Podcast
Questions and Answers
What is a primary focus of manufacturing facility locations?
What is a primary focus of manufacturing facility locations?
Which factor can negatively impact skilled labor availability in an area?
Which factor can negatively impact skilled labor availability in an area?
How can transportation costs be affected by facility location?
How can transportation costs be affected by facility location?
What is a benefit of proximity to markets for a service facility?
What is a benefit of proximity to markets for a service facility?
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Which of the following is NOT a factor affected by facility location in a supply chain?
Which of the following is NOT a factor affected by facility location in a supply chain?
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What is the purpose of the Factor Rating Method in location decision making?
What is the purpose of the Factor Rating Method in location decision making?
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Which method is specifically used to find the optimal location for a distribution center while minimizing transportation costs?
Which method is specifically used to find the optimal location for a distribution center while minimizing transportation costs?
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In the Centre of Gravity Method, how is the optimal location determined when shipping quantities are unequal?
In the Centre of Gravity Method, how is the optimal location determined when shipping quantities are unequal?
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What is the first step in the Factor Rating Method?
What is the first step in the Factor Rating Method?
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What must be done after computing the product of ratings for each location in the Factor Rating Method?
What must be done after computing the product of ratings for each location in the Factor Rating Method?
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What is one of the primary objectives of making a location decision?
What is one of the primary objectives of making a location decision?
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Which factor is NOT typically considered in location decisions?
Which factor is NOT typically considered in location decisions?
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What is a significant risk of making a poor location decision?
What is a significant risk of making a poor location decision?
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Why is the location decision considered a long-term commitment?
Why is the location decision considered a long-term commitment?
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Which of the following is a consideration when selecting an international location?
Which of the following is a consideration when selecting an international location?
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Which type of site is characterized by cheaper land availability?
Which type of site is characterized by cheaper land availability?
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What is one consequence of not properly evaluating location alternatives?
What is one consequence of not properly evaluating location alternatives?
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Which factor does NOT affect regional location decisions?
Which factor does NOT affect regional location decisions?
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Which factor is primarily associated with the location decision for the automotive industry in Pune, Maharashtra?
Which factor is primarily associated with the location decision for the automotive industry in Pune, Maharashtra?
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What is a primary characteristic of the location decision for the retail sector in Mumbai?
What is a primary characteristic of the location decision for the retail sector in Mumbai?
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Which of the following is a non-economic impact that can influence location decisions?
Which of the following is a non-economic impact that can influence location decisions?
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Which method is best for minimizing costs when evaluating location alternatives?
Which method is best for minimizing costs when evaluating location alternatives?
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In the context of location decision variables, which factor relates to community and non-economic impacts?
In the context of location decision variables, which factor relates to community and non-economic impacts?
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Which combination of factors is considered when evaluating qualitative factors for facility location selection?
Which combination of factors is considered when evaluating qualitative factors for facility location selection?
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Which of these is NOT a factor considered in the facility location decision-making process?
Which of these is NOT a factor considered in the facility location decision-making process?
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Which factor enhances the attractiveness of Pune for the automotive industry?
Which factor enhances the attractiveness of Pune for the automotive industry?
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What does Xc represent in the context of the centre of gravity method?
What does Xc represent in the context of the centre of gravity method?
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Which method aims primarily to minimize transportation costs by optimizing facility location?
Which method aims primarily to minimize transportation costs by optimizing facility location?
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In the Load-Distance Method, what should be calculated first?
In the Load-Distance Method, what should be calculated first?
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How is the total Load-Distance (LD) score computed?
How is the total Load-Distance (LD) score computed?
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Which coordinates are required to perform calculations using the centre of gravity method?
Which coordinates are required to perform calculations using the centre of gravity method?
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When calculating Xc, what does the term ∑(XiVi) represent?
When calculating Xc, what does the term ∑(XiVi) represent?
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What is the primary purpose of identifying the centre of gravity in location analysis?
What is the primary purpose of identifying the centre of gravity in location analysis?
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Which distance measurement should be used if the geography requires navigating city blocks?
Which distance measurement should be used if the geography requires navigating city blocks?
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What is the primary metric used to evaluate potential locations based on transportation costs?
What is the primary metric used to evaluate potential locations based on transportation costs?
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Which of the following best describes the importance of accurate load estimates in location evaluation?
Which of the following best describes the importance of accurate load estimates in location evaluation?
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What is a limitation of using simple distance measures for facility location analysis?
What is a limitation of using simple distance measures for facility location analysis?
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In qualitative factor analysis, what is the role of weights assigned to each factor?
In qualitative factor analysis, what is the role of weights assigned to each factor?
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Why is rectilinear distance preferred over Euclidean distance in urban settings?
Why is rectilinear distance preferred over Euclidean distance in urban settings?
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When evaluating multiple facilities, which method may be necessary for effective decision-making?
When evaluating multiple facilities, which method may be necessary for effective decision-making?
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What does a higher score represent in the weighted scoring method for evaluating locations?
What does a higher score represent in the weighted scoring method for evaluating locations?
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What is a key factor that qualitative analysis does NOT account for when evaluating locations?
What is a key factor that qualitative analysis does NOT account for when evaluating locations?
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Study Notes
Facility Location
- Facility/plant location is a process of determining a suitable geographical site for a firm's operations to achieve maximum operating efficiency and effectiveness.
Need for Location Decisions
- Location decisions are a crucial part of strategic planning for every organization.
- They may seem like a one-time decision, however, they are significant for long-term success.
- Reasons for making location decisions include:
- Starting a new business
- Business expansion
- Relocating due to rising costs
- Changes in market conditions
- Social or economic factors
Objectives of Location Decisions
- Maximize benefits
- Balancing cost and customer service
- Selecting a location suitable from acceptable locations to gain a competitive edge
Importance of Location Decisions
- Long-term commitments are involved in location decisions.
- A poor choice can result in issues like:
- High transportation costs
- Labor shortages
- Loss of competitive advantage
- High operating costs in service industries
- Service industry locations can lead to customer loss if not strategically planned
General Procedure for Making Location Decisions
- Establish criteria for location selection
- Identify important factors for location
- Develop alternative locations to consider
- Evaluate each alternative location option
Factors Affecting Location Decisions
Deciding on International Location
- Political stability
- Export/import quotas
- Exchange rates
- Cultural and economic considerations
- Natural resource availability
- Labor costs
Regional Location Decisions
- Raw material availability and proximity
- Market proximity
- Proximity to suppliers
- Power availability
- Transportation facilities
- Climate suitability
- Government policy
- Competition among states
Selection of Community
- Labor availability
- Civic amenities for employees
- Complementary industries
- Financial and research facilities
- Water availability
- Fire fighting facilities
- Local taxes and restrictions
Selection of Exact Site
- Available land area
- Soil characteristics
- Topography
- Land costs
- Waste disposal
- Community attitude
Rural Site
- Cheap land availability
- Low taxes
- Cheaper labor costs
- Easier to build smaller structures
Urban Site
- Good transportation and communication facilities
- Skilled labor availability
- Civic amenities
- Banking facilities
- Availability of industries
- Large markets
- Educational and training institutions
Types of Facility Locations
- Manufacturing facility location: Focuses on minimizing production, transportation, and inventory costs. Prioritizes proximity to raw materials or distribution centers.
- Service facility location: Prioritizes customer accessibility and convenience (retail, banking, healthcare).
- Distribution facility location: Focuses on efficient product delivery and optimizing transportation networks.
Impact of Facility Location on Supply Chain
- Transportation costs: Optimized location reduces transportation costs and delivery time.
- Inventory management: Correct location ensures faster replenishment and reduces stockouts.
- Customer satisfaction: Proximity to markets leads to quicker response to demand.
- Risk management: Diversifying locations mitigates risks like natural disasters.
Example of Facility Location in an Indian Context
- Manufacturing: Automotive industry in Pune, Maharashtra (proximity to suppliers, skilled labor, infrastructure, incentives)
- Service: Retail sector in Mumbai (high footfall, proximity to customers, transportation network, dense population, high purchasing power)
Location Decision Variables
- Regional: Climate, competition
- Site: Land costs, construction costs, waste disposal
- Labor: Supply, skills, costs
- Raw materials: Supply costs, utilities
- Capital: Equity, debt, banking facilities
- Community: Attitude, image
- Non-economic: Ecological, environmental impact, social factors
- Marketing: Distribution, storage, transportation
Methods for Evaluating Location Alternatives
- Qualitative: Factor rating method, analytical hierarchy process (AHP)
- Quantitative: Load-distance method, center of gravity method, transportation model, break-even analysis, clustering methods, GIS analysis.
Factor Rating Method
- List the relevant location factors.
- Assign importance scores to factors.
- Rate each location based on each factor.
- Calculate a weighted score for each location by multiplying factor scores by importance weights.
- Select the location with the highest total weighted score.
Centre of Gravity Method
- Finds the optimal location for a distribution center to minimize total transportation costs.
- Considers factors like cost of goods, transportation, and distribution points.
- Calculates the weighted average of the X & Y coordinates of delivery points.
Load-Distance Method
- Minimizes transportation costs by calculating the weighted distance between a facility and demand/supply points.
- Identifies demand points
- Calculates the load (quantity to be transported) for each demand point
- Measures distance to facility from each demand point
- Calculates the total load-distance score for each potential location
- Chooses the location with the lowest score as optimal.
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Description
This quiz explores the critical aspects of facility location decisions within strategic planning for organizations. It highlights the rationale behind choosing a location and outlines the objectives and potential consequences of poor location choices. Understanding these factors is essential for achieving operational efficiency and long-term success.
