III.

Supply Chain Design

The McGraw-Hill Companies, 200 !echnical no!e ele"en

FACILITY LOCATION
Issues in #acili!y $oca!ion % & #ree !ra'e (one 'e)ine' Tra'ing *locs 'e)ine'

+lan! $oca!ion Me!ho's % 2 #ac!or-ra!ing sys!ems Transpor!a!ion me!ho' o) linear programming Cen!roi' me!ho' $oca!ing Ser"ice #acili!ies % , Conclusion Case. /pplichem0The Transpor!a!ion +ro*lem %-% Case. The +lan! $oca!ion +u((le %%-& #ac!or-ra!ing sys!em 'e)ine' Transpor!a!ion me!ho' 'e)ine' Cen!roi'me!ho''e)ine'

STARBUCKS GENERAL APPROACH TO SITE SELECTION S!ar*uc1s has achie"e' a phenomenal ra!e o) grow!h 'ue in par! !o loca!ion analysis an' si!e selec!ion cri!eria. In some hea"ily popula!e' areas such as 2ew 3or1 Ci!y, i! seems !ha! !here is a S!ar*uc1s e"ery )ew *loc1s. /n' in'ee',on Manha!!an4s upper wes! si'e, !here are eigh! S!ar*uc1s wi!hin a one s5uare mile area *e!ween 6es! --!h an' 6es! ,-!h s!ree!s7 In i!s early years, a small group o) S!ar*uc1s e8ecu!i"es ma'e si!e selec!ion 'ecisions *ase' on largely su*9ec!i"e analysis. 2ow, !he company uses spa!ial mo'eling an' e8!ensi"e analysis o) 'emographic in)orma!ion !o i'en!i)y an' analy(e po!en!ial loca!ions. Spatial Modeling :nli1e many o!her re!ail chains, S!ar*uc1s 'oes no! accep! cre'i! car's or chec1s *ecause mos! o) !heir cus!omers pay cash. S!ar*uc1s con'uc!s perio'ic s!ore in!ercep! s!u'ies !o ai' Source. www.geoplace.

III. Supply Chain Design % 0

sec!ion;

Supply Chain Design

/$C</ S +<=T$/2D,>ICT<=I/, /:ST=/$I/ +$/2T IS <2? <# <>?=T6< D<@?2 SM?$T?=S +=<D:CI2G +=IM/=3 /$:MI2:M #<= /$C</ G$<A/$$3.TH? C=?/TI<2 <# +/=B$/2DS /=<:2D TH? +$/2T SIT? H/S ?/=2?D ITTH? TIT$?, SM?$T?= I2TH? +/=B,C /2D TH? <2$3 C?=TI#IC/TI<2 /S / >I/A$? H/AIT/T G=/2T?D <:TSID?TH? :.S.A3 TH? 6I$D$I#? H/AIT/T ?2H/2C?M?2T C<:2CI$.

in loca!ion analysis an' si!e selec!ion. Maps are use' !o calcula!e wal1!ime !ra'e areas. The num*er o) po!en!ial cus!omers in an area, say a &0-s5uare-*loc1 area o) a gi"en *usiness 'is!ric!, is u!ili(e' !o calcula!e how many people coul' wal1 !o a s!ore wi!hin !wo minu!es, how many people coul' wal1 !o a s!ore wi!hin )our minu!es, an' so )or!h. /s wal1!ime increases, !he num*er o) po!en!ial cus!omers 'ecreases. / similar approach is use' in analy(ing su*ur*an loca!ions when 'ri"e !ime is !he consi'era!ion. Maps also are use' *ase' on consumer pro8imi!y )igures plus 'emographics 'a!a De.g., 'isposa*le income )iguresE !o pinpoin! ho!spo!s )or gourme! co))ee consump!ion. De og!ap"i#$ S!ar*uc1s has his!orically !arge!e' higher income geographic areas. 2ow i! is loo1ing )or more mo'era!e income neigh*orhoo's as well as neigh*orhoo's un'ergoing gen!ri)ica!ion. They are also mo"ing in!o new !ouris! 'es!ina!ion (ones such as Aal!imore4s inner har*or an' 'own!own Miami, #lori'a. In!erna!ional si!e selec!ion is pro"ing !o *e more challenging 'ue !o !he lac1 o) a"aila*le 'a!a. Transla!ion o) 'a!a, !erms, an' *oun'aries )rom )oreign 'a!a )orma!!ing in!o 'omes!ic si!e selec!ion cri!erion )orma!s can *e challenging. #or e8ample, a Ccoun!yC in Fapan an' in ?nglan' is no! !he same as a coun!y in !he :ni!e' S!a!es. /''ing !o !he challenge, Clari!as, a wi'ely use' "en'or o) 'emographics 'a!a, 'oes no!ye! ha"e one cen!ral glo*al clearinghouse o) in!erna!ional 'a!a. $i1ewise, ?S=I Dano!her popular "en'or o) 'emographics 'a!aE 'oesn4! ha"e in)orma!ion a"aila*le )or many non'omes!ic mar1e!s. 6here shoul' a plan! or ser"ice )acili!y *e loca!e'G This is a !op 5ues!ion on !he s!ra!egic agen'as o) con!emporary manu)ac!uring an' ser"ice )irms, par!icularly in !his age o) glo*al mar1e!s an' glo*al pro'uc!ion. Drama!ic changes in in!erna!ional !ra'e agreemen!s ha"e ma'e !he worl' !ruly a Cglo*al )ac!ory,C allowing companies grea!er )le8i*ili!y in !heir loca!ion

choices. In prac!ice, howe"er, !he 5ues!ion o) loca!ion is "ery much lin1e' !o !wo compe!i!i"e impera!i"es.

&. The nee' !o pro'uce close !o !he cus!omer 'ue !o !ime-*ase' compe!i!ion, !ra'e agreemen!s, an' shipping cos!s. 2. The nee' !o loca!e near !he appropria!e la*or pool !o !a1e a'"an!age o) low wage cos!s an'Hor high !echnical s1ills. This !echnical no!e 'iscusses !hese an' o!her issues in )acili!y loca!ion 'ecisions. ?8amples co"er 'i))eren! in'us!ries wi!h a glo*al perspec!i"e.6e presen! !ypical !echni5ues in"ol"e' in )acili!y loca!ion analysis an' !wo cases on glo*al loca!ion 'ecisions. ISSUES IN FACILITY LOCATION The pro*lem o) )acili!y loca!ion is )ace' *y *o!h new an' e8is!ing *usinesses, an' i!s solu!ion is cri!ical !o a company4s e"en!ual success. /n impor!an! elemen! in 'esigning a company4s supply chain is !he loca!ion o) i!s )acili!ies. #or ins!ance, ;M has mo"e' a signi)ican! par! o) i!s corpora!e ac!i"i!y, inclu'ing =ID, !o !he more !empera!e clima!e o) /us!in, Te8as. Toys C;C :s has opene' a new loca!ion in Fapan as a par! o) i!s glo*al s!ra!egy. Disney chose +aris, #rance, )or i!s ?uropean !heme par1, an' AM6 assem*les !he @; spor!s car in Sou!h Carolina. Manu)ac!uring an' ser"ice companies4 loca!ion 'ecisions are gui'e' *y a "arie!y o) cri!eria 'e)ine' *y compe!i!i"e impera!i"es. Cri!eria !ha! in)luence manu)ac!uring plan! an' warehouse loca!ion planning are 'iscusse' ne8!. P!o%i it& to C'$to e!$ #or e8ample, Fapan4s 2a!S!eel ?lec!ronics has *uil! i!s !wo larges! plan!s in Me8ico an' Hungary !o *e closer !o ma9or mar1e!s in !he :ni!e' S!a!es an' ?urope 0whose *uyers wan! !heir goo's 'eli"ere' yes!er'ay. Such pro8imi!y also helps ensure !ha! cus!omer nee's are incorpora!e' in!o pro'uc!s *eing 'e"elope' an' *uil!. B'$ine$$ Cli ate / )a"ora*le *usiness clima!e can inclu'e !he presence o) similarsi(e' *usinesses, !he presence o) companies in !he same in'us!ry, an', in!he case o) in!erna!ional loca!ions, !he presence o) o!her )oreign companies. +ro*usiness go"ernmen! legisla!ion an' local go"ernmen! in!er"en!ion !o )acili!a!e *usinesses loca!ing in an area "ia su*si'ies, !a8 a*a!emen!s, an' o!her suppor! are also )ac!ors. Total Co$t$ The o*9ec!i"e is !o selec! a si!e wi!h !he lowes! !o!al cos!. This inclu'es regional cos!s, in*oun' 'is!ri*u!ion cos!s, an' ou!*oun' 'is!ri*u!ion cos!s. $an', cons!ruc!ion, la*or, !a8es, an' energy cos!s ma1e up !he regional cos!s. In a''i!ion, !here are hi''en cos!s !ha! are 'i))icul! !o measure. These in"ol"e D&E e8cessi"e mo"ing o) prepro'uc!ion ma!erial *e!ween loca!ions *e)ore )inal 'eli"ery !o !he cus!omers an' D2E loss o) cus!omer respon si"eness arising )rom loca!ing away )rom !he main cus!omer *ase, In(!a$t!'#t'!e /'e5ua!e roa', rail, air, an' sea !ranspor!a!ion are "i!al. ?nergy an' !elecommunica!ions re5uiremen!s also mus! *e me!. Ina''i!ion, !he local go"ernmen!4s willingness !o in"es! in upgra'ing in)ras!ruc!ure !o !he le"els re5uire' may *e an incen!i"e !o selec! a speci)ic loca!ion.

)'alit& o( La*o! The e'uca!ional an' s1ill le"els o) !he la*or pool mus! ma!ch !he company4s nee's. ?"en more impor!an! are !he willingness an' a*ili!y !o learn. S'pplie!$ / high-5uali!y an' compe!i!i"e supplier *ase ma1es a gi"en loca!ion sui!a*le. The pro8imi!y o) impor!an! suppliers4 plan!s also suppor!s lean pro'uc!ion me!ho's. Ot"e! Fa#ilitie$ The loca!ion o) o!her plan!s or 'is!ri*u!ion cen!ers o) !he same company may in)luence a new )acili!y4s loca!ion in !he ne!wor1. Issues o) pro'uc! mi8 an' capaci!y are s!rongly in!erconnec!e' !o !he loca!ion 'ecision in !his con!e8!.

Glo*al
Glo*al F!ee t!ade +one #ree Tra'e @ones / )oreign !ra'e (one or a )ree !ra'e (one is !ypically a close' )acili!y Dun'er !he super"ision o) !he cus!oms 'epar!men!E in!o which )oreign goo's can *e *rough! wi!hou! *eing su*9ec! !o !he normal cus!oms re5uiremen!s. There are a*ou! 2-0 such )ree !ra'e (ones in !he :ni!e' S!a!es !o'ay. Such speciali(e' loca!ions also e8is! in o!her coun!ries. Manu)ac!urers in )ree !ra'e (ones can use impor!e' componen!s in !he )inal pro'uc! an' 'elay paymen! o) cus!oms 'u!ies un!il !he pro'uc! is shippe' in!o !he hos! coun!ry. Politi#al Ri$, The )as!-changing geopoli!ical scenes in numerous na!ions presen! e8ci!ing, challenging oppor!uni!ies. Au!!he e8!en'e'phase o) !rans)orma!ion !ha! many coun!ries are un'ergoing ma1es !he 'ecision !o loca!e in !hose areas e8!remely 'i))icul!. +oli!ical ris1s in *o!h !he coun!ry o) loca!ion an' !he hos! coun!ry in)luence loca!ion 'ecisions. Go-e!n ent Ba!!ie!$ Aarriers !o en!er an' loca!e in many coun!ries are *eing remo"e' !o'ay !hrough legisla!ion. 3e! many nonlegisla!i"e an' cul!ural *arriers shoul' *e consi'ere' in loca!ion planning. T!ading *lo#$ Tra'ing Alocs The Cen!ral /merica #ree Tra'e /greemen! DC/#T/E is one o) !he new t!ading *lo#$ in our hemisphere. Such agreemen!s in)luence loca!ion 'ecisions, *o!h wi!hin an' ou!si'e !ra'ing *loc coun!ries. #irms !ypically loca!e, or reloca!e, wi!hin a *loc !o !a1e a'"an!age o) new mar1e! oppor!uni!ies or lower !o!al cos!s a))or'e' *y !he !ra'ing agreemen!. <!her companies D!hose ou!si'e !he !ra'ing *loc coun!riesE 'eci'e on loca!ions wi!hin !he *loc so as no! !o *e 'is5uali)ie' )rom compe!ing in !he new mar1e!. ?8amples inclu'e !he loca!ion o) "arious Fapanese au!o manu)ac!uring plan!s in ?urope *e)ore &JJ2 as well as recen! mo"es *y many communica!ions an' )inancial ser"ices companies in!o Me8ico in a pos!-2/#T/ en"ironmen!. En-i!on ental Reg'lation The en"ironmen!al regula!ions !ha! impac! acer!ain in'us!ry in a gi"en loca!ion shoul' *e inclu'e' in !he loca!ion 'ecision. Aesi'es measura*le cos! implica!ions, !hese regula!ions in)luence !he rela!ionship wi!h !he local communi!y. Ho$t Co 'nit& The hos! communi!y4s in!eres! in ha"ing !he plan! in i!s mi's! is a necessary par! o) !he e"alua!ion process. $ocal e'uca!ional )acili!ies an' !he *roa'er issue o) 5uali!y o) li)e are also impor!an!.

Co petiti-e Ad-antage /n impor!an! 'ecision )or mul!ina!ional companies is !he na!ion in which !o loca!e !he home *ase )or each 'is!inc! *usiness. +or!er sugges!s !ha! a company can ha"e 'i))eren! home *ases )or 'is!inc! *usinesses or segmen!s. Compe!i!i"e a'"an!age is crea!e' a! a home *ase where s!ra!egy is se!, !he core pro'uc! an' process !echnology are crea!e', an' a cri!ical mass o) pro'uc!ion !a1es place. So a company shoul' mo"e i!s home *ase !o a coun!ry !ha! s!imula!es inno"a!ion an' pro"i'es !he *es! en"ironmen! )or glo*al compe!i!i"eness.& This concep! can also *e applie' !o 'omes!ic companies see1ing !o gain sus!aina*le compe!i!i"e a'"an!age. I! par!ly e8plains !he sou!heas!ern s!a!es4 recen! emergence as !he pre)erre' corpora!e 'es!ina!ion wi!hin !he :ni!e' S!a!es D!ha! is, !heir *usiness clima!e )os!ers inno"a!ion an' low-cos! pro'uc!ionE. PLANT LOCATION METHODS /s we will see, !here are many !echni5ues a"aila*le )or i'en!i)ying po!en!ial si!es )or plan!s or o!her !ypes o) )acili!ies. The process re5uire' !o narrow !he 'ecision 'own !o a par!icular area can "ary signi)ican!ly 'epen'ing on !he !ype o) *usiness we are in an' !he compe!i!i"e pressures !ha! mus! *e consi'ere'. /s we ha"e 'iscusse', !here are o)!en many 'i))eren! cri!eria !ha! nee' !o *e consi'ere' when selec!ing )rom !he se! o) )easi*le si!es. In !his sec!ion, we sample !hree 'i))eren! !ypes o) !echni5ues !ha! ha"e pro"en !o *e "ery use)ul !o many companies. The )irs! is !he)ac!or-ra!ing sys!em !ha! allows us !o consi'er many 'i))eren! !ypes o) cri!eria using simple poin!-ra!ing scales. 2e8!,we consi'er !he !ranspor!a!ion me!ho'o) linear programming, a power)ul!echni5ue )or es!ima!ing !he cos! o) usinga ne!wor1 o) plan!s an' warehouses. #ollowing!his, we consi'er !he cen!roi'me!ho', a !echni5ue o)!en use' *y communica!ions companies Dcell phone pro"i'ersE !o loca!e !heir !ransmission !owers. #inally,we consi'er how ser"ice )irms such as McDonal'4s an' S!a!e #armInsurance use s!a!is!ical !echni5ues !o )in' 'esira*le loca!ions )or !heir )acili!ies. Fa#to!.Rating S&$te $ Fa#to!.!ating $&$te $ are perhaps !he mos! wi'ely use' o) !he general loca!ion !echni5ues #ac!or-ra!ingsys!ems *ecause !hey pro"i'e amechanism!o com*ine 'i"erse )ac!ors inaneasy-!o-un'ers!an' )orma!. Ay way o) e8ample, are)inery assigne' !he )ollowing range o) poin! "alues !o ma9or )ac!ors a))ec!ing a se! o) possi*le si!es. Range 0 !o ;;0 an' 0 to 200 0 to 200 0 to 100 0 to 50 0 to 10 0 to 50 0 to 60 0 to 20

#uels in region +ower a"aila*ili!y relia*ili!y $a*or clima!e $i"ing con'i!ions Transpor!a!ion 6a!er supply Clima!e Supplies Ta8 policies an' laws

?ach si!e was !hen ra!e' agains! each )ac!or, an' a poin! "alue was selec!e' )rom i!s assigne' range. The sums o) assigne' poin!s )or each si!e were !hen compare'. The si!e wi!h !he mos! poin!s was selec!e'. / ma9or pro*lem wi!h simple poin!-ra!ing schemes is !ha! !hey 'o no! accoun! )or !he wi'e range o) cos!s !ha! may occur wi!hin each )ac!or. #or e8ample, !here may *e only a )ew hun're' 'ollars 'i))erence *e!ween !he *es! an' wors! loca!ions on one )ac!or an' se"eral !housan's o) 'ollars4 'i))erence *e!ween !he *es! an' !he wors! on ano!her. The )irs! )ac!or may ha"e !he mos! poin!s a"aila*le !o i! *u! pro"i'e li!!le help in ma1ing !he loca!ion 'ecisionK !he secon' may ha"e )ew poin!s a"aila*le *u! po!en!ially show a real 'i))erence in !he "alue o) loca!ions. To 'eal wi!h !his pro*lem, i! has *een sugges!e' !ha! poin!s possi*le )or each )ac!or *e 'eri"e' using a weigh!ing scale *ase' on s!an'ar' 'e"ia!ions o) cos!s ra!her !han simply !o!al cos! amoun!s. In !his way, rela!i"e cos!s can *e consi'ere'. T!an$po!tation Met"od o( Linea! P!og!a ing

The t!an$po!tation et"od is a special linear programming me!ho'. D2o!e !ha! linear programming is 'e"elope' in 'e!ail inTechnical 2o!e 2.E I! ge!s i!s name )rom i!s applica!ion !o pro*lems in"ol"ing !ranspor!ing pro'uc!s )rom se"eral sources !o se"eral 'es!ina!ions. The!wo common o*9ec!i"es o) such pro*lems are ei!her D&E minimi(e !he cos! o) shippingnuni!s!o m'es!ina!ions or D2E ma8imi(e !he pro)i! o) shipping n uni!s !o m 'es!ina!ions. E/AMPLETN 00102 U1S1 P"a! a#e'ti#al Co pan& Suppose !he :.S. +harmaceu!ical Company has )our )ac!ories supplying !he warehouses o) )our ma9or cus!omers an' i!s managemen! wan!s !o 'e!ermine !he minimum-cos! shipping sche'ule )or i!s mon!hly ou!pu! !o !hese cus!omers. #ac!ory supply, warehouse 'eman's, an' shipping cos!s per case )or !hese 'rugs are shown in ?8hi*i! T2I&.&. The !ranspor!a!ion ma!ri8 )or !his e8ample appears in ?8hi*i! T2&&.2, where supply a"aila*ili!y a! each )ac!ory is shown in !he )ar righ! column an' !he warehouse 'eman's are shown in !he *o!!om row. T!an$po!tation et"od

e8hi*i! T2&&.& Da!a )or :.S. +harmaceu!icalTranspor!a!ion +ro*lem Shipping Costs per Case (in Dollars) To Columbu s #ac!ory $n"iana polis +hoeni8 2ew 3or1 /!lan!a Suppl !arehous e Deman " #rom in"ianapoli 10 s 12 'hoeni( & 2ew 3or1 + Atlanta To St. Louis To Denver To Los Angeles

15 Columbus 6 St. Louis 1) Denver Los 11 Angeles

%25 55 )0 &0

%&5 &0 50 )0

%&6 25 *0 66

%60 25 +0 ,5

e8hi*i! T2&&.2 Transpor!a!ion Ma!ri8 )or :.S. +harmaceu!ical +ro*lem

To From indianapolis phoenix Ne yor!

colombus 25 55 )0

St. louis &5 &0 50

denver &6 25 *0

Los angeles 60 25 +0

Supply factory 15 6 1" 11 )6 )6

#tlanta $estination re%uirement s

&0 10

)0 12

66 15

,5 +

The shipping cos!s are shown in !he small *o8es wi!hin !he cells. #or e8ample, !he cos! !o ship one uni! )rom !he In'ianapolis )ac!ory !o !he cus!omer warehouse in Colum*us is L2 . SOLUTION This pro*lem can *e sol"e' *y using Microso)!M ?8cel4sM Sol"er )unc!ion. ?8hi*i! T2I&.; shows how !he pro*lem can *e se! up in !he sprea'shee!. Cells A- !hrough ?- con!ain !he re5uiremen! )or each cus!omer warehouse. Cells #2 !hrough # con!ain !he amoun! !ha! can *e supplie' )rom each plan!. Cells A2 !hrough ? are !he cos! o) shipping one uni! )or each po!en!ial plan! an' warehouse com*ina!ion. Cells )or !he solu!ion o) !he pro*lem are AJ !hrough ?&2.These cells can ini!ially *e le)! *lan1 when se!!ing up !he sprea'shee!. Column cells #J!hrough #&2 are !he sum o) each row in'ica!ing how much is ac!ually *eing shippe' )rom each )ac!ory in !he can'i'a!e solu!ion. Similarly, row cells A&; !hrough ?l; are sums o) !he amoun! *eing shippe' !o each cus!omer in !he can'i'a!e solu!ion. The ?8celM Sum )unc!ion can *e use' !o calcula!e !hese "alues. The cos! o) !he can'i'a!e solu!ion is calcula!e' in cells A&- !hrough ?&J. Mul!iplying !he amoun! shippe' in !he can'i'a!e solu!ion *y !he cos! per uni! o) shipping o"er !ha! par!icular rou!e ma1es !his calcula!ion. #or e8ample, mul!iplying A2 *y AJ in cell A&- gi"es !he cos! o)

shipping *e!ween In'ianapolis an' Colum*us )or !he can'i'a!e solu!ion. The !o!al cos! shown in cell #20 is !he sum o) all !hese in'i"i'ual cos!s. To sol"e !he pro*lem, !he ?8celM Sol"er applica!ion nee's !o *e accesse'. The Sol"er is )oun' *y selec!ing Tools an' !hen Sol"er )rom !he ?8celM menu./ screen similar !o wha! is shown *elow shoul' appear. I)you canno! )in' Sol"er a! !ha! loca!ion, !he re5uire' a''-in migh! no! ha"e *een a''e' when

#acili!y $oca!ion !echnical no!e % ?8celM Screen Showing !he :.S. +harmaceu!ical +ro*lem e8hi*i! T2&&.; ?8celM was ini!ially ins!alle' on your compu!er. Sol"er can easily *e a''e' i) you ha"e your original ?8celM ins!alla!ion 'is1. Sol"er parame!ers now nee' !o *e se!. #irs! se! !he !arge! cell. This is !he cell where !he !o!al cos! associa!e' wi!h !he solu!ion is calcula!e'. In our sample pro*lem, !his is cell #20. 2e8! we nee' !o in'ica!e !ha! we are minimi(ing !his cell. Selec!ing !he CMinC *u!!on 'oes !his. The loca!ion o) our solu!ion is in'ica!e' in !he CChanging Cells.C These cells are AJ !hrough ?&2 in our e8ample. 2e8! we nee' !o in'ica!e !he cons!rain!s )or our pro*lem. #or our !ranspor!a!ion pro*lem we nee' !o *e sure !ha! cus!omer 'eman' is me! an' !ha! we 'o no! e8cee' !he capaci!y o) our manu)ac!uring plan!s.

To ensure !ha! 'eman' is me!, clic1 on C/''C an' highligh! !he range o) cells where we ha"e calcula!e' !he !o!al amoun! *eing shippe' !o each cus!omer. This range is A&; !o ?l; in our e8ample. 2e8! selec! CNC in'ica!ing !ha! we wan! !he amoun! shippe' !o e5ual 'eman'. #inally, on !he righ! si'e en!er !he range o) cells where !he ac!ual cus!omer 'eman' is s!a!e' in our sprea'shee!. This range is A- !o ?- in our e8ample. The secon' se! o) cons!rain!s !ha! ensures !ha! !he capaci!y o) our manu)ac!uring plan!s is no! e8cee'e' is en!ere' similarly. The range o) cells !ha! in'ica!e' how much is *eing shippe' )rom each )ac!ory is #J !o #&2. These "alues nee' !o *e less !han or e5ual !o DONE !he capaci!y o) each )ac!ory, which is in cells #2 !o # . To se! up !he Sol"er, a )ew op!ions nee' !o *e se! as well. Clic1 on !he C<p!ionsC *u!!on an' !he )ollowing screen shoul' appear.

Two op!ions nee'!o *e se! )or sol"ing !ranspor!a!ion pro*lems. #irs!we nee'C/ssume$inear Mo'el.C This !ells !he Sol"er !ha! !here are no nonlinear calcula!ions in our sprea'shee!. This is impor!an! *ecause !he Sol"er can usea "ery e))icien! algori!hm !o calcula!e !he op!imal solu!ion !o !his pro*lem i) !his con'i!ion e8is!s. 2e8! !he C/ssume 2on-2ega!i"eC*o8 nee's !o *e chec1e'. This !ells Sol"er !ha! !he "alues in our solu!ion nee'!o *e grea!er !han or e5ual !o (ero. In!ranspor!a!ion pro*lems, shipping nega!i"e 5uan!i!ies 'oes no! ma1eany sense. Clic1 C<BC!o re!urn !o !he mainSol"er *o8,an'!hen clic1 CSol"eC !o ac!ually sol"e !he pro*lem. Sol"er will no!i)y you !ha! i!)oun' a solu!ion. In'ica!e !ha! you wan! !ha! solu!ion sa"e'. #inally, clic1 <B !o go *ac1 !o !he main sprea'shee!. The solu!ion shoul' *e in cells AJ!o ?l2. The !ranspor!a!ion me!ho'can *e use' !o sol"e many 'i))eren! !ypes o) pro*lems i) i! is applie' inno"a!i"ely. #or e8ample, i!can *e use'!o !es! !he cos! impac! o) 'i))eren! can'i'a!e loca!ions on !he en!ire pro'uc!ion-'is!ri*u!ionne!wor1.To 'o !his we migh! a''a new row !ha! con!ains !he uni! shipping cos! )rom a )ac!ory ina new loca!ion, say, Dallas, !o !he e8is!ing se! o) cus!omer warehouses, along wi!h !he !o!al amoun! i! coul' supply. 6e coul' !hen sol"e

!his par!icular ma!ri8 )or minimum !o!al cos!. 2e8! we woul' replace !he )ac!ory loca!e' in Dallas in !he same row o) !he ma!ri8 wi!h a )ac!ory a! a 'i))eren! loca!ion, Hous!on, an' again sol"e )or minimum !o!al cos!. /ssuming !he )ac!ories in Dallas an' Hous!on woul' *e i'en!ical in o!her impor!an! respec!s, !he loca!ion resul!ing in !he lowes! !o!al cos! )or !he ne!wor1 woul' *e selec!e'. #or a''i!ional in)orma!ion a*ou! using !he Sol"er, see Technical 2o!e 2, C$inear +rogramming :sing !he ?8cel Sol"er.C P

Cent!oid et"od The #ent!oid et"od is a !echni5ue )or loca!ing single )acili!ies !ha! consi'ers !he e8is!ing )acili!ies, !he 'is!ances *e!ween !hem, an'!he "olumes o) goo's !o *e shippe'. The !echni5ue is o)!en use' !o loca!e in!erme'ia!e or 'is!ri*u!ion warehouses. In i!s simples! )orm, !his me!ho' assumes !ha! in*oun' an' ou!*oun' !ranspor!a!ion cos!s are e5ual, an' i! 'oes no! inclu'e special shipping cos!s )or less !han )ull loa's. -ri" .ap /or Centroi" 0(ample 500 1 Thousand &a!s. '(5) "5*+ 1 ,lendale'-5'. "**+ La2abra ()50.&50) 1 &00 3 /entroid '-*01(12+ 200 1 #naheim '"**1 15*+ 100 Q Long 3each '-(5.25+

)00

0 100 Q 4lant 5 $istributor

200

&00

)00

500

/no!her ma9or applica!ion o) !he cen!roi' me!ho' !o'ay is !he loca!ion o) communica!ion !owers in ur*an areas. ?8amples inclu'e ra'io,T>, an' cell phone !owers. In!his applica!ion !he goal is !o )in' si!es !ha! are near clus!ers o) cus!omers, !hus ensuring clear ra'io signals. The cen!roi' me!ho' *egins *y placing !he e8is!ing loca!ions on a coor'ina!e gri' sys!em. The choice o) coor'ina!e sys!ems is en!irely ar*i!rary. The purpose is !o es!a*lish rela!i"e 'is!ances *e!ween loca!ions. :sing longi!u'e an' la!i!u'e coor'ina!es migh! *e help)ul in in!erna!ional 'ecisions. ?8hi*i! T2&&.% shows an e8ample o) a gri' layou!.

The cen!roi' is )oun' *y calcula!ing !he R an' 3 coor'ina!es !ha! resul! in !he minimal !ranspor!a!ion cos!. 6e use !he )ormulas

C8N

dix Vi
----------------------

diy Vi

Vi

Cy= ........................ Vi

6here6 C%7 X #oo!dinate o( t"e #ent!oid

= Y #oo!dinate o( t"e #ent!oid dix = X #oo!dinate o( t"e it" lo#ation diy = Y #oo!dinate o( t"e it" lo#ation Vi = 8ol' e o( good$ o-ed to o! (!o
Cy

t"e it" lo#ation

?R/M+$? T2&&.2 . Hi<c!ane =e)ining Company The Hi<c!ane =e)ining Company nee's !o loca!e an in!erme'ia!e hol'ing )acili!y *e!ween i!s re)ining plan! in $ong Aeach an' i!s ma9or 'is!ri*u!ors. ?8hi*i!T2&&.% shows !he coor'ina!e map. The amoun! o) gasoline shippe' !o or )rom !he plan! an' 'is!ri*u!ors appears in ?8hi*i!T2&&. . In!his e8ample, )or !he $ongAeach loca!ion D!he )irs! loca!ionE,'&8N;2 , '&y NS , an' >& N &, 00.

SOLUTION :sing !he in)orma!ion in ?8hi*i!s T2I&.% an'T2I&. ,we can calcula!e !he coor'ina!es o) !he cen!roi'.

C%

7 D;2

8 &, 00E T D%00 8 2 0E T D% 0 8 % 0E T D; 0 8 ; 0E T D2 &, 00 T 2 0 T % 0 T ; 0 T% 0

8 % 0E

7 J2;,S 0 N ;0S.J

;,000 Shipping >olumes, Cen!roi'?8ample

Lo#ation$ $ong Aeach /naheim $aHa*ra Glen'ale Thousan' <a1s Gallon$ o! Ga$oline pe! Mont" 344414445 &, 00 2 0 % 0 ; 0 % 0

C&

7 DS

8 &, 00E T D& 0 8 2 0E T D; 0 8 % 0E T D%00 8 ; 0E T D% 0 8 % 0E &, 00 T 2 0 T % 0 T ; 0 T% 0

7 - 0,000 N 2&-.S

;,000 This gi"es managemen! !he R an' 3 coor'ina!es o) appro8ima!ely ;0, an' 2&S, respec!i"ely, an' pro"i'es an ini!ial s!ar!ing poin! !o search )or a new si!e. Ay e8amining !he loca!ion o) !he calcula!e' cen!roi' on !he gri' map, we can see !ha! i! migh! *e more cos!e))icien! !o ship 'irec!ly *e!ween !he $ong Aeach plan! an' !he /naheim 'is!ri*u!or !han !o ship "ia a warehouse near !he cen!roi'. Ae)ore a loca!ion 'ecision is ma'e, managemen! woul' pro*a*ly recalcula!e !he cen!roi', changing !he 'a!a !o re)lec! !his D!ha! is, 'ecrease !he gallons shippe' )rom $ong Aeach *y !he amoun! /naheim nee's an' remo"e /naheim )rom !he )ormulaE. P

LOCATING SER8ICE FACILITIES Aecause o) !he "arie!y o) ser"ice )irms an' !he rela!i"ely low cos! o) es!a*lishing a ser"ice )acili!y compare' !o one )or manu)ac!uring, new ser"ice )acili!ies are )ar more common !han new )ac!ories an' warehouses. In'ee', !here are )ew communi!ies in which rapi' popula!ion grow!h has no! *een parallele' *y concurren! rapi' grow!h in re!ail ou!le!s, Ser"ice res!auran!s, municipal ser"ices, an' en!er!ainmen! )acili!ies.
$?SS TH/2 T6< MI$?S #=<M T6I2 CITI?S I2T?=2/TI<2/$/I=+<=T, 6ITH #<:= M/F<= HIGH6/3S I2T?=S?CTI2G TH? S,-/C=? +=<+?=T3, A$<<MI2GT<24S M/$$ <# /M?=IC/ H/S A?C<M? G$<A/$$3 =?C<G2I@?D /S TH? $/=G?ST ?2T?=T/I2M?2T /2D =?T/I$ C<M+$?R I2TH? :2IT?D ST/T?S. S?=>I2G <>?= 2, MI$$I<2 +?<+$? 6ITHI2 / <2?D/3 D=I>? /S 6?$$ /S M/23 M<=? /S / D?STI2/TI<2, TH? M/$$ ?M+$<3S M<=?TH/2 &2,000 +?<+$? /2D T<T/$ T=/##IC IS A?T6??2 ; /2D %2 MI$$I<2 >ISITS 3?/=$3. >ISIT<=S S+?2D /2 />?=/G? <# TH=?? H<:=S I2TH? M/$$, 6HICH IS TH=?? TIM?S TH? 2/TI<2/$ />?=/G? #<= SH<++I2G M/$$S.

Geographic In)orma!ion Sys!ems DGISE, SH<62 H?=? #=<M M/+l2#<, /=? :S?D A3 =?T/I$?=S, #I2/2CI/$ S?=>IC?S G=<:+S, /2D <TH?=S I2 TH? SIT? S?$?CTI<2 +=<C?SS. M/++I2G I2#<=M/TI<2 <2 +<T?2TI/$ SIT?S S:CH /S D?M<G=/+HICS, C<M+?TIT<=S,/2D S< <2 /$$<6S I2#<=M/TI<2T< A? S??2 I2 / SI2G$?, C<M+=?H?2SI>? >I?6 #<= M<=? I2#<=M?D D?CISI<2 M/BI2G. Copyrigh! 2002 MapIn)o Corpora!ion, Troy,2ew 3or1. Ser"ices !ypically ha"e mul!iple si!es !o main!ain close con!ac! wi!h cus!omers. The loca!ion 'ecision is closely !ie' !o !he mar1e! selec!ion 'ecision. I) !he !arge! mar1e! is college-age groups, loca!ions in re!iremen! communi!ies 'espi!e 'esira*ili!y in !erms o) cos!, resource a"aila*ili!y, an' so )or!h are no! "ia*le al!erna!i"es. Mar1e! nee's also a))ec! !he num*er o) si!es !o *e *uil! an' !he si(e an' charac!eris!ics o) !he si!es. 6hereas manu)ac!uring loca!ion 'ecisions are o)!en ma'e *y minimi(ing cos!s, many ser"ice loca!ion 'ecision !echni5ues ma8imi(e !he pro)i! po!en!ial o) "arious si!es. 2e8! we presen! a mul!iple regression mo'el !ha! can *e use' !o help selec! goo' si!es. E/AMPLE TN0019 2 S#!eening Lo#ation Site$ at La )'inta Moto! Inn$ Selec!ing goo' si!es is crucial !o a ho!el chain4s success. <) !he )our ma9or mar1e!ing consi'era!ions Dprice, pro'uc!, promo!ion, an' loca!ionE, loca!ion an' pro'uc! ha"e *een shown !o *e mos! impor!an! )or mul!isi!e )irms. /s a resul!, ho!el chain owners who can pic1 goo' si!es 5uic1ly ha"e a 'is!inc! compe!i!i"e a'"an!age. ?8hi*i! T2I&.- shows !he ini!ial lis! o) "aria*les inclu'e' in a s!u'y !o help $a Uuin!a Mo!or Inns screen po!en!ial loca!ions )or i!s new ho!els.2 Da!a were collec!e' on S e8is!ing $a Uuin!a Inns. /nalysis o) !he 'a!a i'en!i)ie' !he "aria*les !ha! correla!e' wi!h opera!ing pro)i! in &J,; an' &J,-. DSee ?8hi*i! T2I&.S.E

SOLUTION / regression mo'el Dsee Chap!er &;E was cons!ruc!e'. I!s )inal )orm was +ro)i!a*ili!y N ;J.0 - .%& 8 S!a!e popula!ion per inn D&,000E T .,- 8 +rice o) !he inn - ;.J& 8 S5uare roo! o) !he me'ian income o) !he area D&,000E T &.S 8 College s!u'en!s wi!hin )our miles The mo'el shows !ha! pro)i!a*ili!y is a))ec!e' *y mar1e! pene!ra!ion, posi!i"ely a))ec!e' *y price, nega!i"ely a))ec!e' *y higher incomes D!he inns 'o *e!!er in lower-me'ian-income areasE, an' posi!i"ely a))ec!e' *y colleges near*y. e%"i*it TN001: Independent 8a!ia*le$ Colle#ted (o! t"e Initial Model B'ildingStage Ca!egory Compe!i!i"e 2ame I22=/T? +=IC? =/T? =MS =MST<T/$ =<<MSI22 CI>I$I/2 C<$$?G? H<S+& H<S+T<T$ H>3I2D $GTI2D M/$$S MI$A$BD MI$IT/=3 MI$T<T <#C& <#CT<T/$ <#CCAD +/SS?2G= =?T/I$ T<:=ISTS T=/##IC >/2 ?M+$3+CT I2C<M? +<+:$/C? /G? 2?/=?ST Descrip!ion Inn price =oom ra!e )or !he inn /"erage compe!i!i"e room ra!e & Ho!el rooms wi!hin &mile Ho!el rooms wi!hin ; miles Inn rooms Ci"ilian personnel on *ase College enrollmen! Hospi!al *e's wi!hin &mile Hospi!al *e's wi!hin % miles Hea"y in'us!rial employmen! $igh! in'us!rial acreage Shopping mall s5uare )oo!age Mili!ary *ase *loc1e' Mili!ary personnel MI$IT/=3 TCI>I$I/2 <))ice space wi!hin &mile <))ice space wi!hin % miles <))ice space in Cen!ral Ausiness Dis!ric! /irpor! passengers enplane' Scale ran1ing o) re!ail ac!i"i!y /nnual !ouris!s Tra))ic coun! /irpor! "an :nemploymen! percen!age /"erage )amily income =esi'en!ial popula!ion 3ears inn has *een open Dis!ance !o neares! inn

Deman' genera!ors

Demographic Mar1e! awareness

ST/T? :=A/2

S!a!e popula!ion per inn :r*an popula!ion per inn

+hysical

/CC?SS /=T?=3 DISTCAD SIG2>IS

/ccessi*ili!y Ma9or !ra))ic ar!ery Dis!ance !o 'own!own Sign "isi*ili!y

e%"i*it TN001; / Summary o) !he >aria*les Tha! Correla!e' wi!h <pera!ing Margin in &J,; an' &J,4ariabel ACC0SS A-0 C5LL0-0 D$STC6D 0.'L8'CT $9C5.0 .$LT5T 90A:0ST 5#CC6D '5';LAC0 ':$C0 :AT0 STAT0 S$-94$S T:A##$C ;:6A9 1+*& 20 2+ 1+*6 )+ 25 722 722 72& 22

722

751 &0 &0 &* 7&2 25 &2 722

&5 5* 2, 7&&

726

$a Uuin!a implemen!e' !he mo'el on a sprea'shee! an' rou!inely uses !he sprea'shee! !o screen po!en!ial real es!a!e ac5uisi!ions. The )oun'er an' presi'en! o) $a Uuin!a has accep!e' !he mo'el4s "ali'i!y an' no longer )eels o*liga!e' !o personally selec! !he si!es. This e8ample shows !ha! a speci)ic mo'el can *e o*!aine' )rom !he re5uiremen!s o) ser"ice organi(a!ions an' use' !o i'en!i)y !he mos! impor!an! )ea!ures in si!e selec!ion. P CONCLUSION

#acili!y loca!ion 'ecisions are a 1ey elemen! in any )irm4s o"erall s!ra!egic plan. Drama!ic changes in !he glo*al geopoli!ical en"ironmen!, couple' wi!h rapi' a'"ances in !echnology, ha"e place' a premium on ma1ing loca!ion 'ecisions in a ma!!er o) wee1s ra!her !han mon!hs, as has *een !he case in !he recen! pas!. /s a )inal commen!, much o) !he loca!ion Cac!ionC is in 'eci'ing where !o loca!e suppor! )unc!ions ra!her !han )ac!ories or re!ail

ou!le!s. In!hese si!ua!ions, !he nee' )or special capa*ili!ies o) !he wor1)orce is o)!en )ar more impor!an! !han o!her cos! )ac!ors. #or e8ample, IAMAusiness Consul!ing Ser"ices s!a!e' !ha! a 'ominan! )ac!or in 'eci'ing where !o loca!e !he so)!ware applica!ion group o) i!s clien!, a :.S. in"es!men! *an1, was !he a"aila*ili!y o) a large pool o) mul!ilingual wor1ers. Ke& Te! $ #ree !ra'e (ones / close' )acili!y Dun'er !he super"ision o) go"ernmen! cus!oms o))icialsE in!o which )oreign goo's can *e *rough! wi!hou! *eing su*9ec! !o !he paymen! o) normal impor! 'u!ies. Tra'ing *loc / group o) coun!ries !ha! agree on a se! o) special arrangemen!s go"erning !he !ra'ing o) goo's *e!ween mem*er coun!ries. Companies may loca!e in places a))ec!e' *y !he agreemen! !o !a1e a'"an!age o) new mar1e! oppor!uni!ies. #ac!or ra!ing sys!em /n approach )or selec!ing a )acili!y loca!ion *y com*ining a 'i"erse se! o) )ac!ors. +oin! scales are 'e"elope' )or each cri!erion. ?achpo!en!ial si!e is !hen e"alua!e' on each cri!erion an' !he poin!s are com*ine' !o calcula!e a ra!ing )or !he si!e. Transpor!a!ion me!ho'/ special linear programming me!ho' !ha! is use)ul )or sol"ing pro*lems in"ol"ing !ranspor!ing pro'uc!s )rom se"eral sources !o se"eral 'es!ina!ions. Cen!roi' me!ho'/ !echni5ue )or loca!ing single )acili!ies !ha! consi'ers !he e8is!ing )acili!ies, !he 'is!ances *e!ween !hem, an' !he "olumes o) goo's !o *e shippe'. #ormula =e"iew Cen!roi'

C8N
Sol-ed P!o*le

dix Vi
----------------------

diy Vi

Vi

Cy= ........................ Vi

Cool /ir, a manu)ac!urer o) au!omo!i"e air con'i!ioners, curren!ly pro'uces i!s RA-;00 line a! !hree 'i))eren! loca!ions. +lan! /, +lan! A, an' +lan! C. =ecen!ly managemen! 'eci'e' !o *uil' all compressors, a ma9or pro'uc! componen!, in a separa!e 'e'ica!e' )acili!y. +lan! D. $Tsing !he cen!roi' me!ho' an' !he in)orma!ion 'isplaye' in?8hi*i!sT2&&., an'T2&&.J, 'e!ermine !he *es! loca!ion )or +lan! D. /ssume a linear rela!ionship *e!ween "olumes shippe' an' shipping cos!s Dno premium chargesE. Solu!ion '&8 N& 0 '28 N &00 ';8 N2S '&y NS '2y N;00 ';y N;,0 >& N-,000 >2 N,,200 >; NS,000

C/ 7 dix Vi

Vi

N D& 08-,000ETD&008,,200ETD2S 8S,000E N &S2

-,000 T ,,200 T S,000 e8hi*i! T2&&., +lan! $oca!ion Ma!ri8

)00 &00 200

Q 4lant # '(251-0*+ Q 4lant 3 '1**1-**+

100 Q 4lant # '15*125+

* 1** (** -** "**

e%"i*it TN001< )'antit& o( Co p!e$$o!$ Re='i!ed *& Ea#" Plant 'lant A 6 C <ompressor re=uire" per ear 6000 *200 ,000

CY7 diY Vi

Vi

N DS 8-,000ETD;008,,200ETD;,08S,000E N 2-2,S

2&,200 +lan! DVCR C3 NDV&S2, 2-;W

Re-ie> and Di$#'$$ion )'e$tion$ &. 6ha! mo!i"a!ions !ypically cause )irms !o ini!ia!e a )acili!ies loca!ion or reloca!ion pro9ec!G

2. $is! )i"e ma9or reasons why a new elec!ronic componen!s manu)ac!uring )irm shoul' mo"e in!o your ci!y or !own. ;. How 'o )acili!y loca!ion 'ecisions 'i))er )or ser"ice )acili!ies an' manu)ac!uring plan!sG %. 6ha! are !he pros an' cons o) reloca!ing a small or mi'si(e' manu)ac!uring )irm D!ha! ma1es ma!ure pro'uc!sE )rom !he :ni!e' S!a!es !o Me8ico in !he pos!-2/#T/ en"ironmen!G . I) you coul' loca!e your new so)!ware 'e"elopmen! company anywhere in !he worl', which place woul' you choose, an' whyG P!o*le $ &. =e)er !o !he in)orma!ion gi"en in !he sol"e' pro*lem. Suppose managemen! 'eci'es !o shi)! 2,000 uni!s o) pro'uc!ion )rom +lan! A !o +lan! /. Does !his change !he propose' loca!ion o) +lan! D, !he compressor pro'uc!ion )acili!yG I) so, where shoul' +lan!D*e loca!e'G 2. / small manu)ac!uring )acili!y is *eing planne' !ha! will )ee' par!s !o !hree hea"y manu)ac!uring )acili!ies. The loca!ions o) !he curren! plan!s wi!h !heir coor'ina!es an' "olume re5uiremen!s are gi"en in !he )ollowing !a*le.

+lan! $oca!ion Coor'ina!es D.8,yE >olume D+ar!s per 3earE 'lant Lo<ation '05:$A D0CAT;: @5L$0T Coor"inates ( >?8 ) &00?&20 &,5?),0 ),0?1*0 45L;.0 ( 'A:TS '0: 80A: ) )000 6000 &000

:se !he cen!roi' me!ho' !o 'e!ermine !he *es! loca!ion )or !his new )acili!y. ;. Ain'ley Corpora!ion has a one-year con!rac! !o supply mo!ors )or all washing machines pro'uce' *y =inso $!'. =inso manu)ac!ures !he washers a! )our loca!ions aroun' !he coun!ry. 2ew 3or1, #or! 6or!h, San Diego, an' Minneapolis. +lans call )or !he )ollowing num*ers o) washing machines !o *e pro'uce' a! each loca!ion. 2ew 3or1 #or! 6or!h San Diego Minneapolis 0,000 S0,000 -0,000 ,0,000

Ain'ley has !hree plan!s !ha! can pro'uce !he mo!ors. The plan!s an' pro'uc!ion capaci!ies are

Aoul'er Macon Gary

&00,000 &00,000 & 0,000

Due !o "arying pro'uc!ionan' !ranspor!a!ion cos!s, !he pro)i! Ain'ley earns on each &,000 uni!s 'epen's on where !hey were pro'uce'an' where !hey were shippe'. The )ollowing !a*le gi"es !he accoun!ing 'epar!men! es!ima!es o) !he 'ollar pro)i! per uni!. DShipmen! will *e ma'e in lo!s o) &,000.E Shippe' !o +ro'uce' a! Aoul'er Macon Gary 2ew 3or1 S 20 , #or! 6or!h && &S &, San Diego , &2 &; Minneapolis &; &0 &-

Gi"enpro)i! ma8imi(a!ion as a cri!erion, Ain'ley woul' li1e !o 'e!ermine how many mo!ors shoul' *e pro'uce' a! each plan! an' how many mo!ors shoul' *e shippe' )rom each plan! !o each 'es!ina!ion.

a. De"elop a !ranspor!a!ion gri' )or !his pro*lem. *. #in' !he op!imal solu!ion using Microso)!M ?8cel. %. =en!4= Cars is a mul!isi!e car ren!al company in !he ci!y. I! is !rying ou! a new Cre!urn !he car !o !he loca!ion mos! con"enien! )or youC policy !o impro"e cus!omer ser"ice. Au! !his means !ha! !he company has !o cons!an!ly mo"e cars aroun' !he ci!y !o main!ain re5uire' le"els o) "ehicle a"aila*ili!y. The supply an' 'eman' )or economy cars, an' !he !o!al cos! o) mo"ing !hese "ehicles *e!ween si!es, are shown *elow.

To From # 3 / $emand

$ %+ + 5

6 %* * &

F %6 * &

, %5 0 10

Supply 5* "* 25 165 165

5*

65

(5

-*

a. #in' !he solu!ion !ha! minimi(es mo"ing cos!s using Microso)!M ?8cel. *. 6ha! woul' you ha"e !o 'o !o !he cos!s !o assure !ha! / always sen's a car !o Das par! o) !he op!imal solu!ionG

CASE2 Appli#"e

? T"e T!an$po!tation P!o*le

/pplichem managemen! is )ace' wi!h !he 'i))icul! pro*lem o) alloca!ing !o i!s cus!omers !he capaci!y o) manu)ac!uring plan!s !ha! are loca!e' aroun' !he worl'. Managemen! has longrecogni(e' !ha! !he manu)ac!uring plan!s 'i))er grea!ly in e))iciency *u! has ha' li!!le success in impro"ing !he opera!ions o) !he ine))icien! plan!s. /! !his !ime, managemen! has 'eci'e' !o )ocus on how *es! !o use !he capaci!y o) i!s plan!s gi"en !he 'i))erences in manu)ac!uring cos!s !ha! curren!ly e8is!. They recogni(e !ha! !his s!u'y may resul! in !he signi)ican! re'uc!ion o) ou!pu! or possi*ly !he shu!!ing 'own o) one or more o) !he e8is!ing plan!s. /pplichem ma1es a pro'uc! calle' =elease-ease. +las!ics mol'ing manu)ac!urers use !his chemical pro'uc!. +las!ic par!s are ma'e *y in9ec!ing ho! plas!ic in!o a mol' ma'e in !he shape o) !he par!. /)!er !he plas!ic has su))icien!ly coole', !he )resh par! is remo"e' )rom !he mol' an' !he mol' is !hen reuse' !o ma1e su*se5uen! par!s. =elease-ease is a 'ry pow'er, applie' as par! o) !he manu)ac!uring process, !ha! ma1es i! easy !o remo"e !he par! )rom !he mol'. /pplichem has ma'e !he pro'uc! since !he early &J 0s, an' 'eman' has *een consis!en! o"er !ime. / recen! s!u'y *y /pplichem4s mar1e! research !eam has in'ica!e' !ha! 'eman' )or =elease-ease shoul' *e )airly s!ea'y )or !he ne8! )i"e years. /l!hough /pplichem 'oes ha"e some compe!i!ion, par!icularly in !he ?uropean mar1e!s, managemen! )eels !ha! as long as !hey can pro"i'e a 5uali!y pro'uc! a! a compe!i!i"e cos!, cus!omers shoul' s!ic1 wi!h /pplichem. =elease-ease sells a! an a"erage price o) L&.00 per poun'. The company owns plan!s capa*le o) ma1ing =elease-ease in !he )ollowing ci!ies. Gary, In'ianaK 6in'sor, <n!ario, Cana'aK #ran1)ur!, GermanyK Me8ico Ci!y, Me8icoK Caracas, >ene(uelaK an' <sa1a, Fapan. /l!hough !he plan!s are )ocuse' on mee!ing 'eman' )or !he imme'ia!e surroun'ing regions, !here is consi'era*le e8por!ing an' impor!ing o) pro'uc! )or "arious reasons. The )ollowing !a*le con!ains 'a!a on how 'eman' has *een me! 'uring !he pas! year. +ro'uc! Ma'e an' Shippe' 'uring +as! 3ear D8 &00,000 +oun'sE #romH!o Me8ico Ci!y 6in'sor, <n!ario Caracas #ran1)ur! Gary Me8ico ;.0 2.%.& .20.0 &2.% &%.0 Cana'a >ene(uela -.; ?urope :ni!e' S!a!es Fapan S.J

<sa1a

%.0

Di))erences in !he !echnologies use' in !he plan!s an' in local raw ma!erial an' la*or cos!s crea!e' signi)ican! 'i))erences in !he cos! !o pro'uce =elease-ease in !he "arious loca!ions. These cos!s may change 'rama!ically 'ue !o currency "alua!ion an' la*or law changes in some o) !he coun!ries. This is especially !rue in Me8ico an' >ene(uela The capaci!y o) each plan! also 'i))ers a! each loca!ion, an' managemen! has no in!eres! in increasing capaci!y anywhere a! !his !ime. The )ollowing !a*le gi"es 'e!ails on !he cos!s !o pro'uce an' capaci!y o) each plan!. +lan! +ro'uc!ion Cos!s an' Capaci!y +lan! Me8ico Ci!y 6in'sor, <n!ario Caracas #ran1)ur! Gary <sa1a +ro'uc!ion Cos! D+?= &.000$ASE J -0& JS-; &&-.;% S-.-J 02.J; & ;-,0 +lan!Capaci!yD8 &00,000l*sE 22.0 ;.S %. %S.0 &,. .0

In consi'ering how *es! !o use !he capaci!y o) i!s plan!s, /pplichem managemen! nee's !o consi'er !he cos! o) shipping pro'uc! )rom one cus!omer region !o ano!her. /pplichem now commonly ships pro'uc! in *ul1 aroun' !he worl', *u! i! is e8pensi"e. The cos!s in"ol"e' are no! only !he !ranspor!a!ion cos!s *u! also impor! 'u!ies !ha! are assesse' *y cus!oms in some coun!ries. /pplichem is commi!!e' !o mee!ing 'eman', !hough, an' some!imes !his is 'one e"en !hough pro)i! migh! no! *e ma'e on all or'ers. The )ollowing !a*le 'e!ails !he 'eman' in each coun!ry, !he cos! !o !ranspor! pro'uc! )rom each plan! !o each coun!ry, an' !he curren! impor! 'u!y ra!e le"ie' *y each coun!ry. DThese percen!ages 'o no! re)lec! curren! 'u!ies.E Impor! 'u!y is calcula!e' on !he appro8ima!e pro'uc!ion plus !ranspor!a!ion cos! o) pro'uc! *rough! in!o !he coun!ry. D#or e8ample, i) !he pro'uc!ion an' shipping cos! )or &,000 poun's o) =elease-ease shippe' in!o >ene(uela were L&00, !heimpor! 'u!y woul' *e L&00 8 . NL 0.E Transpor!a!ion Cos! Dper &,000l*sE, Impor! Du!ies,an' Deman's )or =elease-?ase +lan!HCoun!ry Me8ico Ci!y Me8ico 0 Cana'a &&.%0 0 &0.00 &&. 0 -.00 &;.00 2.>ene(uela S.00 J.00 0 &2. 0 &&.00 &2. 0 &-.0 ?urope &&.00 &&. 0 &;.00 0 &0.00 &%20 20.0 :ni!e' S!a!es &&.00 -.00 &0.%0 &&.20 0 &;.00 2-.% Fapan &%.00 &;.00 &%.;0 &;.;0 &2. 0 0 &&.J

6in'sor, <n!ario &&.00 Caracas #ran1)ur! Gary <sa1a To!al 'eman' S.00 &0.00 &0.00 &%.00 ;.0

D8i00,000 l*sE Impor! 'u!y 0.0X 0.0X 0.0X J- X %. X -.0X

)'e$tion$ Gi"en all !hese 'a!a, se! up a sprea'shee! D/pplichem.8ls is a s!ar!E an' answer !he )ollowing 5ues!ions )or managemen!. &. ?"alua!e !he cos! associa!e' wi!h !he way /pplichem4s plan! capaci!y is curren!ly *eing use'. 2. De!ermine !he op!imal use o) /pplichem4s plan! capaci!y using !he Sol"er in ?8cel. ;. 6ha! woul' you recommen' !ha! /pplichem /pplichem9!ls managemen! 'oG 6hyG CASE2 T"e Plant Lo#ation P'++le9 /nn =ear'on ma'e her way across !he crow'e' !ra'eshow )loor, 'eep in !hough! an' o*li"ious !o !he noisy ac!i"i!y all aroun' her. /s C?< o) !he ?l'ora Company D?DCE )or !he pre"ious &; years, she ha' le' her organi(a!ion !hrough a perio' o) e8!raor'inary success. 6hile larger *icycle ma1ers ha'mo"e' !heir manu)ac!uring opera!ions o"erseas !o !a1e a'"an!age o) lower la*or cos!s, ?l'ora ha' s!uc1 wi!h a 'omes!ic manu)ac!uring s!ra!egy, 1eeping i!s plan! on !he same campus as i!s corpora!e o))ices in Aoul'er, Colora'o./nn )el! !ha! her s!ra!egy o) 1eeping all !he par!s o) !he company in !he same loca!ion, al!hough uncon"en!ional, ha' con!ri*u!e' grea!ly !o coopera!ion among "arious 'epar!men!s an', ul!ima!ely, !o !he company4s grow!h. ?DC ha' *ecome !he larges! an' mos! pro)i!a*le *icycle company in !he :ni!e' S!a!es. 3e! her manu)ac!uring "ice presi'en!, Sean /n'rews, was now urging her !o *uil' a plan! in China. C$oo1 a! !he num*er o) companies here,C he ha' sai' !ha! morning, as !hey helpe' se"eral o!her ?DC s!a))ers s!ac1 *rochures on !he e8hi*i! !a*le an' posi!ion !he company4s la!es! mo'els aroun' !he perime!er o) !heir area. Manu)ac!uring hea's rarely a!!en'e' !ra'e showsK in )ac!, !his was Sean4s )irs!, *u! he ha' wan!e' !o a!!en', an' /nn ha' suppor!e' his in!eres!. CThere are !oo many players in !his mar1e!,C he ha' sai' CI4"e *een saying !his )or !wo mon!hs now, an' you 1now !he )orecas!ers4 num*ers *ac1 me up. Au! i) !hey weren4! enough !o con"ince you, 9us! loo1 aroun'. The in'us!ry is reaching !he sa!ura!ion poin! here in !he S!a!es. 6e ha"e !o *rea1 in!o /sia.C C$ea"e i! alone, Sean,C /nn ha' replie'. CI1now !his is some!hing you4re pushingK you4"e sai' so in !he pas!. Au! le!4s se! up a !ime !o !al1 a*ou! i! in 'e!ail la!er. This isn4! !he !ime or !he place.C 2ow, !hree hours la!er, wi!h !he show in )ull swing, /nn un'er s!oo' why Sean ha' *een compelle' !o spea1 up again. Ha"ing all !heir compe!i!ors in !he same room a! !he same !ime was a power)ul "isual remin'er o) how !he in'us!ry ha' change'. She !hough! a*ou! wha! Sean ha' sai' a*ou! !he :.S. mar1e!. In &JJ2 ?DC4s sales an' earnings ha' hi! recor'

le"els. The company now pro'uce' almos! ;0 percen! o) !he *icycles sol' in !he :ni!e' S!a!es. :.S. mass-mar1e! *icycle sales were growing *y only 2 percen! per year, while !he /sian mar1e! )or !hose same *i1es was nearly 'ou*ling annually. /n' ?l'ora coul' no! compe!i!i"ely ser"e !hose mar1e!s )rom i!s :.S. manu)ac!uring )acili!y.Two o) !he larges! *i1e manu)ac!urers in !he worl', loca!e' in rapi'ly growing /sian mar1e!s, en9oye' a signi)ican! la*or an' 'is!ri*u!ion cos! a'"an!age. She s!oppe' a! a moun!ain *i1e 'isplay se! up *y a )as!-growing young *i1e company. Moun!ain *i1es wi!h )ron! suspension were !he la!es! !ren' !he a''e' suppor! an' cushion allowe' ri'ers !o *e!!er a*sor* !he shoc1s inheren! in o))-roa' ri'ing wi!hou! slowing 'own or losing *alance. Mos! o) !hese *i1es were s!ill prohi*i!i"ely e8pensi"e. Au! ?l'ora, !oo, ha' an en!ry in !his pro'uc! ca!egory, re!ailing )or a*ou! L&J0, an' /nn was prou' o) i! #or years, !he company ha' concen!ra!e' i!s e))or!s on ine8pensi"e *icycles, which re!aile' !hrough mass merchan'isers )or *e!ween L&00 an' L200. ?l'ora4s prices were sligh!ly higher !han o!her low-en' compe!i!ors, *u! large re!ailers were willing !o pay !he premium *ecause ?DCha'consis!en!ly *een a*le !o o))er many s!a!e o) !he ar! s!yles an' )ea!ures wi!h 5uic1, !imely 'eli"eries !ha! compe!i!ors *uil'ing o"erseas coul'n4! ma!ch. <ne o) !he reasons !he company ha'*een so success)ul was !ha! Aoul'er, Colora'o, was a *icyclis!s4 mecca. ?l'ora employees a! all le"els share' a genuine lo"e o) *icycling an' eagerly pursue' 1nowle'ge o) !he in'us!ry4s la!es! !ren's an' s!yles. Someone was always sugges!ing a *e!!er way !o posi!ion !he han'*ra1es or a new !oe grip !ha! allowe' )or *e!!er !rac!ion an' easier 'ismoun!s. /n' ?l'ora ne"er ha' a shor!age o) people willing !o !es! ou! !he la!es! pro!o!ypes. /no!her reason was !ha! all mar1e!ing s!a)), engineers, 'esigners, an' manu)ac!uring personnel wor1e' on one campus, wi!hin a &0-minu!e wal1 o) one ano!her./nn ha'*e! *igon !ha! s!ra!egy, an' i! ha' pai' o)). Communica!ion was easy, an' changes in s!yles, pro'uc!ionplans,an'!he li1ecoul'*e ma'e5uic1ly an' e))icien!ly. Moun!ain *i1es, )or e8ample, ha' gone )rom 0 percen! !o more !han 0percen! o) !he mar1e! "olume since &J,,, an'?l'oraha'me! !he increase' 'eman' wi!h ease. /n' when or'ers )or cross *i1es a moun!ainHroa' *i1e hy*ri' !ha! ha'en9oye' a spur! o) populari!y *egan !o )all o)), ?l'ora ha' *een a*le !o a'9us! i!s pro'uc!ion run wi!h minimal 'isrup!ion. ?DC ha' also *ene)i!e' )rom i!s )oray in!o !he high-en' mar1e! D*icycles re!ailing )or *e!ween L%00 an' LS00E &2 years earlier. <ne o) /nn4s )irs! mo"es as C?< ha' *een !o en!er in!o a 9oin! "en!ure wi!h =inal'i, a high-en' I!alian *icycle manu)ac!urer !ha! a! !he !ime was speciali(ing inracing mo'els./s par! o) !he agreemen!, ?DC ha' *egun impor!ing =inal'i *i1es un'er !he *ran' name Summi! an' selling !hem !hrough special!y *i1e 'ealers. Similarly, =inal'i ha' *egun mar1e!ing ?DC *i1es in ?urope. Tha! arrangemen! ha' ha' las!ing rewar's. /l!hough racing *i1es were no longer "ery popular, ?DC4s o))erings ha' !a1en o)). /*ou! 20 percen! o) ?DC4s sales were now ma'e ou!si'e !he :ni!e' S!a!es Dprimarily in ?urope an' Cana'aE !hrough !his an' o!her agreemen!s.

The rela!ionships wi!h =inal'i an' !he special!y *i1e shops also helpe' 1eep ?DC managemen! aware o) !he la!es! in'us!ry !ren's o"er !he years. Mos! recen!ly, !hose !ren's ha' inclu'e' a mo"e !owar' more e8o!ic )rame ma!erials li1e aluminum an' car*on )i*er an' more a'"ance' componen!s, inclu'ing !he new )ron!-)or1 suspension sys!ems. /nn e8amine' ano!her ri"al4s *rochure !ou!ing a soon-!o-*e-release' high-en' mo'el wi!h !hese a'"ances. ?DC engineers were clearly ahea' o) !he cur"e. Her sa!is)ac!ion was 5uic1ly !empere' wi!h !hough!s o) )oreign sales per)ormance. Ae!ween &J,S an' &JJ&, ?DC4s )oreign sales ha' grown a! an annual ra!e o) o"er ,0 percen!. Au! 'uring !he pre"ious !wo years !hey ha' *een )la!. Sean appeare' a! /nn4s si'e, 9ol!ing her ou! o) her !hough!s an' in!o !he reali!y o) her surroun'ings. CDale 9us! )inishe' up !he )irs! roun' o) re!ailers4 mee!ings,C he sai'. C6e4' li1e !o ge! some lunch *ac1 o"er a! !he ho!el an' !al1 a*ou! our op!ions.C Dale S!ewar! was ?l'ora4s mar1e!ing "ice presi'en!. His "iews o) wha! was *es! )or !he company o)!en 'i))ere' )rom Sean4s, *u! !he !wo ha'an amia*le wor1ing rela!ionship an' en9oye' )re5uen! spiri!e' "er*al sparring ma!ches. C3ou won4! le! !his go, will you,C /nn sai', !hrowing up her han's in a ges!ure o) surren'er. C#ine, le!4s !al1. Au! you 1now I won4! ma1e a 'ecision un!il we4"e ha' a more )ormal roun' o) 'iscussions *ac1 in Aoul'er ne8! mon!h.C <"er san'wiches, Sean ma'e his case. C<ur primary mar1e!s in 2or!h /merica an' wes!ern ?urope represen! less !han a 5uar!er o) !he worl'wi'e 'eman'. <) !he 200 million *icycles ma'e in !he worl' las! year, %0 million were sol' in China, ;0 million in In'ia, an' J million in Fapan. His!orically, *i1es sol' in /sia4s 'e"eloping mar1e!s were low-en' pro'uc!s use' as primary mo'es o) !ranspor!a!ion. Au! !he economic pic!ure is changing )as!. There4s a growing mi''le class. Su''enly people ha"e 'isposa*le income. Many consumers !here are now see1ing higher 5uali!y an' !ren'ier s!yles. Moun!ain hi1es wi!h suspension are in./n' cross-hi1es are s!ill hol'ing !heir own. In)ac!, !he 'eman' in !hese mar1e!s )or !he pro'uc! ca!egories we pro'uce has *een 'ou*ling annually, an' !he grow!h ra!es seem sus!aina*le. CI) we4re going !o compe!e in /sia, !hough, we nee' a local plan!.My s!a)) has e"alua!e' many loca!ions !here. 6e4"e loo1e'a! wage ra!es, pro8imi!y !o mar1e!s, an' ma!erials cos!s, an' we )eel !ha! China is our *es! *e!.6e4' li1e !o open a plan! !here as soon as possi*le, an' s!ar! *uil'ing our posi!ion.C Dale 9umpe' in. 4Two o) our larges! compe!i!ors, one )rom China, one )rom Taiwan, ha"e *een )illing !he 'eman' so )ar,C he sai'. CIn &JJ0, JS percen! o) !he "olume pro'uce' *y !hese companies was )or e8por!. In &JJ%, !hey are pro9ec!ing !ha! % percen! o) !heir pro'uc!ion will *e )or local mar1e!s.6e can4! compe!e wi!h !hem )rom here. /*ou! 20 percen! o) our pro'uc! cos! is la*or, an' !he hourly wages o) !he manu)ac!uring wor1)orce in !hese coun!ries are *e!ween percen! an' & percen! o) ours. I! also cos!s us an a''i!ional 20 percen! in !ranspor!a!ion an''u!ies !o ge! our *icycles !o !hese mar1e!s.C He glance' a! Sean 5uic1ly an' con!inue'. CAu! here4s where I 'isagree wi!h Sean. I!hin1 we nee' a shor!-!erm solu!ion. These companies ha"e a *ig lea' on us, an' !he moreI!hin1 a*ou! i!, !he moreI*elie"e we nee'!o pu! a 'irec! sales opera!ion in /sia )irs!.C

CDale, you4re cra(y,C Sean sai', pouring himsel) some ice wa!er )rom !he pi!cher on !he !a*le. C6ha! goo'woul' an/sian sales opera!ion 'o wi!hou! a manu)ac!uring plan!G I 1now we source componen!s in /sia now, *u! we coul' sa"e ano!her &0 percen! o) !hose par!s i) we were loca!e' !here. Then we woul' really *e *ringing ?l'ora !o /sia. I) we wan! !o compe!e !here, we ha"e !o play )rom our grea!es! s!reng!h 5uali!y. I) we 'i' i! your way, you woul'n4! *e selling ?l'ora *i1es. 3ou4'9us! *e selling some pro'uc! wi!h our la*el on i!. 3ou woul'n4! ge! !he 5uali!y. 3ou woul'n4! *uil' !he same 1in' o) repu!a!ion we ha"e here. I! woul'n4! really *e ?l'ora. <"er !he long !erm, i! coul'n4! wor1.C C6e4re *uil'ing *icycles, no! roc1e! ships,C Dale coun!ere'. CThere are lo!s o) companies in /sia !ha! coul' pro"i'e us wi!h a pro'uc! "ery 5uic1ly i) we ga"e !hem our 'esigns an' helpe' !hem wi!h !heir pro'uc!ion process.6e coul' ou!source pro'uc!ion in !he shor! !erm un!il we ma'e more permanen! arrangemen!s.C He !urne' !o /nn. C6e coul' e"en ou!source !he pro'uc! permanen!ly, 'espi!e wha! Sean says. 6ha! 'o we 1now a*ou! *uil'ing an' running a plan! in ChinaG /ll I1now is we4re losing po!en!ial share e"en as we si! here. The !ra'ing companies aren4! gi"ing our pro'uc!s !he a!!en!ion !hey 'eser"e, an' !hey also aren4! gi"ing us !he in)orma!ion we nee' on !he )ea!ures !ha! consumers in !hese mar1e!s wan!./ sales opera!ion woul' help us learn !he mar1e! e"en as we4re en!ering i!. Se!!ing up a plan! )irs! woul' !a1e !oo long. 6e nee' !o *e o"er !here now, an' opening a sales opera!ion is !he 5uic1es! way.C /nn cu! in. CDale has a goo' poin!, Sean,C she sai'. C6e4"e *een success)ul here in large par! *ecause our en!ire opera!ion is in Aoul'er, on one si!e. 6e4"e ha' comple!e con!rol o"er our own )le8i*le manu)ac!uring opera!ion, an' !ha!4s *een a 1ey )ac!or in our a*ili!y !o mee! rapi' change in !he local mar1e!. How woul' we a''ress !he challenges inheren! in manu)ac!uring in a )acili!y hal)way aroun' !he worl'G 6oul' you consi'er mo"ing !hereG /n' )or how longG C/lso, !hin1 a*ou! our o!her op!ions. I) !he *igges! issue 1eeping us ou! o) !hese mar1e!s righ! now is cos!, !hen *o!h o) you are ignoring a )ew o*"ious al!erna!i"es. =igh! now, only our )rame-*uil'ing opera!ion is au!oma!e'. 6e coul' cu! la*or cos!s signi)ican!ly *y au!oma!ing more processes. /n' why are you so *en! on ChinaG #ran1ly, whenIwas !here las! mon!h !ouring )acili!ies, a lo! o) wha! Isaw worrie' me.3ou 1now, !ha! 'ayIwas suppose' !o !our a pro 'uc!ion )acili!y, !here was a power )ailure. Fu'ging *y !he reac!ions o) !he personnel in !he plan! !he ne8! 'ay, !hese ou!ages are common. The roa's !o !he )acili!y are in "ery poor con'i!ion. /n' was!ewa!er an' cleaning sol"en!s are regularly 'umpe' un!rea!e' in!o !he wa!erways.6e coul'opera!e 'i))eren!ly i)we loca!e' !here, *u! wha! impac! woul' !ha! ha"e on cos!sG 4Taiwan has a *e!!er-'e"elope' in)ras!ruc!ure !han China. 6ha! a*ou! ma1ing !ha! our /sian *aseG /n' I4"e hear' !ha! Singapore o))ers a!!rac!i"e !a8 arrangemen!s !o new manu)ac!uring opera!ions. Then !here4s Me8ico. I!4s closer !o home, an' asi'e )rom 'is!ri*u!ion cos!s, !he wage ra!es are similar !o /sia4s an' many o) !he o!her ris1s woul' *e minimi(e'. 3ou *o!h )eel s!rongly a*ou! !his, I 1now, *u! !his isn4! a 'ecision we can ma1e *ase' on en!husiasm.C /nn crumple' up her san'wich wrapper an' 'ran1 !he las! o) her so'a. C$e!4s ge! *ac1 o"er !o !he e8hi*i!s. I4ma!!en'ing !he IT seminar a! &.;0. 6e4ll sche'ule a )ormal mee!ing on !his su*9ec! soon. Iwas going !o say ne8! mon!h, *u! how a*ou! *umping i! up !wo wee1sG4

6al1ing *ac1 !o !he con"en!ion cen!er wi!h Dale an' Sean, /nn reali(e' !ha! she wasn4! 9us! )rus!ra!e' *ecause she 'i'n4! 1now which course ?DC shoul' pursue. She was concerne' !ha! she really 'i'n4!1now which aspec!s o) !he 'ecision were impor!an! an' which were irrele"an!. Shoul' she es!a*lish a 'i"ision in ChinaG I) so, which )unc!ions shoul' she s!ar! wi!hG Manu)ac!uringG Mar1e!ingG/n' wha! a*ou! engineeringG <r shoul' she consi'er a 'i))eren! loca!ionG 6oul' China4s low la*or cos!s o))se! pro*lems cause' *y a poor in)ras!ruc!ureG Grow!h ha'always *een"i!ally impor!an! !o ?l'ora,*o!h in crea!ing "alue !o sharehol'ers an' in pro"i'ing a wor1 en"ironmen! !ha! coul' a!!rac! an' re!ain !he mos! !alen!e' people. 2ow i! appeare' !ha! /nn woul' ha"e !o choose *e!ween con!inue' grow!h an' a 'omes!ic-only manu)ac!uring s!ra!egy !ha! ha' ser"e' her well. /nn 1new !he plan! loca!ion 'ecision she ha' ma'e years earlier ha' *een cri!ical !o !he company4s success, an' she )el! !he company4s ne8! mo"e woul' *e9us! as crucial. )'e$tion$ &. 6ha! is !he compe!i!i"e en"ironmen! )acing ?DCG 2. 6ha! are ?DC4s s!reng!hs in manu)ac!uringG ;. Shoul'?DC es!a*lish a manu)ac!uring 'i"ision in/siaG %. 6ha! plan o) ac!ion woul' you recommen' !o /nn =ear'onG

Sele#ted Bi*liog!ap"& Aallou, =. H. Ausiness $ogis!ics Managemen!. %!h e'. :pper Sa''le =i"er, 2F. +ren!ice Hall, &JJ,. Blamro!h, B. Single #acili!y $oca!ion +ro*lems wi!h Aarriers. Aerlin. Springer->erlag Telos, 2002. Dre(ner, @., an' H. Hamacher. #acili!y $oca!ion. /pplica!ions an' Theory. Aerlin. Springer >erlag, 2002. +as!o, D.F., an' =. $. #rancis. #acili!y $ayou! an'$oca!ion./naly!ical /pproach. :pper Sa''le =i"er, 2F. +ren!ice Hall, &JJ,. Bhumawala, A. M., an' D. C. 6hy*ar1. The :se o)?conomic $ogic in #acili!y$oca!ion.6es! $a)aye!!e, I2.Ins!i!u!e)or =esearch in !he Aeha"ioral, ?conomic, an' Managemen! Sciences, Branner! School, +ur'ue :ni"ersi!y, &JS . Sule, D. =. Manu)ac!uring #acili!ies. +6S+u*lishingCompany, &JJ%. $oca!ion, +lanning an' Design. Aos!on.

Footnote$ &. M. ?. +or!er, CThe Compe!i!i"e/'"an!age o) 2a!ion,CHar"ar'Ausiness =e"iew, March-/pril &JJ0. 2. S. ?. Bimes an' F. /. #i!(simmons, CSelec!ing +ro)i!a*le Ho!el Si!es a! $a Uuin!a Mo!or Inn,C In!er)aces 20 DMarch-/pril &JJ0E, pp. &2-20. ;. This is a *roa' !op-managemen!-orien!e' s!ra!egy case 'esigne' !o elici! 'e*a!e.