TOPIC VIII

LOCATION PLANNING
AND ANALYSIS

By: Prof. Marissa Lanuza

Objectives of Location Decisions:

• It entails a long-term commitment

• Location decisions often have an impact on investment
requirements, operating costs and revenues and
operations
• It can have a significant impact on competitive advantage
• It is important to supply chains
Factors that affect location decisions

1. Regional Factors

–Location of raw materials

–Location of markets
–Labor Factors

o Geographic Information System (GIS)

–A computer-based tool for collecting, storing, retrieving, and displaying
demographic data on maps.
Factors that affect location decisions

2. Community Considerations

❖ Quality of Life
❖ Services
❖ Attitudes
❖ Taxes
❖ Environmental Regulations
❖ Utilities
❖ Development Support
Factors that affect location decisions

3. Site – Related Factors

▪ Land
▪ Transportation
▪ Environmental/Legal (Zoning restrictions)
MICROFACTORY

– Small factory with a narrow product focus, located near major markets,
Multiple Plant Manufacturing Strategies

➢ Assign different product lines to different plants

➢ Assign different market areas to different plants

➢ Assign different processes to different plants

SERVICE AND RETAIL LOCATIONS

o Nearness to raw materials is usually not a factor

o Costumer access is a prime consideration
o Traffic volume and convenience are important factors as well
as good transportation and parking facilities
o Customer safety and security and competitors’ locations can
be of significance
 Global Locations
GLOBAL LOCATIONS
– Companies are finding strategic and tactical reasons to globalize their operations.

TWO KEY FACTORS:

1. Trade Agreements
– ASEAN, NAFTA

2. Technology
– Technological advances in communication and information
 Global Locations
ADVANTAGES OF GLOBAL LOCATIONS:
– Markets
– Cost-Savings
– Legal and Regulatory
– Financial

DISADVANTAGES OF GLOBAL LOCATIONS:

– Transportation Costs
– Security Costs
– Unskilled Labor
– Import Restrictions
– Criticisms
 Global Locations

RISKS:
– Political
– Terrorism
– Economic
– Legal
– Cultural
Evaluating Location Alternatives

1.) Locational Cost – Profit – Volume Analysis

• Technique for evaluating location choices in economic term

2.) Transportation Model

• Based on the movement of either raw materials or finished
goods
• A separate analysis of transportation is needed when a
problem involves shipment of goods from multiple sending
points to multiple receiving points and a new location
(sending or receiving points) is to be added to the system.
Evaluating Location Alternatives

3.) Factor Rating

• Used for location analysis
• It is an approach to evaluating locations that includes
quantitative and qualitative inputs.

4.) Center of Gravity Method

• Method for locating a distribution center that minimizes
distribution costs.
THANKS!