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Operation Management - Location Strategies Cheat Sheet (DRAFT) by

Operational Management

This is a draft cheat sheet. It is a work in progress and is not finished yet.

The Strategic Importance of Location

Location options include: 1. Expanding an existing facility instead of moving, 2. Mainta­ining current sites while adding another facility elsewhere, 3. Closing the existing facility & moving to another location.
Object­ions: maximizing the benefit of location to the firm
Import­ance: location & cost, because location is such a signif­icant cost & revenue driver

Factors Affecting Location Decision

Selecting a facility location is becoming much more complex with global­ization
Global­ization has taken place because of the develo­pment: 1. market economics, 2. better intern­ational commun­ica­tion, 3. more rapid, reliable travel & shipping, 4. ease of capital flow between countries, 5. high differ­ences in labor costs
other factors: labor produc­tivity, exchange rates & currency risk, costs, political risks-­val­ues­-cu­lture, proximity to markets, proximity supplies, proximity compet­itors

Methods of Evaluating Location Altern­atives

1. The factor facing method, 2. Locational Cost=v­olume analysis, 3. Center­-of­-gr­avity method, 4. Transp­ort­ation Model
The factor facing method educat­ion­>re­cre­ati­on>­lab­ors­kills
Locational cost=v­olume analysis technique for making an economic comparison of location altern­atives
center­-of­-gr­avity method a mathem­atical technique used for finding the location of a distri­bution center that will minimize distri­bution cost
Transp­ort­ation model to determine the best pattern of shipments from several points of supply (sources) to several points of demand (desti­nat­ions) so as to minimize total production & transp­ort­ation
 

Service Location Strategy

The focus in indust­ria­l-s­ector location analysis is on minimizing cost
the focus in the service sector is on maximizing revenue
eight major determ­inants of volume & revenue for the service firm:
1. Purchasing power of the customer drawing area
2. Service and Image compat­ibility with demogr­aphics of the customer drawing area
3. compet­ition in the area
4. quality of the compet­ition
5. Uniqueness of the firm's and compet­itor's locations
6. Physical qualities of facilities & neighb­oring businesses
7. Operating policies of the firm
8. Quality management

Geographic Inform­ation System

GIS, Stores, accesses, displays, and links demogr­aphic inform­ation to a geogra­phical location.
Some geographic databases:
1. Census data
2. Maps of every street, highway, bridge, tunnel in the u.s
3. Utilities
4. Aquatic areas
5. Airports, college, etc.