Where should a plant or service facility be located? This is a top question on the strategic agenda of contemporary manufacturing and service firms, particularly in this age of global markets and global production. Dramatic changes in communication technology have made the world truly a "global village," allowing companies greater flexibility in their location choices. In practice, however, the question of location is very much linked to two competitive imperatives:
1. The need to produce close to the customer due to time-based competition, trade agreements, and shipping costs.
2. The need to locate near the appropriate labor pool to take advantage of low wage costs and/or high technical skills.
The problem of facility location is common to new and existing businesses. This planning is critical to a company's eventual success. For instance, 3M has moved a significant part of its corporate activity, including R & D, to the more temperate climate of Austin, Texas. Toys "R" Us has opened a new location in Japan as a part of its global strategy.
Manufacturing and service companies' location decisions are guided by
a variety of criteria defined by competitive imperatives. Criteria that
influence location planning (primarily based on manufacturing plant and
warehouse needs) are discussed below.
A location close to the customer is important because of the ever-increasing need to be customer-responsive. This enables faster delivery of goods to customers. In addition, it ensures that customers' needs are incorporated into the products being developed and built. Population characteristics provide a basis for decision making on these criteria.
Examples:
Claire's
www.claires.com
I chose to look at Claire's in terms of proximity to customers.
Claire's
places all of their stores in malls. This offers them the advantage
of
always being in the best location for all customers. By being
in a mall,
Claire's attracts customers that may just be passing by and are interested
in what they have to offer. Claire's bases their products on
the newest
fashions and trends. This ensures that customer's needs are incorporated
into the products being designed.
Melissa Sims
McDonald’s
URL:http://www.mcdonalds.com
The reason McDonald’s is so successful is because of the company’s
proximity to customers. McDonald’s is a company that strives to serve
everyone with superior customer satisfaction. McDonald’s is located
everywhere in the United States and even in some international markets.
Most locations are close and convenient to where customers can easily locate
them. McDonald’s can be recognized by individuals of all ages, as
the company has adopted the golden arch as their trademark.
Michelle Zillmann
1KoolCat Productions
http://www.1koolcat.com/stn.htm
This website gives suggestions when looking for the perfect spot to
place your business. This company deals with the area of St.Paul
and Minneapolis, MN. They bring tradition back to shopping at
neighborhood stores.]
Chuck Schneickert
Applebee's
http://www.applebees.com
Applebee's prides themselves on being a neighborhood grill. That
is their slogan, and that is what they are known for. You can find
an Applebee's in 49 states. Any Applebee's that I have ever been
to has been located right in the middle of town, or in a very busy and
populated area.
Shannon Schuman
Taco Bell
http://www.tacobell.com
Taco Bell is successful because there is always a Taco Bell in driving
distance. They are usually located next to other fast food restaurants.
Some universities offer Taco Bell in their cafeteria or eating
establishment. College students run low on money and Taco Bell
is
affordable. There are also some Taco Bells in convenient stores.
Almost
everyone can afford to eat at Taco Bell. They make their prices
reasonable
so their customers can get full off of a cheap meal. Taco Bells
advertisements help boost a lot of their sales. Almost everyone
is
interested in what Taco Bell is offering for a limited time.
Cherie Dixon
Western Auto
www.westernauto.com
Western Auto has various locations in many cities. This company
offers an
array of auto parts for every car. If they do not have the part
needed they
will order it for the customer. Western Auto has ever item needded
for
cars. trucks, jeeps, vans and any other vehicle. This company
only
specializes in automobiles. Not just one specific kind or type.
Having
many locations allows Western Auto to be a top competitor in this market.
Being accessible to all people allows for a greater customer base and
more
sales.
Tabitha Thomas
Bank of America
http://www.bankofamerica.com
Bank of America has many locations to make banking easier for their
customers. No matter where their customers may travel throughout the
US they
have the peace of mind that there is a Bank of America located in about
every
state. That means the customer has the ability to take care of banking
responsibilities or get banking assistance wherever or whenever they
need it.
Kevin Hanlin
Intrust Bank
http://www.intrustbank.com/
One of the main reason I opened up an account with Intrust Bank is
because
is very close to me. I didn't have to rush to drive to the bank, it
is right
inside my school. Going is the same as going to the bank.
Romao Varela
Hy-Vee
http://www.hy-vee-stores.com
As I noted in the earlier web assignment, Hy-Vee is located at least
a mile
away from the customer base, so it is very accessible to grocery shopping.
They are also near or off major streets and can be seen easily.
Being a huge
store also gives some benefits to its locality.
David Adden
A favorable busienss climate can include the presence of similar-sized businesses, the presence of companies in the same industry, the presence of other foreign companies in the case of international locations. Probusiness government legislation, and local government intervention to facilitate businesses locating in an area via subsidies, tax abatements, and other support are also factors.
Examples:
Cable-Dahmer
http://www.cabledahmer.com
Cable-Dahmer chose their location because of the Business Climate in
the
area. This car dealership is located at 1834 S. Noland Road in
Independence, Missouri on what is called the "miracle mile" because
of
all the auto dealers located on Noland Road. The presence of
competition on this road is beneficial to the automobile industry as
it
brings in new and used buyers from all over Kansas City.
Vicki McQuain
Dillards Department Stores Inc.
http://www.dillards.com/
Dillards Department Stores as well as most other large department stores
tend to be located due to business climate. Over the past decade,
fewer and fewer department stores are located in their own building away
from their competitors. Today, most department stores flock into
malls as cornerstones or build near other similar businesses. All
these location changes have two specific goals cutting costs and taking
advantage of the competition’s consumers. Dillards has also taken
advantage of tax abatements and other savings due to locations within commercial
parks and special land areas. Such tax deferments and exemptions
are available due to the future sales taxes produced by the store as well
as the number of local jobs made available.
Eric W. Smith
FAO Schwarz
http://www.faoschwarz.com/
FAO Schwarz's location relies heavily on the business climate of the
area.
FAO Schwarz is always located in very ritzy areas of town. In
Kansas City
the store is located in the J.C. Nicols Plaza. This area, also
known as the
country club plaza, is a shopping district of only the finest galleries,
most
upscale shops, and most chic restaurants. FAO Schwarz also has
stores on
Fifth Ave. in New York, Georgetown in D.C. and other upscale shopping
areas
around the nation. FAO Schwarz's pricing strategies also dictate
that stores
should be near other stores with an elite clientele.
If FAO Schwarz and Kaybee toys were near each other in a mall, I would
definately buy from KayBee, based solely on price.
Brian Winsor
The objective is to select a site with the lowest total cost. This includes regional costs, inbound distribution costs, outbound distribution costs, and regional costs. Land, construction, labor, taxes, and energy costs comprise the regional costs. In addition, there are hidden costs that are difficult to measure. These involve (1) excessive moving of preproduction material between locations before final delivery to the customers and (2) loss of customer responsiveness arising from locating away from the main customer base.
Examples:
WAL-MART
http://www.walmart.com
WAL-MART stresses a competitave advantage at it's web page. The
first
thing you see is the company logo which stresses low price. In
the discount
department store battle they are the low cost leader without quwstion.
They
also have products listed with sale pricing to stress this.
Price is and
always will be an advantage for WAL-Mart.
m
Ken Ramsey
Kohl's
http://www.kohls.com
Kohl's offers "brands you like; at prices you'll love!" They
have a
competitive advantage because they offer clothing for men, women, children
and infants, which are the same brands you can find at the mall.
The
difference is the price. Every item in the store is marked down.
And most
of the time you get to the register and are suprised that your items
are
marked down even more. Kohl's is the place to find stylish clothing
at
reasonable prices.
Jessica Steckler
Gordman's
http://www.gordmans.com
Gordman's has low total costs, which is how it is able to offer extremely
low prices to its customers. Gordman's is a store that offers
the latest
style and name brands with a discount up to 50% off regular prices.
This
store not only offers clothing for women, men, and children, but also
sells
designer fragrances, accessories, and home decor.
Jennifer A. Mader
Adequate road, rail, air, and sea transportation is vital. Energy and telecommunications requirements must also be met. In addition, the local government's willingness to invest in upgrading infrastructure to the levels required may be an incentive to select a specific location.
Examples:
The educational and skill levels of the labor pool must match the company's needs. Even more important are the willingness and ability to learn.
Examples:
Labette Community College
http://www.labette.cc.ks.us/
The educational and skill levels of the faculty and staff employed
by
Labette Community College(LCC) go beyond matching the company's needs.
LCC
enables personal dreams and aspirations to be realized throughout an
entire
lifetime. The instructors at Labette Community College go out
of their way
to help the students. They are personal, and they will work with
students
one-on-one.
LCC is proud of their 75-year tradition of excellence that has contributed
to helping people’s dreams come true. Thousands of alumni and former
students who now live all over the United States, and several other
countries as well, are currently living out their dreams in all walks
of
life. The outcome of past LCC students is living proof of the excellent
level of quality labor provided by Labette employees. LCC is
ready to
assist you, your family members, your agency or your company to be
all it
can be.
Mandy Swayze
Adecco
http://www.adecco.com/
Adecco is a company that locates itself near to the necessary labor
pool.
The company, a supplier of temporary services and permanent staffing,
often
locates within an urban location near areas containing higher education.
Satellite offices are located near commuting suburbs where the necessary
population may be located. The company also maintains a central
office to
its satellites that can capture urban populations. The web site,
which
allows those nearby a particular job to find the office it is connected
to
and all relevant information. By locating near a necessary
labor pool, the
customers of Adecco know the company will carry employees that are
not to far
to commute, and are reasonably trained by the company or by nearby
educational facilities. The universities and community colleges
often assist
Adecco by holding career days that allow for easy recruitment.
This also
gives the company a chance to easily interview or list new prospective
employees. The expense of hiring new employees, as well as the
legal
restrictions on how the process is done, creates a large possibility
for
expansion. With a tight labor market being located conveniently
for the
worker has now become a even more important factor.
Maria Johnston
A high-quality and competitive supplier base makes a given location suitable. The proximity of important suppliers' plants also supports lean production methods.
Examples:
The location of other plants or distribution centers of the same company may influence a new facility's location in the network. Issues of product mix and capacity are strongly interconnected to the location decision in this context.
Examples:
ShopKo
http://www.shopko.com/
I believe that ShopKo stores have used the "Other Facilities" Issues
in
Facility Location. The location of their stores and their subsidiaries
is
a main reason for their wide number and variety of stores throughout
the
United States. They are in competition with Wal-Mart, Target,
K-Mart, and
other retail/discount stores. So the location of their stores
is of great
importance. A lot of the times you will find ShopKo's at the
ends of
shopping malls or sometimes even right next to Wal-Mart's, because
of the
competition. The products that ShopKo has in their stores is
very similar
to their competitors. This is why their sale ads and specials
are always
in comparison to other stores.
Ashley Baldwin
A foreign trade zone or a free trade zone is typically a closed facility (under supervision of the customs department) into which foreign goods can be brought without being subject to the necessary customs requirements. There are about 170 such free trade zones in the United State today. Such specialized locations also exist in other countries. Manufacturers in free trade zones can use imported components in the final product and delay payment of customs duties until the product is shipped into host country.
Examples:
Samuel Shapiro Company
http://www.shapiro.com/
Samuel Shapiro Company is a customs broker which handles the logistics
of importing and exporting goods in and out of the country.
Their services are highly dependent on what the economic conditions of
the world are. Within the industry of foreign trade there are many
political risks associated with laws and policies enforced to govern international
trade. If laws are passed to restrict trade, Sameuel Shapiro could
be directly affected. On the flip side, if laws are passed to open
up trade restrictions, this organization could reap some pretty substantial
benefits if they capture the increase in business.
In addition, they interface with the transfer of goods in and out of
the Free Trade Zones. One of the services provided to their customers
is to reduce and/ or eliminate the costs of duties and fees resulting from
the export/import of goods. By moving material into the Free Trade
Zone, they eliminate the duties and save the customer money-- they are
paid for their services.
Debbie Freeman
The fast-changing geopolitical scenes in numerous nations present exciting, challenging opportunities. But the extended phase of transformation that many countries are undergoing makes the decision to locate in those areas extremely difficult. Political risks in both the country of location and the host country infuence location decisions.
Examples:
Barriers to enter and locate in many countries are being removed today through legislation. Yet many nonlegislative and cultural barriers should be considered in location planning.
Examples:
The world of trading blocs gained a new member with the ramification of the North American Free Trade Agreement (NAFTA). Such agreements influence location decisions, both within and outside trading bloc countries. Firms typically locate, or relocate, within a bloc to take advantage of new market opportunities or lower total costs afforded by the trading agreement. Other companies (those outside the trading bloc countries) decide on locations within the bloc so as not to be disqualified from competing in the new market.
Examples:
The environmental regulations that impact a certain industry in a given location should be included in the location decision. Besides measurable cost implications, this influences the relationship with the local community.
Examples:
The host community's interest in having the plant in its midst is a necessary part of the evaluation process. Local educational facilities and the broader issue of quality of life are important too.
Examples:
Cleveland
http://www.clevelandbrowns.com
In 1995, the owner of the Cleveland Browns announced that he was relocating
his football franchise to Baltimore, Maryland. This was devastating
news to the city of Cleveland. However, instead of sitting around
and wallowing in their misery, they rallied together and decided to get
their team back. The city of Cleveland raised millions of dollars
more than the goal that was set before them, and so in 1996, the NFL made
a deal with the city of Cleveland to return the Browns to the football
field in a new and improved stadium. Not only did the city of Cleveland
get their team back, but they also saw to it that the name, colors, and
heritage of their football team remain in Cleveland as well. In return,
the owners, coaches, staff, and athletes of the Cleveland Browns are giving
back to their host communities. They are donating a large amount
of time and funding to support charities, community programs, causes, and
non-profit organizations throughout Northern Ohio in hopes of improving
the quality of life of their fans and the communities that they live in.
The host community of Cleveland is definitely interested in the business
of the Browns, and as they have shown, the community will go to great lengths
to keep their football team. The Cleveland Browns aren't looking
to move to anywhere else.
Stephen Page
An important decision for multinational companies is the nation in which to locate the home base for each distinct business. Porter [9] suggests that a company can have different home bases for distinct businesses or segments. Competitive advantage is created at a home base where strategy is set, the core product and process technology is created, and a critical mass of production takes place. So a company should move its home base to a country that stimulates innovation and provides the best environment for global competitiveness. [9] This concept can also be applied to domestic companies seeking to gain sustainable competitive advantage. It partly explains the southeastern states' recent emergence as the preferred corporate destination within the United States (i.e., its business climate fosters innovation and low cost production).
Examples:
McDonalds
www.mcdonalds.com
The beanie baby craze is back and McDonald's is there to take
advantage of
this opportunity. McDonald's is the only fast food restaurant
that offers
the "Ty" beanie babies. This is a huge competitive advantage
for
McDonald's. They always try to be on top when it comes to offering
the hot
items. They also always offer low prices which make these items
even more
popular. McDonald's realizes that by selling these items they
are also
increasing their revenues.
Angie Chilcott
Pizza Hut
www.pizzahut.com
Since Pizza Hut first opened in 1958 it has had a competitive advantage
over all the other pizza restaurants. They have over 6,000 restaurants
worldwide with over 1,000 of these being international, plus over 1,000
convience stores serve their personal pan pizzas. In 1996 Pizza hut
aired its first Superbowl ad and on that day they delivered 30% of the
12,000,000 pizzas that were ordered, now thats a lot of pizza!
Jaime Cales
Because of the variety of service firms and the relatively low cost of establishing a service facility compared to one for manufacturing, new service facilities are far more common than new factories and warehouses. Indeed, there are few communities in which rapid population growth has not been paralleled by concurrent rapid growth in retail outlets, restaurants, municipal services, and entertainment facilities.
Services typically have multiple sites to maintain close contact with
customers. The location decision is closely tied to the market selection
decision. If the target market is college-age groups, locations in retirement
communities - despite desirability in terms of cost, resource availability,
and so forth - are not viable alternatives. Market needs also affect the
number of sites to be built, the size, and the characteristics of the sites.
Whereas manufacturing location decisions are often made by minimizing costs,
many service location decision techniques maximize the profit potential
of various sites. [1]
Service-Facility Location Criteria
Service facilities are the terminal points in the system, the points where demand takes place. Either the customer travels to the service facility (as in the case of a hospital), or the service facility travels to the customer (as in the case of a mobile library unit). Since service facilities generally serve a small geographic area, the principal trade-off is between the number of facilities to have and the travel cost between the customers and facilities. Hence, service-facility location problems often involve multiple sites.
For profit-seeking service organizations, perhaps the most important criterion is road access or the availability of public transportation. Other critical factors are:
Location in the Service/Retail/Professional Sector - General
While the focus in industrial sector location analysis is on minimizing cost, the focus in the service sector is on maximizing revenue. This is because manufacturing costs tend to vary substantially between locations, but in service firms costs vary little within a market area. Therefore, for the service firm, a specific location influences revenue more than it does cost. This means that the location focus for service firms should be on determining the volume of business and revenue. There are eight major components of volume and revenue for the service firm.
These are:
Retail Facility Location - Example - Bank ATMs
The major criterion used in locating a retail facility is the volume of demand. It might be measured by dollar sales revenue for a grocery store or restaurant, or by the number of visitors each year for an amusement park. In any case, estimates of demand must be obtained for potential locations.
Consider the situation of a bank that needs to determine future locations for automatic teller machines (ATMs). The success of an ATM site is measured by the number of transactions that occur there each month, so some way of predicting that volume is required.
The statistical technique of regression analysis can be used by specifying a set of independent variables that are related to the number of transactions. This can be established through meetings with the bank executives and branch managers in charge of existing sites.
The following variables are typical.
In locating facilities that are oriented toward sales, the principle factors are market-related and the important data are demographic. Other intangible factors that influence retail location are:
Public-Service-Facility Location
Public-Service facilities include post offices, schools, highways, parks, and so on. A major problem in locating such facilities is the lack of easily quantifiable data. How does one define "social cost" or "social benefit"?
Some of the typical criteria used in the public-service location decisions include the average distance or time traveled by the users of the facilities and the maximum distance or travel time between the facility and its intended population.
Another feature not present in industrial location problems is that public facilities create demand; one would like to locate facilities to serve the largest segment of the population. In this sense, the problem is similar to locating a bank or grocery store, except that profit is not a motivating factor. Cost/benefit analysis is often used to determine public-facility location. [32]
Using several of the Issues in Facility Location factors, and other factors considered, discuss why a particular retail business you go to frequently is so successful, assuming it is.
This should take about two screens of explanation.
Send your comments to the instructor, subject: MG 476 6-1
Reminder: This week, you should also be working on your Electronic Journal Article, if you have not done so already.
Locate a web site which emphasizes the use of one of the Issues in Facility Location factors:
name the particular issue (one only, please and thankyou!),
provide the URL, and
a very brief explanation of how that issue was used by that service
business, and
your name at the end.
This should take one or two screens of explanation. These responses will be posted.
This will be a mid-course assessment opportunity. Please send me an e-mail with your numbered reply plus a sentence or two of comments on each item. Good feedback from you allows me to make adjustments in the second half of this course and in future offerings.
1. Rate the amount of reading material supplied with this course. (1-7) with
1 = much too little, 4 = about right, 7 = much too much
Comments:
2. Rate the difficulty of reading material supplied with this course. (1-7) with
1 = much too easy, 4 = about right, 7 = much too difficult
Comments:
3. Rate the ease/difficulty you had with understanding the assignments. (1-7) with
1 = very easy to understand, 4 = no problems, 7 = very difficult to understand
Comments:
4. Rate the ease/difficulty of having the course using the Web Page format for study materials. (1-7) with
1 = very easy to work with, 4 = no problems, 7 = very difficult to work with
Comments:
5. How well prepared were you, looking back, to deal with the electronic communications required by this course. (1-7) with
1 = very poorly prepared, 4 = just fine, 7 = very well prepared
Comments:
6. Rate your perception of the ease/difficulty you have had finding good web sites to answer those assignments that called for a new web site. (1-7) with
1 = very easy to find, 4 = just fine, 7 = very difficult to find
Comments:
7. Rate your perception of the variety of assignments you have been asked to do, to-date. (1-7) with
1 = seemed like very little variety, 4 = good mix, 7 = seemed like a great deal of variety
Comments:
8. Rate your perception of the responses you have gotten from the instructor to your questions and to your assignments. (1-7) with
1 = very poor response, 4 = average response, 7 = outstanding response
Comments:
9. Rate your impressions of the use of the weekly Updates, to date, in the course. (1-7) with
1 = total waste of time, 4 = useful, 7 = really a great idea
Comments:
10. How do you like having immediate access to other students' e-mail address through the Student Directory. (1-7) with
1 = of no use at all, 4 = ok, 7 = really like having them
Comments:
11. How do you like having the student web pages available to review. (1-7) with
1 = of no use at all, 4 = ok, 7 = really like having them
Comments:
12. Rate the course overall, at this point in time. (1-7) with
1 = the worst, 4 = ok, 7 = the best
Comments:
Thank you very much. Dr. Smith
William
L. Smith Teacher Home PageService
Management Home Page
Emporia
State UniversityIf you have comments or suggestions, email me at smithwil@emporia.edu