Location Strategies in Logistics

Location Strategies

• Federal Express's Central hub concept enables service to more locations with fewer aircraft, matching aircraft flights with package loads, and reducing mishandling and delay in transit.

Importance of Location Decisions

• Location decisions are one of the most important decisions a firm makes, with significant impact on fixed and variable costs.
• Decisions are increasingly global in nature and have a long-term impact, making it crucial to maximize the benefit of location to the firm.

Location and Costs

• Location decisions based on low cost require careful consideration, as once in place, location-related costs are fixed and difficult to reduce.

Location and Innovation

• Cost is not always the most important aspect of a strategic decision, and innovation-based strategies consider four key attributes: high-quality and specialized inputs, an environment that encourages investment and local rivalry, a sophisticated local market, and local presence of related and supporting industries.

Location Decisions

• Long-term decisions that are made infrequently, affecting both fixed and variable costs, with many resource and cost issues difficult to change once committed to a location.

Country Decision Key Success Factors

• Key factors to consider when making a country decision include:
  • Political risks, government rules, attitudes, and incentives
  • Cultural and economic issues
  • Location of markets
  • Labour talent, attitudes, productivity, and costs
  • Availability of supplies, communications, and energy
  • Exchange rates and currency risks

Region/Community Decision Key Success Factors

• Key factors to consider when making a region/community decision include:
  • Corporate desires
  • Attractiveness of region
  • Labour availability and costs
  • Costs and availability of utilities
  • Environmental regulations
  • Government incentives and fiscal policies
  • Proximity to raw materials and customers
  • Land/construction costs

Site Decision Key Success Factors

• Key factors to consider when making a site decision include:
  • Site size and cost
  • Air, rail, highway, and waterway systems
  • Zoning restrictions
  • Proximity of services/supplies needed
  • Environmental impact issues

Factors That Affect Location Decisions

• Labour productivity and cost: wage rates are not the only cost, and lower productivity may increase total cost.
• Exchange rates and currency risks can have a significant impact on costs, and rates change over time.
• Intangible costs include education, public transportation, community, and quality-of-life.
• Political risk, values, and culture: national, state, and local governments' attitudes toward private and intellectual property, zoning, pollution, and employment stability may be in flux.
• Proximity to markets is very important to services and may be important to manufacturers due to JIT systems or high transportation costs.
• Proximity to suppliers is crucial for perishable goods, high transportation costs, and bulky products.
• Clustering of companies, driven by resources such as natural, information, capital, and talent, can be found in both manufacturing and service industries.