Report

On

Location Planning and Analysis of Bandbox Limited

 Report on

Location Planning and analysis of Bandbox Limited

Prepared for:

Dr. Motaher Hossain

Course Instructor

Operations Management, Course: BUS650.4

Prepared by:

Minhaz Uddin Md Ikram 1411880660

Emdad Ahmed 1430954660

Syed Faisal Waky 1512921660

North South University

Dhaka, Bangladesh

Date of Submission: July 27, 2016.

To

Dr. Motaher Hossain

Faculty Member

School of Business and Economics

North South University

Subject: Submission of report on Location Planning and analysis of Bandbox Limited.

Dear Sir,

We intend to submit the report on Location Planning of Bandbox Limited. We put our best
effort to prepare the report. It has been joyful & enlightening experience for us to work on
this project. However this has been obviously a great source of learning for us to conduct
similar types of studies in the future.

We would like to express our sincere gratitude to you for your kind guidance & suggestions
in this regard. We shall be happy to provide any further explanation regarding this report if
required.

Obediently yours,

Minhaz Uddin Md Ikram, 1411880660 ……………………………..

Emdad Ahmed, 1430954660 ……………………………..

Syed Faisal Waky, 1512921660 ………………………………

Table of Contents
Executive Summary V

Origin of the Term Paper 1

Background of the Study 1

Objective of the Study 2

Methodology 2

Sources of data 2

Limitations of Study 3

Theoretical Background 4

Overview of the Organization 9

Assumptions 9

Location Planning 11

Procedure of making Location Decision of Bandbox Ltd. 11

Factors that affect BANDBOX’s Location Planning Decision 12

Several Methods of Location Planning of Bandbox Ltd 13

 Location Cost-Profit-Volume Analysis (13)

 The Transportation Model (15)

 Factor Rating (15)

 The Center Of Gravity Method (15)

Recommendation 19

Conclusion 19

Reference 20

Executive Summary
Bandbox Ltd. Is one of the first movers in Laundry and dry cleaning industry in Bangladesh.
The company started it business in 1989 and the company is based on Ashulia. Now,
Bandbox Ltd is operating its business with 45 outlets across the country. The purpose of this
term paper is to discover the planning of location of Bandbox Ltd. In addition, location
analysis is also done in the project report. The report includes 4 different chosen outlets
situated in different part in Dhaka city which are the concern of this study. Also, there are
other two potential locations mentioned and considered to be the future outlets of the
company. We have applied methods like center of gravity method, factor rating method,
and location planning and cost analysis method in order to accomplish the project. Center of
gravity indicates us to identify new locations in between existing outlets. Factor rating helps
us choose better location decisions and through cost analysis method, we have identified
which outlet would serve more profit to the company. The project report gives us an
overview of the company. Finally a conclusion has been drawn following few
recommendations about the locations analysis and planning of Bandbox Ltd.

Location Planning
Location plays an important role for every business whether new or existing. Location
planning decisions are not limited to one time strategic planning decisions for building a
new manufacturing or service facility rather most of the organizations face the challenge of
increasing their capacity through selection of new locations or extension of existing
locations. It is very important for any organization through various departments of the
organization. Accounting, which prepares cost estimates for changing locations as well as
operating at new locations. Distribution, which seeks warehouse layouts to makes material
handling easier and customer response shorter. Importance of Location Engineering,
considers the impact of product or service location choices for the company. Finance
Department, which helps to perform the financial analysis for investing in new locations.
Human Resources Management, which hires and trains employees to support new locations
or relocations of operations. Management Information Systems, which provide information
technologies that link operations at different locations. Importance of Location Marketing
which assesses new locations and revised locations that is popular with the customers.
Operations Management, which seeks and finalizes locations that create, sustains, protect
and project the best performance criteria for the whole organization.

Procedure of making Location Decision

Location decisions play an integral part of the strategic planning process of every
organization. It is important to learn about the need and nature of location decisions. As a
part of his routine responsibilities a senior Operations Manager often carries out the
evaluation of different available locations. By following steps location decision can be made.

 Decide on the criteria

 Identify the important factors

 Develop location alternatives

 Evaluate the alternatives

 Evaluate and make selection

Need for making Location Decision

Quite often Multinational companies move to a host country with a lot of hype and
propaganda of bringing jobs to the local labor but the reality is its own need to increase its
revenue and profits. Most of the time the need for location decision focuses on

 Marketing Strategy

 Cost of Doing Business

 Growth

 Depletion of Resource

Factors that Affect Location Decision

The process of determining a geographic site for firms operations takes into account both
manufacturing and marketing aspects. We just focus on the manufacturing aspects as it’s
more closely related to Operations Management. Following factors can affects the location
decision:

 Regional factors.

 Community consideration.

 Multiple plan strategies

 Site-related factors

Evaluating Location Alternatives

There are three specific analytical techniques available to aid in evaluating location
alternatives:

Location Cost-Profit-Volume Analysis

The Cost-Volume-Profit (CVP) Analysis can be represented either mathematically or
graphically. It involves following three steps:

 For each location alternative, determine the fixed and variable costs,

 For all locations, plot the total-cost lines on the same graph, and

 Use the lines to determine which alternatives will have the highest and
lowest total costs for expected levels of output.

Additionally, there are four assumptions one must keep in mind when using this method:

 Fixed costs are constant.

 Variable costs are linear.

 Required level of output can be closely estimated.

 There is only one product involved.

Total cost = FC = V (Q)

Where, FC=Fixed Cost, v=Variable Cost per Unit, Q=Number of Units

The Transportation Model

The transportation model uses the principle of 'transplanting' something, like taking a hole
from one place and inserting it in another without change. First, it assumes that to disturb
or change the idea being transported in any way will damage and reduce it somehow. It also
assumes that it is possible to take an idea from one person's mind into another person's so
that the two people will then understand in exactly the same way.

The model requires a few keys pieces of information, which include the following:

 Origin of the supply

 Destination of the supply

 Unit cost to ship

The transportation model can also be used as a comparative tool providing business
decision makers with the information they need to properly balance cost and supply. The
use of this model for capacity planning is similar to the models used by engineers in the
planning of waterways and highways.

Factor Rating

This method involves qualitative and quantitative inputs, and evaluates alternatives based
on comparison after establishing a composite value for each alternative. Factor Rating
consists of following six steps:

 Determine relevant and important factors

 Assign a weight to each factor, with all weights totaling 1.00

 Determine common scale for all factors, usually 0 to 100

 Score each alternative.

 Adjust score using weights; add up scores for each alternative

 The alternative with the highest score is considered the best option

Minimum scores may be established to set a particular standard, though this is not
necessary.

The Center Of Gravity Method

Either this technique is used in determining the location of a facility that will reduce travel
time or lower shipping costs. Distribution cost is seen as a linear function of the distance and
quantity shipped. The Center of Gravity Method involves the use of a visual map and a
coordinate system; the coordinate points being treated as the set of numerical values when
calculating averages. If the quantities shipped to each location are equal, the center of
gravity is found by taking the averages of the x and y coordinates; if the quantities shipped
to each location are different, a weighted average must be applied.

Overview of the Organization

Bandbox Limited is an automated laundry service located at Ashulia, Dhaka. In December

1989, Bandbox started its operation with 2 outlets only. Now by rendering quality dry
cleaning and laundry services and focusing on customer satisfaction, Bandbox expanded its
service throughout Dhaka city and now operating with 45 outlets. Today competing with
two other similar companies, Bandbox is the market leader holding approx. 60% of the total
market share. This was possible due to Bandbox’s commitment to the customer,
concentrating on the market demand and ultimately ensuring quality of service. Over the
last decade Bandbox has improved & increased their production capacity by BMRE of the
project. To cope with the modern washing & dry cleaning technology, Bandbox has adopted
more sophisticated and modern equipment. Customer satisfaction is the ultimate goal of
Bandbox, and to achieve it, they update themselves with the latest technologies. Thus by
earning confidence and satisfaction of the customers Bandbox grew day by day, offering
multifaceted cleaning options to the customers. Bandbox believes that the customers are
their strength. With the slogan “We will do it better for you”, Bandbox introduced the
culture of continuous improvement among its employees. By strictly ensuring the quality
standards, Bandbox achieved ISO 9001:2000 award, which is a reflection of its
uncompromising attitude towards quality. Today Bandbox is operating from its own 1 bigha
land at Ashulia with 20000 sft floor area, which enabled them to concentrate more on their
core business operation. These dreams turned into realities due to the continuous support
of all the stakeholders of Bandbox.

Assumption

We choose some assumption to easily analyze those methods of location-planning.

Following assumptions can be made for the analysis:

 Service price charged by BANDBOX ltd:

Location Address of Branch Service price per unit (tk)

Mohakhali 67, Mohakhali C/A, Wireless Gate, 200

Mohakhali

Gulshan Shop No. G- 15 ,D.C.C Market, 200

Ground Floor, Gulshan-02
Banani Plot- 116, Road- 11,Block- E, 200
Banani
Kalabagan 10, Mirpur Road, kalabagan Bus 200
stand

 Fixed Cost and Variable Cost of BANDBOX per year:

 Location Name of the Branch Fixed Cost Variable Cost No. of unit
(tk) (tk) (per yr)
Mohakhali 67, Mohakhali C/A, 1,50,000 30 16,500
Wireless Gate,
Mohakhali
Gulshan Shop No. G- 15 ,D.C.C 3,50,000 20 16,500
Market, Ground Floor,
Gulshan-02
Banani Plot- 116, Road- 1,00,000 50 16,500
11,Block- E, Banani
Kalabagan 10, Mirpur Road, 2,50,000 25 16,500
kalabagan Bus stand

 Now let’s assume, BANDBOX ltd. is introducing a new branch in Shantinagar and
Shyamoli. [Assumption]
 Hypothetically taken some data like factor, weight and scores:

Factors Weight Scores (Out of 100) Weighted Score

Shantinagar Shyamoli Shantinaga Shyamoli
r
Customer Visit .45 100 70 45.0 31.5
Traffic Volume .07 80 65 5.6 4.55
Rental Cost .40 90 55 36.0 22.0
Size .50 75 80 37.5 40.0
Layout .25 65 70 16.3 17.5
Operating Cost .20 50 60 10.0 12.0
150.4 127.55

 Hypothetically taken some data to analyze the center of gravity method:

Destination X Y Monthly Quantity

D1 4 6 850
D2 3 7 750
D3 4 3 800
D4 7 9 900
3,350
Where D1 : Mohakhali, D2 : Gulshan, D3: Banani, D4 : Kalabagan

Location Planning
Every firm must use location planning techniques. There are many options for location
planning. Corporations choose from expanding an existing location, shutting down one
location and moving to another, adding new locations while retaining existing facilities, or
doing nothing. There are a variety of methods used to decide the best location or
alternatives for the corporation. Methods are such as identifying the country, general
region, small number of community alternatives, and site alternatives. Several factors that
influence location positioning include the location of raw materials, proximity to the market,
climate, and culture. Models for evaluating whether a location is best for an organization
consist of cost-profit analysis for locations, the center of gravity model, the transportation
model, and factor rating.

As an operations management student, we can focus on the importance of location for any
organization through various departments of the organization. We got different results from
the four methods and we interpret these results according to our assumptions.

Procedure of making Location Decision of Bandbox Ltd.

We assume that Bandbox Ltd. Laundry is going to introduce a new layout at Shantinagar or
Shyamoli. They need to follow five steps to choose one place. By following steps they can
make the decision:

 They need to setup the criteria. What type of layout they want, target customers,
transportation facility, others facilities could be considered?
 They have to find out the important factors. What factor would be affecting the
layout of the Bandbox Ltd?
 We assume they develop two alternatives. One is Shantinagar and another is
Shyamoli.
 They need to evaluate the alternatives. Whether Shantinagar is better or Shyamoli is
better.
 And finally they need to choose one location for their layout.
Factors that affect BANDBOX’s Location Planning Decision

A business will have to consider many factors when determining where to locate a new
branch or operation. Usually, it will have to balance several factors in making a decision.

Regional Factor
 Location of Raw Materials: Bandbox ltd generally imports all raw materials it needs
to provide services with laundry and dry cleaning in the market.
 Location of Markets: Location of market is one of the, major factors. Bandbox chose its
market on the basis of its customer responses. As we saw the outlet situated in the
place from where they can easily capture the whole market and develops their own
existing market.

 Labor Factor: as Bandbox ltd is a service oriented organization. So it needs to decide

about its location planning in a way so that it can easily avail cheap labor.
 Quality of life: the company has to make decisions on location planning considering
quality of life of the customers they want to serve. This study will determine whether
an outlet will be able to serve as many customers as possible.

Site related factors

The company has to be very particular about site related factors. Outlets of the company
should be easy reachable so people can easily drop by during their travel to their
destination. A decent parking lot is also required.

Utility factors of the location

Utility like electricity and basic stuffs should be in consideration for the outlets and factory.
The company is self sufficient in generating its electrical power. It has its own submersible
water pump for continuous supply of water.

Environment factor
Though the customers do not have to stay long in the outlets, the company has to ensure
basic environmental requirements to the customers. Bandbox ltd also takes care about not
polluting the environment when it operates the business.

Several Methods of Location Planning of Bandbox Ltd

Hypothetical Example for selecting location-planning method:

Location Cost-Profit-Volume Analysis

We assume following data to analyze the location cost-profit-volume analysis.

From the table we can calculate Cost-Volume by (Fixed Cost + Variable Cost=
Total Cost)
Location Initial Fixed Variable No. of Variable Cost Per Total Cost
Cost (tk) Cost Per unit(per Year (FC+VC)
Unit(tk) yr)
Mohakhali A 1,50,000 30 16,500 30*16,500=4,95,000 6,45,000

Gulshan B 3,50,000 20 16,500 20*16,500=3,30,000 6,80,000

Banani C 1,00,000 50 16,500 50*16,500=8,25,000 9,25,000

Kalabagan D 2,50,000 25 16,500 25*16,500=4,12,500 6,62,500

Interpretation
To conclude we can say that if the units limit is within 25,00 then Banani (C) will be the most
suitable choice then for 2,500 to 20,000 units, Mohakhali (A) is the most preferred choice
and finally for units more than 20,000 units is Gulshan (B) will preferable. For 16,500 units
location Mohakhali (A) is providing lowest cost.

The approximate ranges for which the various alternatives will yield the lowest cost are
shown on the graph. Here, location Kalabagan (D) is never be superior. The exact ranges can
be determined by finding the output level at which lines A and C and lines D , B and A. To do
this, we need to set their total cost equations equal and solve for Q, the break-even output
level. Thus for C and D:

(A) (C)

30Q + 150,000 = 50Q + 100,000

Q = 2,500 units per year

 For D and B

(B) (D)

20Q + 350,000 = 25Q + 250,000

Q = 20,000 units per year

The Transportation Model

Clothes are received from the customers at different outlets. It is then sent to factory where
checking, sorting and marking take place. The clothes are divided into categories viz woolen
cotton, etc. The woolen materials are sent to dry cleaning machine wherein they are
cleaned. It is then pressed in utility press and form finished. Thereafter, it is wrapped in poly
bags for final delivery to the customers. The suits safaris are delivered along with plastic
hangers. Hence, the nearer the warehouse IS better for them.

Factor Rating
We assume following data to analyze factor rating method of BandBox

Factors Weight Scores (Out of 100) Weighted Score

Shantinagar Shyamoli Shantinaga Shyamoli
r
Customer Visit .45 100 70 45.0 31.5
Traffic Volume .07 80 65 5.6 4.55
Rental Cost .40 90 55 36.0 22.0
Size .50 75 80 37.5 40.0
Layout .25 65 70 16.3 17.5
Operating Cost .20 50 60 10.0 12.0
150.4 127.55

Interpretation
Here Bandbox manager may prefer to establish maximum thresholds. So, alternative 1
(Shantinagar) is better because it has higher composite score.

The Center Of Gravity Method

We assume BANDBOX wants to introduce a new layout at Bashundhara or Banani to analyze
center of gravity method of BANDBOX
Destination X Y
D1 4 6
D2 3 7
D3 4 3
D4 7 9
18 25

^ ∑xi ^ ∑yi
X = ------- =18/4=4.5 Y= ------- =25/4=6.25
n n
Interpretation
From this graph it can be derived that center of gravity of all four of our locations is (4.5, 6.25). And
D5 is the Shyamoli. As per this graph they should go for location Banani.

If there is monthly quantities varies, the center of gravity will results different. We assume
that.

Destination X Y Monthly Quantity

D1 4 6 850
D2 3 7 750
D3 4 3 800
D4 7 9 900
3350

^ ∑xiQi
X = -------- = 4(850)+3(750)+4(800)+7(900) / 3350 = 4.5 Round to 5
 n

^ ∑yiQi
Y= --------- = 6(850)+7(750)+3(800)+9(900) / 3350 = 6.22
n

Graph:

Interpretation
As per this graph, they also need to go for location Shyamoli for setting their new outlet.

Recommendation
From this report we can state some recommendation of choosing appropriate location for
Bandbox ltd. Following recommendation can be made from our assumption based report:

 From the cost-profit-volume analysis, it can be stated that the company should
go for Location Mohakhali, if they have increased their sales. Profit is also
generated more from location Dhanmondi.
 In factor rating analysis, we can recommend to go for Shantinagar for their new
outlet. Because, location Shantinagar has higher composite score.
 From the center of gravity method, we can recommend to go for Shyamoli. If
there is a variation in monthly quantity or same quantity, as per center of gravity
method location Shyamoli is the best place for new outlet.

Conclusion
Location planning decisions are major decisions for a company. The decision determines
profit margin for a company. As Bandbox is a laundry and dry wash oriented company, it has
to identify locations and place its outlet through which service is offered effectively with the
minimum cost. As the cloths are collected and taken to the factory so, the distance and
outlet locations should also be place considering convenience of the location.

Reference
J. Stevenson, W. (n.d.). Location planning and analysis. In Operations Management (8th ed.,
p.872). New York, 1221 Avenue of the Americas, New York: McGraw-Hill/Irwin.

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