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OPERATIONS MANAGAMENT - Summary Location Planning Every...

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Summary Location Planning Every firm must use location planning techniques. There are many options for location planning. Corporations choose from expanding an existing location, shutting down one location and moving to another, adding new locations while retaining existing facilities, or doing nothing. There are a variety of methods used to decide the best location or alternatives for the corporation. Methods such as identifying the country, general region, small number of community alternatives, and site alternatives. Several factors that influence location positioning include the location of raw materials, proximity to the market, climate, and culture. Models for evaluating whether a location is best for an organization consist of cost-profit analysis for locations, the center of gravity model, the transportation model, and factor rating. This chapter discusses the decision to relocate a facility by considering costs and benefits. If you are planning on moving or acquiring a new facility, there are many factors to consider: the size, the geographic area, culture, transportation costs and others. After a location or locations have been chosen a cost-profit-volume analysis is done. The main factors that affect location decisions include regional factors, community considerations, and site-related factors. Community factors consist of quality of life, services, attitudes, taxes, environmental regulations, utilities, and development support. EVALUATING LOCATION ALTERNATIVES (Page 385) -€ There are three specific analytical techniques available to aid in evaluating location alternatives: 1. Location Cost-Volume-Profit Analysis: 1. The Cost-Volume-Profit (CVP) Analysis can be represented either mathematically or graphically. It involves three steps: 1) For each location alternative, determine the fixed and variable costs, 2) For all locations, plot the total-cost lines on the same graph, and 3) Use the lines to determine which alternatives will have the highest and lowest total costs for expected levels of output. Additionally, there are four assumptions one must keep in mind when using this method: 1.1. Fixed costs are constant. 1.2. Variable costs are linear. 1.3. Required level of output can be closely estimated. 1.4. There is only one product involved. 1.5. 2. Total cost = FC = v(Q)
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where FC=Fixed Cost, v=Variable Cost per Unit, Q=Number of Units (Also shown below but not in the same format) 1. Factor Rating 1. This method involves qualitative and quantitative inputs, and evaluates alternatives based on comparison after establishing a composite value for each alternative. Factor Rating consists of six steps: 1.1. Determine relevant and important factors. 1.2. Assign a weight to each factor, with all weights totaling 1.00. 1.3. Determine common scale for all factors, usually 0 to 100.
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