Facility Location in Logistics
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What does facility location refer to?

  • Deciding on marketing strategies
  • Optimizing employee schedules
  • Selecting distribution centers, warehouses, and production facilities (correct)
  • Choosing locations for retail stores

    • Customer service expectations decrease over time.

    False

    What are some factors that can influence facility location decisions?

    Cost considerations, customer service expectations, and location of customer or supply markets.

    Facilities are generally added when service levels become ___.

    <p>unacceptable</p> Signup and view all the answers

    Agglomeration is also known as industry ________.

    <p>cluster</p> Signup and view all the answers

    What is the term used for the movement of goods from one mode of transportation to another (e.g., from truck to train)?

    <p>Intermodal transfer</p> Signup and view all the answers

    What is the term for previously developed land that is not currently in use but may be potentially contaminated?

    <p>Brownfields</p> Signup and view all the answers

    The Center-of-gravity approach is a method used to determine the location of a facility based on minimizing transportation costs.

    <p>True</p> Signup and view all the answers

    Match the following terms related to facility location with their definitions:

    <p>Free trade zone = Designated area where goods can be stored, handled, or manufactured before being re-exported without being subject to import duties Locavore strategy = An approach that emphasizes the use of locally-grown or locally-produced goods Maquiladora plants = Manufacturing plants located near the U.S.-Mexico border that benefit from special tariff arrangements Supplier parks = Areas where suppliers locate close to the main manufacturer to reduce transportation costs and lead times</p> Signup and view all the answers

    What is the main reason for adding facilities according to the content?

    <p>When service levels become unacceptable</p> Signup and view all the answers

    What is the result of moving from 1 to 3 facilities according to the content?

    <p>1 day lead time is saved</p> Signup and view all the answers

    What is a key issue in determining the number and location of facilities?

    <p>The time it takes to get from facility to majority of the U.S. population</p> Signup and view all the answers

    What is the trend in customer service expectations according to the content?

    <p>Increasing over time</p> Signup and view all the answers

    What is the purpose of software packages in facility location decisions?

    <p>To help in determining the number and location of facilities</p> Signup and view all the answers

    What is a factor that can influence facility location decisions according to the content?

    <p>Location of customer or supply markets</p> Signup and view all the answers

    What is the result of moving from 3 to 10 facilities according to the content?

    <p>¼ day lead time is saved</p> Signup and view all the answers

    What kind of data is presented in Table 9.1 according to the content?

    <p>The five most populous states in the United States</p> Signup and view all the answers

    What is a significant influence on the location of warehouses, distribution centers, and cross-docking facilities?

    <p>Locations of plants whose products they handle and markets they serve</p> Signup and view all the answers

    What type of products would benefit from being located near raw materials?

    <p>Weight-losing products</p> Signup and view all the answers

    What is a common characteristic of industry clusters?

    <p>They offer organizations proximity to key suppliers</p> Signup and view all the answers

    What is an example of a labor characteristic that can influence facility location?

    <p>All of the above</p> Signup and view all the answers

    What is a transportation consideration that can influence facility location?

    <p>All of the above</p> Signup and view all the answers

    What type of tax can influence facility location?

    <p>Inventory tax</p> Signup and view all the answers

    What is a term used to describe the proximity of facilities to industry clusters?

    <p>Agglomeration</p> Signup and view all the answers

    What is a benefit of locating facilities near natural resources?

    <p>Reduced transportation costs</p> Signup and view all the answers

    What is the primary purpose of a title search in facility location?

    <p>To ensure a parcel of land can be sold and there are no liens against it</p> Signup and view all the answers

    What is a common feature of free trade zones?

    <p>Nondomestic merchandise may be stored, exhibited, processed, or used in manufacturing operations without being subjected to duties and quotas</p> Signup and view all the answers

    What is the term for specific locations at an existing free trade zone?

    <p>Free trade subzones</p> Signup and view all the answers

    Why are free trade zones often located at or near water ports?

    <p>Because they provide easy access to transportation networks</p> Signup and view all the answers

    What is the primary characteristic of brownfields?

    <p>They are previously used sites that contain chemicals or other types of industrial waste</p> Signup and view all the answers

    What is the purpose of engineers examining a site?

    <p>To determine the load-bearing characteristics of the soil</p> Signup and view all the answers

    What is another term for free trade zones?

    <p>Both A andD</p> Signup and view all the answers

    Why have free trade zones become extremely popular in recent years?

    <p>Because they provide a competitive advantage to companies</p> Signup and view all the answers

    Which of the following is NOT a factor in analyzing commodity flow data?

    <p>The cultural amenities of the production location</p> Signup and view all the answers

    What is a key consideration when evaluating the quality of life in a potential facility location?

    <p>Cost of living</p> Signup and view all the answers

    Which of the following is a concern when locating a facility in another country?

    <p>Nationalism and protectionism</p> Signup and view all the answers

    What is a characteristic of local unions that can influence facility location decisions?

    <p>Their jurisdiction over specific geographic areas</p> Signup and view all the answers

    Which of the following is an example of a specialized location characteristic?

    <p>Current zoning of the land</p> Signup and view all the answers

    What is a factor that can influence a firm's labor relations manager when dealing with local unions?

    <p>The firm's labor relations manager's personal preferences</p> Signup and view all the answers

    Which of the following is NOT a concern when locating a facility in another country?

    <p>Local zoning regulations</p> Signup and view all the answers

    What is a potential benefit of a supplemental agreement with a local union?

    <p>Increased managerial flexibility</p> Signup and view all the answers

    What is a primary reason for a company to consider facility closing?

    <p>To absorb redundant capacity in mergers and acquisitions</p> Signup and view all the answers

    Which of the following is NOT a human impact of facility closing?

    <p>Gain of new opportunities</p> Signup and view all the answers

    What is the purpose of the Worker Adjustment and Retraining Notification (WARN) Act?

    <p>To notify employees about facility closing</p> Signup and view all the answers

    What is an example of a factor that can lead to facility closing?

    <p>Poor planning</p> Signup and view all the answers

    What is a key consideration in facility closing?

    <p>Human impact on employees</p> Signup and view all the answers

    What is a potential consequence of poorly handled facility closing?

    <p>Negative publicity</p> Signup and view all the answers

    What is a term related to facility location?

    <p>Agglomeration</p> Signup and view all the answers

    Which of the following terms is related to previously developed land that is not currently in use but may be potentially contaminated?

    <p>Brownfields</p> Signup and view all the answers

    Study Notes

    Facility Location

    • Refers to choosing the locations for distribution centers, warehouses, and production facilities to facilitate logistical effectiveness and efficiency.

    The Strategic Importance of Facility Location

    • Factors that influence facility location decisions include:
      • Cost considerations: low price/low cost framework, consumer sensitivity to prices, and reexamination of low-cost labor paradigm.
      • Customer service expectations: increasing expectations, faster and more reliable order cycles.
      • Location of customer or supply markets: population shift, economic growth, and sustainability.

    Determining the Number of Facilities

    • Facilities are added when service levels become unacceptable.
    • Software packages exist to help determine the number and location of facilities.
    • Key issue: time it takes to get from facility to the majority of the US (or target) population.
      • Moving from 1 to 3 facilities saves 1 day lead time.
      • Moving from 3 to 10 facilities saves ¼ day lead time.

    General Factors Influencing Facility Location

    • Influences on location of manufacturing, processing, or assembly facilities:
      • Raw materials, component parts, labor, and markets.
    • Influences on location of warehouses, distribution centers, and cross-docking facilities:
      • Locations of plants whose products they handle and markets they serve.
    • Other factors:
      • Natural resources (pure materials, weight-losing products, weight-gaining products).
      • Population characteristics (market for goods, labor, maquiladora, sweatshops, right-to-work laws, expatriate workers).
      • Taxes and incentives (inventory tax, incentive packages).
      • Transportation considerations (availability, cost).
      • Proximity to industry clusters (agglomeration concept).
      • Trade patterns (commodity flow data, trade agreements).
      • Quality-of-life considerations (cost of living, educational opportunities, crime rates, employment opportunities, weather, cultural amenities).
      • Locating in other countries (relevant legal system, political stability, bureaucratic red tape, corruption, protectionism, nationalism, privatization, expropriation, treaties and trade agreements).

    Specialized Location Characteristics

    • Current zoning of the land.
    • Local unions (jurisdiction, labor relations, managerial flexibility).
    • Title search (ensuring parcel of land can be sold, no liens).
    • Engineers examine site for proper drainage and load-bearing characteristics of the soil.
    • Due diligence of environmental factors (brownfields).
    • Free trade zones (export processing zones, special economic zones, nondomestic merchandise).

    Finding the Lowest-Cost Location Using Grid Systems

    • Grid systems allow analysis of spatial relationships with mathematical tools.
    • Checkerboard patterns placed on a map to coincide with north-south and east-west lines.

    Facility Relocation and Facility Closing

    • Facility relocation: associated with business growth, common reason is lack of room for expansion at current site.
    • Facility closing: associated with business contraction, examples include eliminating redundant capacity, improving supply chain efficiency, and poor planning.
    • Considerations:
      • Human impact (informed employees, loss of jobs and pay, negative publicity).
      • Worker Adjustment and Retraining Notification (WARN) Act.

    Key Terms

    • Agglomeration (industry cluster)
    • Brownfields
    • Center-of-gravity approach
    • Expatriate workers
    • Facility closing
    • Facility location
    • Facility relocation
    • Free trade zone
    • Grid systems
    • Intermodal competition
    • Intramodal competition
    • Inventory tax
    • Locavore strategy
    • Maquiladora plants
    • Nearsourcing
    • Pure materials
    • Quality-of-life considerations
    • Right-to-work laws
    • Supplier parks
    • Sweatshops
    • Weight-gaining products
    • Weight-losing products

    Factors Influencing Facility Location

    • Customer service expectations continue to increase over time, with customers looking for faster and more reliable order cycles.
    • Location of customer or supply markets is a significant factor, including population shifts, economic growth, and sustainability.

    Determining the Number of Facilities

    • Facilities are generally added when service levels become unacceptable.
    • Software packages can help determine the number and location of facilities.
    • The key issue is the time it takes to get from the facility to the majority of the target population.
    • Moving from 1 to 3 facilities saves 1 day of lead time, while moving from 3 to 10 facilities saves ¼ day of lead time.

    General Factors Influencing Facility Location

    • Raw materials, component parts, labor, and markets influence the location of manufacturing, processing, or assembly facilities.
    • Natural resources, such as pure materials, weight-losing products, and weight-gaining products, also play a role.
    • Population characteristics, including market demand and labor availability, are important considerations.
    • Taxes and incentives, such as inventory tax and incentive packages, can influence facility location.
    • Transportation considerations, including availability, cost, and intermodal competition, are critical.
    • Proximity to industry clusters, trade patterns, and quality-of-life considerations also influence facility location.

    Specialized Location Characteristics

    • Current zoning of the land, local unions, and title search are important considerations.
    • Engineers examine the site for proper drainage and load-bearing characteristics of the soil.
    • Due diligence of environmental factors, including brownfields, is necessary.
    • Free trade zones, also known as foreign trade zones, export processing zones, or special economic zones, offer specialized locations for facilities.
    • Free trade zones are highly popular and often located at or near water ports or airports.

    Facility Relocation and Facility Closing

    • Facility closing occurs when a company decides to discontinue operations at a current site due to redundant capacity, improved supply chain efficiency, or poor planning.
    • Examples of facility closure include eliminating redundant capacity in mergers and acquisitions, improving supply chain efficiency, poor planning, and insufficient volume of business.
    • The Worker Adjustment and Retraining Notification (WARN) Act and human impact must be considered during facility closure.

    Key Terms

    • Agglomeration (industry cluster)
    • Brownfields
    • Center-of-gravity approach
    • Expatriate workers
    • Facility closing
    • Facility location
    • Facility relocation
    • Free trade zone
    • Grid systems
    • Intermodal competition
    • Intramodal competition
    • Inventory tax
    • Locavore strategy
    • Maquiladora plants
    • Nearsourcing
    • Pure materials
    • Quality-of-life considerations
    • Right-to-work laws
    • Supplier parks
    • Sweatshops
    • Weight-gaining products
    • Weight-losing products

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    Description

    This quiz focuses on the strategic importance of facility location in logistics, including determining the optimum number of facilities and the factors that influence facility location decisions.

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