Lesson 6 Location Planning and Analysis

Topic: LOCATION PLANNING AND ANALYSIS
Learning Objectives:
At the end of the module, you should be able to:
• Relate the business problems /in identifying locations in terms of

decision making.
• Familiarize with different strategies in choosing the right location.
LOCATION ANALYSIS is the study and
development of models, techniques, and tools to
provide decision makers with good solutions to
realistic locational decision problems.
The objective of location strategy is to

MAXIMIZE the benefit of location to the firm.
Site Selection
Location Selection
is a micro decision as to the specific piece
is a macro decision involving which of property (or properties) on which to
countries, regions within a country, and establish the service.
communities (within a region, county or .
city) are appropriate for locating the
service units.
Three Options a
Service
Organization may
consider in
Location Selection
1. Enlarge an existing facility at the present

site.
2. Close the present facility and construct
one or more new ones on new sites.
3. Open a new site or sites.
Location
and Site
Location
Evaluation
1. Customer-based: If convenience of location
determines where a customer are the service
should be located in close proximity to its
customers. Examples are shops, banks, and diners.
2. Cost-based: Operating cost is their dominant

location factor. Examples: specialty shops, clerical
services. Dominant
Location Factors
3. Competitor Based: where organization prefer to
locate their competition to observe, share
resources, and draw customer.
4. Support System: where organization consider

location with regards to where it will drive its possible
customer as well as good utilities service. Examples
Hotel may near hospital, airports and travel destinations.
5. Geographic or Environmental
Factors: wherein environmental
constraints is the major considerations.
Example Ocean Resorts, Spa, and health
ranches
6. Business Climate: business is the major
Dominant
constraints when choosing the a location usually Location Factors
it was pre-set by the state or city government.
Example Insurance Companies, Head Quarters
and other institutions
7. Communication Based: when an organizations

requires rapid and steady sources of
communication line to efficiently operates.
Example BPO
8. Transportation Based: easy access and

forwarding of stocks is the major considerations.
Example logistics and delivery company.
9. Personal Desires of the CEO: strategic

decisions or visions of the CEO
General Criteria for Location Selection
1. Labor availability and cost

2. Labor history and culture 11. State taxes
3. Educational centers 12. Health care system
4. Recreational and cultural 13. Suppliers and supporting
centers service companies
5. Electric power 14. Population and population
6. Transportation and road trends
networks 15. Communication systems
7. Climate and weather 16. Preference of management
8. Health and welfare system 17. Cost of living
9. Geography and the 18. Community attitudes
environmental protection 19. Cost of land and constructions
management 20. Potential for expansions
10. State business climate and
incentives
• Invented overnight delivery.
• Uses hub concept.
• Enables service to more locations with

fewer aircraft.
• Concentrates package flows to exploit

transportation economies of scales.
• Enables sorting economies scales.
• Key Issue: Where to locate Hubs?

Warehouse Warehousing – provides the place to utility as
Multisite part of logistics for any business along with
transportation.
Locations
Reasons for Warehousing

1. To support the company’s customer policy.
2. To maintain a source of supply without
interruptions.
3. To achieve transportation economies.
4. To support changing market conditions and sudden
changes in demand.
5. To provide customer with the right mix of products
at all times and all locations.
Major Types of Warehousing
1. Consolidation Warehouses
2. Break Bulk Warehouses

References
R. Schroeder & S.M Goldstein (2017). Operations Management in the Supply Chain,
Decisions and Cases. (7th ed.). Published by McGraw-Hill Education.
Chen X, Xi Z, Jing P (2017) A unified framework for evaluating supply chain reliability
and resilience. IEEE Trans Reliab 66:1144
Chopra S, Sodhi MS (2014) Reducing the risk of supply chain disruptions. MIT Sloan
Manag Rev 55(3):73–80
Dolgui A, Ivanov D, Sokolov B (2018) Ripple effect in the supply chain: an analysis and
recent literature. Int J Prod Res 56(1–2):414–430 Fahimnia B, Tang CS,
W.J. Stevenson (2015). Operations Management. (12th ed.). Published by McGraw-Hill

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Topic: LOCATION PLANNING AND ANALYSIS

At the end of the module, you should be able to:

• Relate the business problems /in identifying locations in terms of

The objective of location strategy is to

1. Enlarge an existing facility at the present

2. Cost-based: Operating cost is their dominant

4. Support System: where organization consider

7. Communication Based: when an organizations

8. Transportation Based: easy access and

9. Personal Desires of the CEO: strategic

1. Labor availability and cost

• Uses hub concept.

• Enables service to more locations with

• Concentrates package flows to exploit

• Enables sorting economies scales.

• Key Issue: Where to locate Hubs?

Reasons for Warehousing

2. Break Bulk Warehouses

W.J. Stevenson (2015). Operations Management. (12th ed.). Published by McGraw-Hill

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