations Cost-Profit-Volume Analysis

13. Evaluating Locations Transportation Model – Decision based on movement costs of raw materials or finished goods Factor Rating – Decision based on quantitative and qualitative inputs Center of Gravity Method – Decision based on minimum distribution costs

14. Transportation Method A quantitative approach that can help solve multiple facility location problems. Based on Linear Programming which we will cover later in our discussions. Normally used to determine the allocation pattern that can be used to minimize the cost of shipping products from two or more plants or sources of supply to two or more warehouses or destinations.

15. Transportation Method It does not solve all the problems of the multiple facility location. It only finds the best shipping pattern between plants and warehouses for a particular set of plant locations with a given capacity. The Operations manager or logistics analyst must try a variety of location-capacity combinations and use this to find the optimal distribution for each alternative.

16. Transportation Method Distribution costs( variable shipping and possible variable production costs) are important inputs in evaluating a particular location allocation combination. Investments costs and other fixed costs are also considered. Qualitative factors ( like land and construction cost against annual profits) are also included in the analysis for each location capacity combination.

17. Transportation Method Step I –Set up the initial matrix/tableau. The basic steps include: –Create a row for each plant ( existing or new) being considered and a column for each warehouse. –Add a column for plant capacities and a row for warehouse demands and then insert specific numerical values.

18. Transportation Method Step I –Each cell not in the requirement row or capacity column represents a shipping route from a plant to warehouse. Insert the unit costs in the upper right hand corner of each of these cells.

19. Transportation Method Example –Pakistan Cellular Mobile Company plans to build a 5000 unit production plant at Islamabad because demand for mobile phones in Pakistan has gone up. The tableau on the next slide shows the unit cost of shipping one truck/loader of mobiles from the existing plant at Lahore and the possible location at Islamabad.

20. Transportation Method PlantWAREHOUSECapacity 123 Lahore 500.0600.05500 5000 Islamabad 700.045006000 5000 REQUIRE MENTS 250045003000 10000

21. matrix/tableau In transportation method, the sum of the shipments in a row must equal the corresponding plants capacity. Similarly the sum of the shipments to a column must add to corresponding warehouses demand requirements. Thus shipments to Warehouse 1 from Lahore and Islamabad must equal 2500 mobiles.

22. Transportation Method PlantWAREHOUSECapacity 123Dummy Lahore 1.0 2500 6.01.0 2500 0 5000 Islamabad 7.02.00 4500 6.00 500 0 5000 Dummy 0000 REQUIRE MENTS 2500450030000 10000