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BALLOU13 - Facility Location Decisions Experience teaches...

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13-1 Facility Location Decisions Chapter 13 Experience teaches that men are so much governed by what they are accustomed to see and practice, that the simplest and most obvious improvements in the most ordinary occupations are adopted with hesitation, reluctance, and by slow graduations. Alexander Hamilton, 1791
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13-2 Facility Location in Location Strategy PLANNING ORGANIZING CONTROLLING Transport Strategy Transport fundamentals Transport decisions Customer service goals The product Logistics service • Ord . proc. & info. sys. Inventory Strategy • Forecasting Inventory decisions Purchasing and supply scheduling decisions Storage fundamentals Storage decisions Location Strategy Location decisions The network planning process Location decisions
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13-3 Location Overview What's located? Sourcing points - Plants - Vendors - Ports Intermediate points - Warehouses - Terminals - Public facilities (fire, police, and ambulance stations) - Service centers Sink points - Retail outlets - Customers/Users
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13-4 Location Overview (Cont’d) Key Questions How many facilities should there be? Where should they be located? What size should they be? Why Location is Important Gives structure to the network Significantly affects inventory and transportation costs Impacts on the level of customer service to be achieved
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13-5 Methods of Solution Single warehouse location Graphic Grid, or center-of-gravity, approach Multiple warehouse location Simulation Optimization Heuristics Location Overview (Cont’d)
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13-6 Nature of Location Analysis Manufacturing (plants & warehouses) Decisions are driven by economics . Relevant costs such as transportation, inventory carrying, labor, and taxes are traded off against each other to find good locations. Retail Decisions are driven by revenue . Traffic flow and resulting revenue are primary location factors, cost is considered after revenue. Service Decisions are driven by service factors . Response time, accessibility, and availability are key dimensions for locating in the service industry.
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13-7 Some Location Theory/Practice Early economic analysis Bid rent curves Weber’s isodapanes Weber’s classification of industries Hoover’s tapered transport rates Agglomeration Mathematical approaches Light analysis - Chart, compass, ruler techniques - Spreadsheets - Checklists Continuous location methods Mathematical programming
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13-8 Bid Rent Curve
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13-9 CR (2004) Prentice Hall, Inc. Weber’s Isodapanes Variable spacing can mean nonlinear transportation costs
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13-10 Weber’s Classification of Industries
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13-11 Hoover’s Transport Curves Y
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13-12 Agglomeration Based on the observation that the output of one industry is the input of another. Customers for an industry’s products are the workers of those industries. Hence, suppliers, manufacturers, and customers group together, especially where transportation costs are high. Historically, the growth of the auto industry showed this pattern.
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