Facility Location Inventory Transport Customer Service Location 1

Facility Location Inventory Transport Customer Service Location 1

Importance of Location n Gives structure to the network Significantly affects inventory and transportation costs Impacts on the level of customer service to be achieved 2

Facility location decisions n Decisions n n Number of facilities Location of facilities Size of facilities Facilities n Plants, ports, vendors, warehouses, DC, retail outlets, service centers 3

Classifying location decisions n n n Driving force (critical factor : trafic, labor rate, transport cost, …. etc ) Number of facilities Discrete vs. Continous choices Data aggregation Time horizon.

Weber’s Classification of Industries CR (2004) Prentice Hall, Inc. 13 -6

Hoover’s (1957) tapered transportation rates n minimum costs at either production point or market point Total Cost Outbound transportation cost Inbound transportation cost Material source Market Tapered transportation rates force location to the source of materials OR to the market 7

Central questions n n n How many warehouses (or other facilities) should there be in the logistics network? How large should they be, and where should they be located? Which customers should be assigned to a warehouse? Which warehouse should be assigned to each plant, vendor or port? Which products should be stocked in each warehouse? Which products should be shipped directly from plants, vendors, or ports to customers? 8

The need for logistics network redesign n n n Changing customer service requirements Shifting locations of customer and/or supply markets Change in corporate ownership Cost pressures Competitive capabilities Corporate organizational change 9

Location Decision Factors Regional Factors Community Considerations Multiple Plant Strategies Site-related Factors 8 -10

Regional Factors n n Location of raw materials Location of markets Labor factors Climate and taxes 8 -11

Community Considerations n n n n Quality of life Services Attitudes Taxes Environmental regulations Utilities Developer support 8 -12

Site Related Factors n n Land Transportation Environmental Legal 8 -13

Multiple Plant Strategies n n n Product plant strategy Market area plant strategy Process plant strategy 8 -14

Service and Retail Locations n n Manufacturers – cost focused Service and retail – revenue focused n n Traffic volume and convenience most important Demographics n n n Age Income Education Location, location 8 -15 Good transportation

Comparison of Service and Manufacturing Considerations Table 8. 2 Manufacturing/Distribution Service/Retail Cost Focus Revenue focus Transportation modes/costs Demographics: age, income, etc Energy availability, costs Population/drawing area Labor cost/availability/skills Competition Building/leasing costs Traffic volume/patterns Customer access/parking

Trends in Locations n Foreign producers locating in U. S. n n n “Made in USA” Currency fluctuations Just-in-time manufacturing techniques Microfactories Information Technology 8 -17

Global Locations n n n Reasons for globalization Benefits Disadvantages Risks Global operations issues 8 -18

Globalization n Facilitating Factors n n n Trade agreements Technology Benefits n n Markets Cost savings Legal and regulatory Financial 8 -19

Globalization n Disadvantages n n n Transportation costs Security Unskilled labor Import restrictions Criticisms Risks n n n Political Terrorism 8 -20 Legal

Table 8. 3