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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
LocationLocation
Chapter 10Chapter 10
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
Reasons for GlobalizationReasons for Globalization
Improved transportation and Improved transportation and communication technologiescommunication technologies
Loosened regulations on financial Loosened regulations on financial institutionsinstitutions
Increased demand for imported Increased demand for imported
services and goodsservices and goods Reduced import quotas and other Reduced import quotas and other
international trade barriersinternational trade barriers
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
Managing Global Managing Global
OperationsOperations• Other LanguagesOther Languages
•Different Norms andDifferent Norms andCustomsCustoms
• Workforce ManagementWorkforce Management
• Unfamiliar Laws andUnfamiliar Laws andRegulationsRegulations
• Unexpected Cost MixUnexpected Cost Mix
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
Location Decisions - Location Decisions -
Manufacturing Manufacturing • Favorable Labor ClimateFavorable Labor Climate
•Proximity to MarketsProximity to Markets
• Quality of LifeQuality of Life
• Proximity to SuppliersProximity to Suppliers
• Proximity to Parent CompanyProximity to Parent Company• Utilities, Taxes, and Real EstateUtilities, Taxes, and Real Estate
CostsCosts
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
Location Decisions - Location Decisions -
ServicesServices
•Proximity to CustomersProximity to Customers
• Transportation Costs andTransportation Costs andProximity to MarketsProximity to Markets
• Location of CompetitorsLocation of Competitors• Site-Specific FactorsSite-Specific Factors
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
LocationLocationHealth-WatchHealth-WatchNorthNorthErieErie
Pittsburgh
Harrisburg
Philadelphia
Scranton
Uniontown
State College
Example 10.1Example 10.1
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LocationLocationHealth-WatchHealth-WatchNorthNorthErieErie
Pittsburgh
Harrisburg
Philadelphia
Scranton
Uniontown
State College
Location Factor Weight Score
Total patient miles per month 25 4Facility utilization 20 3Average time per emergency trip 20 3Expressway accessibility 15 4
Land and construction costs 10 1Employee preference 10 5
Example 10.1Example 10.1
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LocationLocationHealth-WatchHealth-WatchNorthNorthErieErie
Pittsburgh
Harrisburg
Philadelphia
Scranton
Uniontown
State College
Location Factor Weight Score
Total patient miles per month 25 4Facility utilization 20 3Average time per emergency trip 20 3Expressway accessibility 15 4
Land and construction costs 10 1Employee preference 10 5
Weighted Score
Example 10.1Example 10.1
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LocationLocationHealth-WatchHealth-WatchNorthNorthErieErie
Pittsburgh
Harrisburg
Philadelphia
Scranton
Uniontown
State College
Location Factor Weight Score
Total patient miles per month 25 4Facility utilization 20 3Average time per emergency trip 20 3Expressway accessibility 15 4
Land and construction costs 10 1Employee preference 10 5
WS = (25 x 4)
Weighted Score
Example 10.1Example 10.1
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LocationLocation
Health-WatchHealth-WatchNorthNorthErieErie
Pittsburgh
Harrisburg
Philadelphia
Scranton
Uniontown
State College
Location Factor Weight Score
Total patient miles per month 25 4Facility utilization 20 3Average time per emergency trip 20 3Expressway accessibility 15 4
Land and construction costs 10 1Employee preference 10 5
WS = (25 x 4) + (20 x3)
Weighted Score
Example 10.1Example 10.1
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LocationLocation
Health-WatchHealth-WatchNorthNorthErieErie
Pittsburgh
Harrisburg
Philadelphia
Scranton
Uniontown
State College
Location Factor Weight Score
Total patient miles per month 25 4Facility utilization 20 3Average time per emergency trip 20 3Expressway accessibility 15 4
Land and construction costs 10 1Employee preference 10 5
WS = (25 x 4) + (20 x3) + (20 x 3) + (15 x4) + (10 x 1) + (10 x5)
Weighted Score
Example 10.1Example 10.1
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LocationLocation
Health-WatchHealth-WatchNorthNorthErieErie
Pittsburgh
Harrisburg
Philadelphia
Scranton
Uniontown
State College
Location Factor Weight Score
Total patient miles per month 25 4Facility utilization 20 3Average time per emergency trip 20 3Expressway accessibility 15 4
Land and construction costs 10 1Employee preference 10 5
WS = 340
Weighted Score
Example 10.1Example 10.1
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LocationLocationCenter of Gravity ApproachCenter of Gravity Approach
CensusCensus PopulationPopulationTractTract (x, y)(x, y) (l)(l) lxlx lyly
AA (2.5, 4.5)(2.5, 4.5) 22 55 99
BB (2.5, 2.5)(2.5, 2.5) 55 12.512.5 12.512.5CC (5.5, 4.5)(5.5, 4.5) 1010 5555 4545DD (5, 2)(5, 2) 77 3535 1414
EE (8, 5)(8, 5) 1010 8080 5050FF (7, 2)(7, 2) 2020 140140 4040GG (9, 2.5)(9, 2.5) 1414 126126 3535
TotalsTotals 6868 453.5453.5 205.5205.5
Example 10.2Example 10.2
x* =
y* =
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LocationLocationCenter of Gravity ApproachCenter of Gravity Approach
CensusCensus PopulationPopulationTractTract (x, y)(x, y) (l)(l) lxlx lyly
AA (2.5, 4.5)(2.5, 4.5) 22 55 99
BB (2.5, 2.5)(2.5, 2.5) 55 12.512.5 12.512.5CC (5.5, 4.5)(5.5, 4.5) 1010 5555 4545DD (5, 2)(5, 2) 77 3535 1414
EE (8, 5)(8, 5) 1010 8080 5050FF (7, 2)(7, 2) 2020 140140 4040GG (9, 2.5)(9, 2.5) 1414 126126 3535
TotalsTotals 6868 453.5453.5 205.5205.5
Example 10.2Example 10.2
x* =
y* =
453.5
68
205.568
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LocationLocationCenter of Gravity ApproachCenter of Gravity Approach
CensusCensus PopulationPopulationTractTract (x, y)(x, y) (l)(l) lxlx lyly
AA (2.5, 4.5)(2.5, 4.5) 22 55 99
BB (2.5, 2.5)(2.5, 2.5) 55 12.512.5 12.512.5CC (5.5, 4.5)(5.5, 4.5) 1010 5555 4545DD (5, 2)(5, 2) 77 3535 1414
EE (8, 5)(8, 5) 1010 8080 5050FF (7, 2)(7, 2) 2020 140140 4040GG (9, 2.5)(9, 2.5) 1414 126126 3535
TotalsTotals 6868 453.5453.5 205.5205.5
Example 10.2Example 10.2
x* =
y* =
453.5
68
205.568
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LocationLocationCenter of Gravity ApproachCenter of Gravity Approach
CensusCensus PopulationPopulationTractTract (x, y)(x, y) (l)(l) lxlx lyly
AA (2.5, 4.5)(2.5, 4.5) 22 55 99
BB (2.5, 2.5)(2.5, 2.5) 55 12.512.5 12.512.5CC (5.5, 4.5)(5.5, 4.5) 1010 5555 4545DD (5, 2)(5, 2) 77 3535 1414
EE (8, 5)(8, 5) 1010 8080 5050FF (7, 2)(7, 2) 2020 140140 4040GG (9, 2.5)(9, 2.5) 1414 126126 3535
TotalsTotals 6868 453.5453.5 205.5205.5
Example 10.2Example 10.2
x* = 6.67
y* = 3.02
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LocationLocationCenter of Gravity ApproachCenter of Gravity Approach
Figure 10.1Figure 10.1
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LocationLocation
Break-Even AnalysisBreak-Even Analysis
Fixed CostsFixed Costs Variable CostsVariable Costs Total CostsTotal CostsCommunityCommunity per Year per Year per Unitper Unit (Fixed + Variable)(Fixed + Variable)
AA $150,000$150,000 $62$62BB $300,000$300,000 $38$38CC $500,000$500,000 $24$24DD $600,000$600,000 $30$30
Example 10.3Example 10.3
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
LocationLocation
Break-Even AnalysisBreak-Even Analysis
Fixed CostsFixed Costs Variable CostsVariable Costs Total CostsTotal CostsCommunityCommunity per Year per Year per Unitper Unit (Fixed + Variable)(Fixed + Variable)
AA $150,000$150,000 $62$62BB $300,000$300,000 $38$38CC $500,000$500,000 $24$24DD $600,000$600,000 $30$30
for 20,000 unitsfor 20,000 units
Total Variable Costs
$62 (20,000)
Example 10.3Example 10.3
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
LocationLocation
Break-Even AnalysisBreak-Even Analysis
Fixed CostsFixed Costs Variable CostsVariable Costs Total CostsTotal CostsCommunityCommunity per Year per Year per Unitper Unit (Fixed + Variable)(Fixed + Variable)
AA $150,000$150,000 $62$62BB $300,000$300,000 $38$38CC $500,000$500,000 $24$24DD $600,000$600,000 $30$30
for 20,000 unitsfor 20,000 units
Total Variable Costs
$62 (20,000) = $1,240,000
Example 10.3Example 10.3
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
LocationLocation
Break-Even AnalysisBreak-Even Analysis
Fixed CostsFixed Costs Variable CostsVariable Costs Total CostsTotal CostsCommunityCommunity per Year per Year per Unitper Unit (Fixed + Variable)(Fixed + Variable)
AA $150,000$150,000 $62$62 $1,390,000$1,390,000BB $300,000$300,000 $38$38CC $500,000$500,000 $24$24DD $600,000$600,000 $30$30
for 20,000 unitsfor 20,000 units
Total Variable Costs
$62 (20,000) = $1,240,000
Example 10.3Example 10.3
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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
LocationLocation
Break-Even AnalysisBreak-Even Analysis
Fixed CostsFixed Costs Variable CostsVariable Costs Total CostsTotal CostsCommunityCommunity per Year per Year per Unitper Unit (Fixed + Variable)(Fixed + Variable)
AA $150,000$150,000 $62$62 $1,390,000$1,390,000BB $300,000$300,000 $38$38CC $500,000$500,000 $24$24DD $600,000$600,000 $30$30
for 20,000 unitsfor 20,000 units
Total Variable Costs
$62 (20,000) = $1,240,000
Example 10.3Example 10.3
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