Facility Location

Inventory
Customer
Service

Transport

Location
1

Importance of Location

Gives structure to the network

Significantly affects inventory and
transportation costs
Impacts on the level of customer
service to be achieved

Facility location decisions

Decisions

Number of facilities
Location of facilities
Size of facilities

Facilities

Plants, ports, vendors, warehouses,

DC, retail outlets, service centers
3

Classifying location
decisions

Driving force (critical factor :

trafic,labor rate, transport cost,
.etc )
Number of facilities
Discrete vs. Continous choices
Data aggregation
Time horizon.

Central questions

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?
5

The need for logistics network

redesign

Changing customer service

requirements
Shifting locations of customer and/or
supply markets
Change in corporate ownership
Cost pressures
Competitive capabilities
Corporate organizational change
6

Location Decision Factors

Regional Factors

Multiple Plant
Strategies

8-7

Community
Considerations

Site-related
Factors

Regional Factors

Location of raw materials

Location of markets
Labor factors
Climate and taxes

8-8

Community Considerations

Quality of life
Services
Attitudes
Taxes
Environmental regulations
Utilities
Developer support
8-9

Site Related Factors

Land
Transportation
Environmental
Legal

8-10

Multiple Plant Strategies

Product plant strategy

Market area plant strategy
Process plant strategy

8-11

Service and Retail

Locations

Manufacturers cost focused

Service and retail revenue focused

Traffic volume and convenience most important

Demographics

8-12

Age
Income
Education

Location, location, location

Good transportation
Customer safety

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

Foreign producers locating in U.S.

Made in USA
Currency fluctuations

Just-in-time manufacturing techniques

Microfactories
Information Technology

8-14

Global Locations

Reasons for globalization

Benefits
Disadvantages
Risks
Global operations issues

8-15

Globalization

Facilitating Factors

Trade agreements
Technology

Benefits

8-16

Markets
Cost savings
Legal and regulatory
Financial

Globalization

Disadvantages

Transportation costs
Security
Unskilled labor
Import restrictions
Criticisms

Risks

8-17

Political
Terrorism
Legal
Cultural

Table 8.3