Plant layout can be defined as a technique of locating machines, processes and plant services within the factory so as to achieve the greatest possible output of high quality at the lowest possible total cost of manufacturing. From: Production Planning and Control, 2019
ids355: Operations Management Wikispace: “Chapter 8: Location Planning and Analysis”
Review #1 Location Cost-Volume-Profit Analysis, which should help you to understand the financial aspects of choosing a location. In addition consider the factors that influences the location of a new facility. This is important because a poor choice can make it very difficult to meet demand and manage costs effectively. v IDENTIFYING A COUNTRY v IDENTIFYING A REGION- 4 major considerations o Other : Climate is sometimes a consideration because bad weather can disrupt operations. Taxes are also an important factor due to the fact that taxes affect the bottom line in some financial statements. v IDENTIFYING A COMMUNITY v IDENTIFYING A SITE Note: The above part is way too lengthy for this assignment. Summary : There are several ways that are very helpful in evaluating location alternatives, such as locational cost-profit-volume analysis, factor rating, and the center of gravity method. First, let’s take a look at Location Cost-Profit-Volume Analysis. This analysis can be done numerically or graphically. The procedure for locational cost-profit-volume analysis involves these steps: 1. Determine the fixed and variable costs associated with each location alternative. 2. Plot the total-cost lines for all location alternatives on the same graph. 3. Determine which location will have the lowest total cost for the expected level of output. Alternatively, determine which location will have the highest profit. This method assumes the following: 1. Fixed costs are constant for the range of probable output. 2. Variable costs are linear for the range of probable output. 3. The required level of output can be closely estimated. 4. Only one product is involved. Here’re a couple of important formulas to remember: Total cost = Fixed cost + Variable cost per unit * Quantity or volume of outputTotal profit = Quantity(Revenue per unit – Variable cost per unit) – Fixed costIn most situations, other factors besides cost must also be considered. We will now consider another kind of cost often considered in location decisions: transportation costs. Transportation costs sometimes play an important role in location decisions. The company can include the transportation costs in a locational cost-volume analysis by incorporating the transportation cost per unit being shipped into the variable cost per unit if a facility will be the sole source or destination of shipments. When there is a problem with shipment of goods from multiple sending points to multiple receiving points, and a new location is to be added to the system, the company should undertake a separate analysis of transportation. In this case, transportation model of linear programming is very helpful. The model is used to analyze each of the configurations considered, and it reveals the minumum costs each would provide. Then the information can be included in the evaluation of location alternatives. Multiple Plant Manufacturing Strategies (page 381-382)
2. Market Area Plant Strategy
3. Process Plant Strategy
4. General-Purpose Plant Strategy Plants are flexible and have the ability to handle a range of products
E) Both C and D. . Question 2: What is NOT a risk a corporation must consider when planning a location? A) Political B) Exporting C) Economic D) Cultural E) Economic Question 3: What do banks, fast-food chains, supermarkets, and retail stores view locations as? A) One in many intricate decisions for their organizations B) A crucial part of the marketing strategy. C) An easier way to distribute their product or service. D) New ideas for future investments. E) A second home. Question 4: What is the third step when making location decisions? A) Evaluate the alternatives and make a selection. B) Identify important factors. C) Decide on criteria for evaluating alternatives. D) Develop location alternatives. E) None of the above. Question 5: What is the center of gravity method? A) A method that determines the location of a facility that will minimize shipping cost and travel time to various destinations. B) A method that determines the location of a facility closest to the most number of consumers. C) A method that determines the location of a facility closest to the main supplier D) A method that determines the location of a facility in the middle-point of all suppliers. E) none of the above 1.) Location analysis assumes that both qualitative and quantitative factors are important in determining an ideal location when using: a. The Transportation Model b. The Center of Gravity Method c. Factor Rating d. Cost-Profit Analysis e. None of the above 2.) The transportation model can be applied to solve factors including: I. Cost II. Profit III. Capacity IV. Management a. I only b. I and II only c. I, II, and III only d. II, III, and IV only e. II and IV only 3.) The Transportation Model uses the following information to determine costs: a. A list of shipping origins b. Demand of destinations c. Unit costs d. None of the above e. All of the above 4.) Which is a TRUE assumption needed to perform Cost-Profit Volume Analysis? a. Fixed costs are exponential b. Variable costs are logarithmic c. All costs are linear d. At least 2 products are being compared e. Revenue is NOT included in the analysis 5.) In the Factor Rating Method of location analysis, which of the following is NOT a managerial choice? a. Assigning weight to the importance of aspects being compared b. Adding the applied (weight x value) of various categories to get a composite for a location c. Determining the ultimate choice for the location d. Assigning information gathering on a location e. All of the above are managerial choices Question 5 needs an answer, also needs page numbers where answers are found 1) What does GIS stand for? A. General Information Systems B. Great Information Systems C. Geographic Information Systems D. General Institutions E. None of the above 2)The primary consideration for identifying a site is? A. Location B. Zoning C. Transportation D. None of the Above E. All of the above 3) What are the common techniques used to evaluate location alternatives? A. Locational cost-profit-volume analysis B. Factor ratings C. Center of gravity method D. Transportation model E. All of the above 4) What is a general-purpose plant strategy? A. A general approach to evaluating locations that include qualitative and quantitative inputs. B. A way to evaluate rating of geographic area C. A general approach to evaluating locations that include regional inputs. D. A way of being capable of handling a wide range of different products. E. None of the above 5) Method for locating a distribution center that minimizes the distribution costs. A.Location cost-pofit-volume analysis B. Method for finding balance between company culture and geographic culture. C. Method that compares costs to benefits D. All of the above. E. None of the above 1) What is a primary factor in the regional level of location decisions? A. Location of raw materials or supplies B. Quality of life C. Location of markets D. A and C E. None of the above 2) In a geographic information system (GIS), which is NOT involved in the data? A. Age B. Incomes C. Quality of life D. Type of employment E. Type of housing 3) What is a disadvantage of globalization? A. Transportation costs B. Security costs C. Unskilled labor D. Import restrictions E. All of the above 4) Mining operations, farming, forestry, and fishing are all examples of which primary reason for firms locating near or at the source of raw materials? A. Necessity B. Perishability C. Transportation costs D. Processing E. None of the above 5) Which of the following would you establish a composite value for? A. The transportation model B. Factor rating C. The center of gravity method D. Locational Cost-Profit-Volume Analysis E. Geographic information system 1. Which of these is a computer-based tool for collecting, storing, retrieving, and displaying demographic data on maps? A. Geographic Data System B. Geographic Information System C. Demographic Data System D. CAM E. none of the above 2. Which is a major consideration when choosing to operate in a region? A. the minimum wage rate B. identifying a community C. location to raw materials D. possible sites available E. none of the above 3. Considering global expansion, decision makers need to be absolutely clear on the benefits and risks and the likelihood of their occurrences when deciding upon identifying: A. a continent B. a site C. a community D. a country E. none of the above 4. A dominant factor that influences the location decision of a manufacturing firm is: A. Climate changes B. Location to competitors C. Proximity to markets D. Transportation cost E. none of the above 5. Which of the following is Not a primary consideration when identifying a site for operations? A. Land B. Transportation C. Zoning D. Future expansion E. All of the Above 1 . When using the Center of Gravity Method, what are the two differing variables for equal and unequal quantities shipped, respectively? a. n 1 ; n 2 b. n;Q c. n; n i d. e; u e e. n; Q i 2. Which location alternative technique involves viewing the problem in economic terms? a. Factor Rating b. CVP c. GIS d. Center of Gravity e. Transportation Model 3. When considering foreign locations, crime, and the threat of terrorism fall under which category? a. Safety b. Cultural Differences c. Market d. Financial e. Customer Preferences 4. When using the factor rating method of location alternative evaluation, which of the following could be considered relevant factors? a. Location of market b. Water supply c. Parking facilities d. Revenue potential e. All of the above 5. Which of the following is not a step in the general procedure for making location decisions? a. Develop location alternatives b. Evaluate the alternatives and make a selection c. Gain government approval of location alternatives d. Decide on criteria for evaluating alternatives e. Identify important factors (e.g., location of markets) Chapter 8 Summary: The location of a business is crucial to it’s growth. There are many factors that come into play when choosing a suitable location. Usually it is one or a few factors that dominate the decision making process. For example, a change in market supply and/or demand, perhaps even if inputs used by the business have run out. A business can suffer greatly if the right location is not chosen. Therefore a business should evaluate all their options very carefully before making a final conclusion. There are generally four options a manager has with regard to location planning. The first option would be to take the current facility and make it bigger. The second would be to keep the current facility and just create a (or many) new one(s). The third would be to close down the current facility entirely and build a new one. The last option would be to keep things the way they are. Questions: Questions need to be multiple choice format. 1. What is the name of the computer-based tool used for collecting, storing, retrieving, and displaying demographic data on maps? 2. True or False: Most organizations try to find the one best location. 3. What are the three primary regional factors involved in location decision making? 4. Name three trade agreements mentioned in this chapter. 5. What are five disadvantages to having global operations? 6. Suppose that the operating costs of a company has a weight of .20. There are three possible location choices. The first location has a score of 60/100. The second location has a score of 50/100. The third location has a score of 80/100. What are the weighted scores of each location possibility? 7. What are some benefits associated with a company moving it’s operation’s globally? 8. What is the center of gravity method used for? 9. Find the center of gravity with the information provided below.
10. Determine the center of gravity based on the following information:
11. Use the table below and the cost-profit-volume analysis to determine the B Superior range approximation.
12. Use the table from Question 12 and the cost-profit-volume analysis to find the C Superior range approximation. Use the following information to answer question 1-3. 1. What is their total costs for the month? a. $2300 b. $10000 c. $12300 d. $2000 e. none of the above 2. What is the firm’s total revenue for the month? a. $20000 b. $10000 c. $2300 d. $2000 e. none of the above 3. What is the firm’s profit for the month ? a. $20000 b. $10000 c. $12300 d. $7700 e. none of the above 4. If two alternatives yield comparable annual costs, management would be indifferent in choosing between the two in terms of _. a. total revenue b. total costs c. total profit d. total variable costs e. total fixed costs 5. The transportation cost must be converted into cost per unit of in order to correspond to other variable costs if raw materials are involved. a. input b. output c. initial input d. both a& b e. none of the above 6. Which of the following is NOT a governmental factor when locating in a foreign region? a) Import restrictions b) Currency restrictions c) Liability laws d) Local product standards e) all of the above
Choose a business that you would be interested in opening in your community. How would you decide where to locate that business? What would you be most concerned about in making this choice? |