OM 300 1st Edition Lecture 18 Outline of Last Lecture I The Transportation Problem II Example Outline of Current Lecture I Strategic Importance of Location II Location and Costs III Factors that affect Location Decisions Current Lecture The objective of location strategy is to maximize the benefit of location to the firm In other words where is the best place to put our company our restaurant our warehouse our office etc The Strategic Importance of Location One of the most important decisions a firm makes Increasingly global in nature Significant impact on fixed and variable costs Decisions made relatively infrequently Long term decisions Once committed to a location many resource and cost issues are difficult to change Location and Costs Location decisions based on low cost require careful consideration Once in place location related costs are fixed in place and difficult to reduce Determining optimal facility location is a good investment Factors That Affect Location Decisions Globalization adds to complexity o Market economics o Communication o Rapid reliable transportation o Ease of capital flow o Differing labor costs Identify key success factors KFSs Factors That Affect Location Decisions Labor productivity o Wage rates are not the only cost These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute o Lower productivity o Exchange rates and currency risks o Can have a significant impact on costs o Rates change over time Costs o Tangible easily measured such as utilities labor materials taxes o Intangible less easy to quantify and include education public transportation community quality of life Political risk values and culture o National state local governments attitudes toward private and intellectual property zoning pollution employment stability may be in flux o Worker attitudes towards turnover unions absenteeism o Globally cultures have different attitudes towards punctuality legal and ethical issues Proximity to markets o Very important to services o JIT systems or high transportation costs may make it important to manufacturers Proximity to competitors o Perishable goods high transportation costs bulky products
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