1. Location & logistics
Part 1

2. Location - Learners should be able to:
Explain the factors affecting the choice of location of a business
Evaluate the advantages & disadvantages of different locations for a business and its stakeholders
Evaluate the impact and importance of location to a business and its stakeholders
Recommend and justify suitable locations for a business

3. Factors affecting location - Quantitative
Fixed Costs
Site costs
Influenced by demand and supply
Expensive in London, cheaper in out of town industrial parks
Availability of grants / subsidies
Maybe available in areas of high unemployment
Regional Growth Fund
Enterprise Zones

4. Factors affecting Location - Quantitative
Variable Costs
Transportation costs
Bulk increasing (locate close to market – e.g. car manufacturers)
Bulk reducing (locate close to raw materials – e.g. quarrying / stone masons / crisp manufacturer)
Nearness to supply of skilled / unskilled labourers
E.g. set up new factory in area of high unemployment

5. Factors affecting Location - Quantitative
Variable Costs
Labour costs
Need to pay more in some areas due to higher costs of living
London weighting allowance
Ability to achieve external EOS (reduced unit cost in industry)
Silicon Valley on M4 corridor
Currency costs
Avoid exchange rate issues
Locate in country of customers / suppliers – e.g. EU

6. Factors affecting location - Quantitative
Revenue
Accessibility by target customers
Particularly important for retailers (footfall)
Corner shops,
B2B – component manufacturers near business customer
Proximity of competitors
Most like to be distant (no close competitors to ‘steal’ business)
Some like to be close
Saville Row renowned for tailoring
Harley Street
Globalisation
Need to be as competitive as possible
Offshoring – e.g. call centres / manufacturing to areas of cheap labour

7. Factors affecting location - Qualitative
Type of business & its product / service
E.g. coal mine must be by coal seam
Working environment
Google campus – hire desk near other similar businesses – share ideas
Ease of access for staff / suppliers
Good transport links
Quality of infrastructure
bandwidth / rail links / road links etc.

8. Factors affecting location - Qualitative
Health & safety considerations
e.g. nuclear power plants near sea
Opportunities for expansion
Ability to get planning permission / land / offices nearby

9. Reasons for locating …. A fashion house locating in Paris?
Shipbuilding companies locating on the Clyde?
Kraft relocating some of Cadbury’s production to Poland?
JLR in Gaydon?

10. Read article and identify as many reasons for / against locating in Chatteris as possible.
Considering the impact of the decision not to open new Chatteris store taken by Tesco’s management on its stakeholders, evaluate their decision. [20]
Identify stakeholders affected
Positively / negatively
On balance – what should the management do – open now or mothball?
Why?
What does your answer depend on?

11. Location & logistics
Part 2

12. Logistics – Learners need to be able to:
Explain what is meant by logistics including:
Supply chain management
Distribution management
The role of warehousing
The role of distribution centres
Digital
Evaluate the factors affecting logistical decisions
Evaluate the internal and external provision of logistics to a business and its stakeholders
Recommend and justify a suitable logistics strategy for a business
Explain what is meant by outsourcing, subcontracting, offshoring & reshoring
Evaluate the impact and importance of outsourcing, subcontracting, offshoring and reshoring to a business and its stakeholders
BRAINSTORM

13. Logistics
‘The activity of organising the movement, equipment, and accommodation of troops.’ (Oxford dictionary)
‘The art and science of obtaining, producing and distributing material and product in the proper place and in proper quantities’ .

14. Seven R’s of Logistics Rapidly evolving business discipline Involves:
Order processing
Warehousing
Transportation
Materials handling
Packaging
All of which need to be integrated through a network of facilities

15. Transportation – largest contributor to logistics costs
Its not just about moving goods
Goods need to be packaged, loaded, unloaded, warehoused and distributed and PAID for whenever they change hands
Need to choose the right combination of transport methods to keep costs low

16. Warehousing
When goods are not on the move between locations, they may have to spend time in a warehouse
Warehousing is the activities relating to receiving, storing and shipping materials to and from production or distribution locations
The more goods and the longer they spend in a warehouse the higher the costs
However, higher inventory levels may enable a firm to meet customer demand more easily

17. Logistics functions can be outsourced
Third party logistics providers perform or manage one or more logistics services
Fourth party logistics providers are logistics specialists and take over the entire logistics function of an organisation
This may involve co-ordinating the combination of divisions or subcontractors
Growing trend

20. Information Systems
It is essential to have an ICT system that connects departments of a business to co-ordinate operations – INTERNAL INFORMATION SYSTEMS
It is also important, especially if demand varies, to communicate externally with customers to track requirements – EXTERNAL INFORMATION SYSTEMS

21. Need to balance logistics costs against appropriate levels of customer service

22. Examples
If a table manufacturer requires a specific type of wood to produce all its table legs, and that wood is not available, it may force the factory to close down until the material arrives
Expensive delays, potential lost sales, decreased customer satisfaction
Worth spending more money to speed up delivery

23. If a home improvement store (B & Q) experiences a one-day delay in inventory replenishment of 20-watt night-light bulbs at its warehouse.
Low impact on operations
Insignificant impact on sales revenue

24. B2B Logistics - Evaluation
When a logistical failure has a significant impact on a customer or their business – error-free logistics should receive higher priority
Need to ensure:
Orders complete
Delivered on time
Consistently correct over time

25. Logistics Supply chain management Distribution Production
DM - Process of managing movement of goods to point of sale.
How? Methods?
Routes?
Using your own? Subcontracted?
SCM - Strategic co-ordination of functions within the firm and others in its supply chain.
Logistics
Warehousing
Warehousing
Supply chain management
Distribution
Production
Pros/cons of your own v paying for someone else’s.
Is JIT possible?
At each stage address 1. costs & 2. matching supply with demand
Affected by:
Warehousing availability & systems
Information systems – both within the firm and with other firms in chain
Transportation
Customer requirements
What if it is a non-physical good? E.g. ‘Information’ such as insurance

26. Other logistic options
Spot the difference
Offshoring
Outsourcing
Subcontracting
Reshoring

27. Other logistic options
Outsourcing
Get a specialist firm to do job that would otherwise be done in-house, eg transportation
By outsourcing some functions, the company can reserve company personnel for their key tasks.
Gains?
Reduce overheads
Pass on responsibility
No need for expertise
Now focus on core activities
Solution to full capacity issues
BUT – what if they fail?
Are they reliable?
What is the contingency plan?

28. Other logistic options
Subcontracting
Bringing in an outside company or individual to perform specific parts of a business contract or project.
In most cases, a company subcontracts another business to perform a task that cannot be handled internally. The subcontracting company and the provider work closely throughout the project, and the hiring party has a reasonable amount of control over the process.
Very common in construction industry
Gains?
Don’t need the specialisms yourself, eg brickwork, plumbing, electrical work etc
Similar reasons to outsourcing
But?
Never develop expertise yourself
Probably higher rates of pay than ‘regular’ employees

29. Other logistic options
Offshoring
Relocation of production abroad
Also provision of service eg call centres
Gains?
Access to growing markets
Labour cost savings
But?
Gains have diminished as realised problems of:
Shipping costs rising
Wars and natural disasters
Marketing issues of call centres and language

30. Other logistic options
Reshoring
Returning from offshoring
Gains?
Able to respond to changing customer needs quickly
And small production runs of new products
Right product, right quantities, right time, right place
Logistics must be integral to overall plan to reach strategic objectives

31. Possible questions?
What is/Why outsource/subcontract/offshore/re-shore?
Internal v external provision of logistics?
Importance of logistics?
Devise a logistics strategy?
Identify the logistical problems
What solutions are there?