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Chapter 10: Service Facility Location Chapter 10 Service Facility Location TEACHING NOTE This chapter begins using La Quinta Motor Inns to illustrate the strategic considerations in the facility location decision. Several strategies are explored including the impact of the Internet on service location. Returning to La Quinta we consider an application of regression analysis to motel site selection that is often used in business statistics classes. A discussion of geographical information systems follows. Because techniques for facility location analysis tend to be very complex, only a few simple approaches are discussed in length. The "cross median" approach to the location of a single facility using a metropolitan travel metric is intuitively pleasing because it is based on the statistical property of the median. This approach is easily implemented graphically and often produces counterintuitive results. Furthermore, the optimality of the solution, whether it is a point, a line, or an area, is easily verified. The Huff retail-location model has been used extensively for locating shopping centers, retail banks, convenience stores, and other profit-making endeavors. The location set covering model is a popular approach to the public sector multiple facility location problem. SUPPLEMENTARY MATERIALS Case: Southwest Airlines-1993 (A) (HBS case 9-694-023) Southwest Airlines, the only major U.S. airline to be profitable in 1992, makes a decision as to which of two new cities to open, or to add a new long-haul route. This case provides a window into Southwests strategy, operations, marketing, and culture. Lessons can be learned how an airline can simultaneously be a low-cost leader, service leader, and profit leader. Software: Excel spreadsheet of Huff model application to Athol Furniture case on CD-ROM LECTURE OUTLINE I. Strategic Location Considerations Competitive Clustering Saturation Marketing Marketing Intermediaries Substitution of Communications for Transportation Separation of Front from Back Office (Table. 10.1) Impact of the Internet on Service Location Site Considerations (Table 10.2) II. Regression Analysis in Location Decisions (Table 10.3) III. Geographic Information Systems (Figure 10.1) IV. Modeling Considerations 10-1 Geographic Representation (Figures 10.2 and 10.3) Number of Facilities Optimization Criteria (Figure 10.4) V. Facility Location Techniques (Figure 10.5) Cross Median Approach for a Single Facility (Fig 10.6 and Tab. 10.4, 10.5, 10.6) Huff Model for a Retail Outlet (Tables 10.7, 10.8, 10.9, 10.10) Location Set Covering for Multiple Facilities (Figure 10.7 and Table 10.11) TOPICS FOR DISCUSSION 1. Pick a particular service, and identify shortcomings of its site selection .... View Full Document

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