Service Management Operations

Strategy Information Technology 8th

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Chapter 08 - Service Facility Location

CHAPTER 8
SERVICE FACILITY LOCATION

True/False
1. Finding a unique set of sites in a multi-location problem is a simple extension of the methods used
for single facility location. (F)
2. When a customer travels to the service facility, the direct cost that is incurred is the decrease in
potential customer demand that occurs as a result of the distance traveled. (F)
3. The metropolitan metric method of measuring distance is described as travel "as the crow flies."
(F)

4. Locating a public service facility in an area that contains a large number of individuals for whom
distance would be a strong barrier will maximize facility utilization. (T)
5. The choice of location criterion has little effect on the site selected. (F)
6. Saturation clustering occurs when service firms locate their business near their competitors
because they expect a high level of customer traffic. (F)
7. The Huff model for retail outlet location postulates an inverse relationship between the
attractiveness of a location and the travel time to that location for a particular customer. (T)
8. The location set-covering problem locates facilities to minimize the distance that the most distant
customer would travel to reach a facility (known as maximal service distance). (T)
9. The advantage of substituting communication for travel becomes possible when face-to-face
interaction between server and customer is not necessary. (T)
10. The absence of quantifiable criteria considerably diminishes the importance of facility location
methods in the public sector. (F)
11. Geographic information systems are a visual method of displaying data. (T)
12. Cross-median is an approach to the location of a single facility using the metropolitan metric to
maximize the total distance traveled. (F)
13. Marketing intermediaries are business entities in the channel of distribution between the final
customer and the service provider. (T)
14. Use of center of gravity formulas for solving the single-location problem is incorrect. (T)
15. The greedy algorithm is a solution procedure that is used for measuring the attraction of a
customer to a facility. (F)
16. The Euclidian metric is used for locating a facility in an urban area. (F)
17. For a multisite location problem, the services to provide at each site might vary. (T)
18. The median has the property of minimizing the sum of absolute deviations from it. (T)
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Chapter 08 - Service Facility Location

19. The Euclidian location model is used when vector travel is involved. (T)
20. The success of L.L. Bean questioned the necessity of always finding a location that is convenient
for customers’ physical access. (T)

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© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Service Facility Location

Multiple Choice
1. A strategy that can be used by urban retailers to locate multiple sites close to each other in high-
density areas despite the potential for cannibalization is called
a. competitive clustering.
b. marketing intermediaries.
c. saturation marketing.*
d. saturation clustering.
2. The optimization criteria governing the location of a service facility is determined mainly by the
a. ownership of the service, i.e., public or private.*
b. kind of service, e.g. food, banking, or postal.
c. number of facilities to be located.
d. average size of the facilities to be located.
3. A strategy defying the curse of cannibalization is called
a. competitive clustering.
b. customized marketing.
c. saturation marketing.*
d. relationship marketing.
4. If you are going to open four facilities and have identified six candidate locations, how many
different combinations of site selections are there?
a. 4
b. 6
c. 15*
d. 24
5. The following marketing phenomenon occurs when there exists within two city blocks the
following hamburger outlets: McDonald's, Burger King, Sonic, and Wendys:
a. competitive clustering.*
b. customized marketing.
c. saturation marketing.
d. relationship marketing.

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any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Service Facility Location

6. A cruise line has the option of locating its dock in Miami or Pensacola because both cities have
adequate port facilities. Which of the following considerations would seem to be the most
germane?
a. Adequate parking
b. Location of competitors
c. Freeway access to the port
d. City served by major airport*
7. Which of the following items does the Huff retail location model not consider?
a. The degree of accessibility*
b. Travel time from the customer's location to the facility
c. Facility size
d. A parameter reflecting the importance of travel time by customers
8. The following are important in estimating spatial demand except:
a. defining the target population
b. selecting a unit of area
c. developing a visual representation or map
d. distance traveled*
9. With respect to service facility location, it is not prudent to open:
a. a new facility next to one's competitors.
b. multiple facilities within the same area, thus cannibalizing one's own business.
c. an information-based service in a downtown area with high real estate prices.*
d. all of the above.
10. A strategy of locating sites in a number of states (or countries) can reduce the overall risk of
financial crisis from a regional economic downturn. This strategic approach to facility location is
known as
a. competitive positioning.
b. flexibility.*
c. demand management
d. focus.

11. In the Huff retail location model, the value of  estimates ______________
a. amount of travel time to reach a service facility.
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Chapter 08 - Service Facility Location

b. the importance of convenience in attracting customers.

c. the importance of travel time in attracting customers.*
d. the cost of transportation for a customer.
12. In the decision to locate a public health clinic, which one of the following criteria is not
appropriate?
a. Maximize utilization
b. Minimize distance per capita
c. Minimize distance per visit
d. Minimize cost*
13. Car dealerships often are located near one another along a “motor mile” to allow customers to
make comparisons. This location strategy is known as:
a. competitive Clustering.*
b. saturation Marketing.
c. marketing Intermediaries.
d. competitive Positioning.
14. The concept of focus in location decisions considers all but one of the following issues:
a. Cannibalization
b. Multisite locations
c. Formula facility
d. Competitive changes*
15. Site selection considerations include all but one of the following
a. Access
b. Environment
c. Government
d. Weather *
16. The disadvantage of saturation marketing lies in which of the following areas?
a. Increased advertising costs
b. Cannibalization*
c. Increased requirement for supervision
d. Reduction in customer awareness

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any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 08 - Service Facility Location

17. The ___________ is a variation on the location set-covering problem.

a. Huff model
b. Greedy algorithm
c. maximal covering algorithm*
d. shortest-path tree
18. Cross-median approach is used for _________ location.
a. single facility *
b. multiple facility
c. (a) and (b)
d. none of the above
19. Competitive clustering is common to the ________ industry.
a. healthcare
b. lodging*
c. communications
d. banking
20. ArcGIS, a GIS for business applications, finds applications in all but one of the following:
a. Mapping customer databases
b. Determining site locations
c. Forecasting demand *
d. Improving delivery service

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© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.