Facility Location And FacilityLayoutStrategic Importance Supplychain

Topics: Assembly line, Costs, Time Pages: 18 (1696 words) Published: January 6, 2015
Facility Location and Facility
Layout

Strategic Importance
• Supply-chain management is critical
• Facility location—intrinsically related to SCM
• Examples:
– FedEx: While opening a hub for Asia in Philippines
1995—
• it had to evaluate several sites
• Linking its American (Memphis) and European (Paris) Hubs • BTW, the facility was closed and the new hub since 2009 is in Guangzhou, Southern China

– Mercedes’ first overseas plant in Vance, Alabama
• Evaluated 170 sites in 30 states and 2 countries

– Hard Rock Café location in Moscow in 2002
• Took 3 years of advance planning
• Russian Food Supply Chain

Facility Location
• Global Nature of Location Decision
• Objective: Maximize the benefit of location
to a firm
– Marketing Strategy: New Markets
– Global Growth: New Markets and supply chain
considerations
– Cost of Doing Business: Attractive alternatives to
relocate business elsewhere

1

Location Options
• Expand existing facility
• Add new location while retaining existing
location
• Close existing operation and move to a
new location

Location Decision Factors
Country Factors

Community Considerations

Regional Factors

Site-related Factors

Site Selection Factors (Country and
Region)
Country









Government stability
Government regulations
Political and economic systems
Economic stability
Exchange rates
Culture
Climate
Export and import regulations,
duties and fees









Raw material availability
Number and proximity of suppliers
Transportation system
Labor pool and cost
Available technology
Commercial travel
Technical expertise

Region








Labor (availability, cost and unions)
Proximity of customers
Number of customers
Construction/leasing costs
Land costs
Modes and quality of transportation
Transportation costs








Government regulations
Environmental regulations
Raw material availability
Commercial travel
Climate
Utilities

2

Site Selection Factors -(Community and
Site)
Community










Community government
Local business regulations
Environmental regulations
Government services
Business climate
Community services
Transportation system
Proximity of customers
Concentration of customers










Taxes
Construction/leasing costs
Land cost
Availability of sites
Financial Services
Labor pool
Community inducements
Proximity of suppliers

Site







Customer base
Construction/leasing cost
Land cost
Site size
Transportation
Utilities








Zoning restrictions
Traffic
Safety/security
Competition
Area business climate
Income level

Some Facts: Location Decisions





Globalization: A two way street for Americans
Labor costs and productivity issues
Worker skills: e.g. call centers and CPA jobs to India.
Government Incentives: Alabama gave $169K per job in
tax incentives to Mercedes in 1993
• Sunbelt is growing
• Attitudes with respect to: pollution, zoning, intellectual property, unionism, turnover, absenteeism, punctuality,
bribe, ethics, etc.
• Proximity
– Markets
– Suppliers
– Competition (clustering)

Evaluating Locations
• Factor Rating (The Scoring Model)
– Decision based on quantitative and qualitative
inputs

• Center of Gravity Method
– Decision based on minimum distribution costs

• Transportation Model
– Decision based on movement costs of raw
materials or finished goods

3

Location Factor Rating
Scores (0 to 100)
Location Factor
Weight
Labor pool and climate
.30
Proximity to suppliers
.20
Wage rates
.15
Community environment .15
Proximity to customers .10
Shipping modes
.05
Air service
.05

Site 1
80
100
60
75
65
85
50

Site 2
65
91
95
80
90
92
65

Site 3
90
75
72
80
95
65
90

More

Location Factor Rating
(Weighted Scores)
Weighted Scores
Location Factor
Labor...
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