Locating Facilities
Aims:
•Understand the importance of location decisions
•Discuss factors that affect the choice of location
•Describea hierarchical approach to locating facilities
•Usean infinite set approach, such as the centre of gravity
•Comparelocations using costing and scoring models
•Usemodels for locating facilities on networks
•Combinelocation decisions into a broader approach to planning
Location decisions
•Facilities location finds the best geographic locations for the different elements in a supply chain.
•These are important decisions that affect the organisation’s performance for many years.
•If an organisation makes a mistake and opens facilities in a poor location, it cannot simply close down and move to a better place.
•The right location does not guarantee success, but the wronglocation will certainly guarantee failure.
Location decisions
•There are other trends in location, such as a growing number of out-of-town malls, super-markets and retail estates.
•The major trend towards shortersupply chains means that layers of intermediaries are disappearing, and logistics is concentrated in fewer facilities.
•Free trade and good transport within the European Union, for example, encourages companies to replace national warehouses by a single European logistics centre as well as AEC.
Alternatives to locating new facilities
There are several reasonswhy they need to consider location, including:
•the end of a lease on existing premises
•expansion into new geographic areas
•changes in the location of customers or suppliers
•changes to operations
•upgrading facilities
•changes to transport
•changes in the transport network
•mergers or acquisitions giving duplicate operations that must be rationalised.
Alternatives to locating new facilities
In practice, when an organisation wants to change its facilities –either expand, move or contract –it has three alternatives:
•expand or change existing facilities at an existing site
•open additional facilities at another site while keeping all existing facilities
•close down existing operations and move.
As a rule of thumb, around 45% of companies expand on the same site, a similar number open additional facilities, and 10% close down existing operations and move.
Five options in order of increasing investment
•Licensing or franchising: local organisations make and supply the company’s products in return for a share of the profit.
•Exporting: the company makes the product in its existing facilities and sells it to a distributor working in the new market.
•Local distribution and sales: the company makes the product in its existing facilities, but sets up its own distribution and sales force in the new market.
•Local assembly and finishing: the company makes most of the product in existing facilities, but opens limited facilities in the new market to finish or assemble the final product.
•Full local production: the company opens complete facilities in the new market.
Locating FacilitiesAims:•Understand the importance of location decisions•Discuss factors that affect the choice of location•Describea hierarchical approach to locating facilities•Usean infinite set approach, such as the centre of gravity•Comparelocations using costing and scoring models•Usemodels for locating facilities on networks•Combinelocation decisions into a broader approach to planningLocation decisions•Facilities location finds the best geographic locations for the different elements in a supply chain.•These are important decisions that affect the organisation’s performance for many years.•If an organisation makes a mistake and opens facilities in a poor location, it cannot simply close down and move to a better place.•The right location does not guarantee success, but the wronglocation will certainly guarantee failure.Location decisions•There are other trends in location, such as a growing number of out-of-town malls, super-markets and retail estates.•The major trend towards shortersupply chains means that layers of intermediaries are disappearing, and logistics is concentrated in fewer facilities.•Free trade and good transport within the European Union, for example, encourages companies to replace national warehouses by a single European logistics centre as well as AEC.Alternatives to locating new facilitiesThere are several reasonswhy they need to consider location, including:•the end of a lease on existing premises•expansion into new geographic areas•changes in the location of customers or suppliers•changes to operations•upgrading facilities•changes to transport•changes in the transport network•mergers or acquisitions giving duplicate operations that must be rationalised.Alternatives to locating new facilitiesIn practice, when an organisation wants to change its facilities –either expand, move or contract –it has three alternatives:•expand or change existing facilities at an existing site•open additional facilities at another site while keeping all existing facilities•close down existing operations and move.As a rule of thumb, around 45% of companies expand on the same site, a similar number open additional facilities, and 10% close down existing operations and move.Five options in order of increasing investment•Licensing or franchising: local organisations make and supply the company’s products in return for a share of the profit.•Exporting: the company makes the product in its existing facilities and sells it to a distributor working in the new market.•Local distribution and sales: the company makes the product in its existing facilities, but sets up its own distribution and sales force in the new market.•Local assembly and finishing: the company makes most of the product in existing facilities, but opens limited facilities in the new market to finish or assemble the final product.•Full local production: the company opens complete facilities in the new market.
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