Chapter 4 Locating, designing and managing facilities
Selecting locations for operations
Factors that influence the choice of location
(PHYSICAL FACTORS)
o Access to raw materials
o Availability of energy or water supply
o Nature of transportation networks
o Nature of communication links
o Availability of land or property
(SOCIO-ECONOMIC OR HUMAN FACTORS)
o Local labour markets
o Access to markets or customers
o Proximity to or distance from competitors
o Business climate
o Government policies
Some organizations and industry sectors appear to routinely select locations that appear to run
counter to the factors identified previously, i.e. that ‘break the rules’
- Competitive clustering: organizations that deliberately locate their operation next to one or
more competitors, the reason is synergy (co-locate attract more customers in total than if
they did not)
- Saturation marketing: a single company co-locating lots of its operations together, so that it
creates market dominance
- Marketing intermediaries: firms choose to be physically close to suppliers who assist in their
downstream or marketing activities
- Personal preferences: the founder or owner just wants to locate there
Key locational issues
- Make or buy decision – should the products being manufactured be made entirely within the
firm or not?
- Outsourcing – organizations can outsource some of their business activity at a variety of
levels
Reasons: reduced operating costs, restructuring costs, focus on core business, access
world-class capability
Reasons which may not be the best practice: cash infusion, function out of control,
catalyst for change, accelerate time to market
Disadvantages: financial costs, loss of control, increase in risk
- Offshoring = to move an activity to another country, usually with low-cost economy
Characteristics: significant wage differences between the home and offshore
countries; activity is based around info so that it can be teleworked either through
telephones (such as call centers) or the Internet (such as computer-aided design and
customer support); work is relatively standardized and hence easy to set up
Tegenovergestelde = backshoring due to the rise in wages, so it is not beneficial
anymore
Selecting sites
Specific site selection for CPO’s
- Size of the trading area – how far will customers travel to get to the operation?
- Market structure
Selecting locations for operations
Factors that influence the choice of location
(PHYSICAL FACTORS)
o Access to raw materials
o Availability of energy or water supply
o Nature of transportation networks
o Nature of communication links
o Availability of land or property
(SOCIO-ECONOMIC OR HUMAN FACTORS)
o Local labour markets
o Access to markets or customers
o Proximity to or distance from competitors
o Business climate
o Government policies
Some organizations and industry sectors appear to routinely select locations that appear to run
counter to the factors identified previously, i.e. that ‘break the rules’
- Competitive clustering: organizations that deliberately locate their operation next to one or
more competitors, the reason is synergy (co-locate attract more customers in total than if
they did not)
- Saturation marketing: a single company co-locating lots of its operations together, so that it
creates market dominance
- Marketing intermediaries: firms choose to be physically close to suppliers who assist in their
downstream or marketing activities
- Personal preferences: the founder or owner just wants to locate there
Key locational issues
- Make or buy decision – should the products being manufactured be made entirely within the
firm or not?
- Outsourcing – organizations can outsource some of their business activity at a variety of
levels
Reasons: reduced operating costs, restructuring costs, focus on core business, access
world-class capability
Reasons which may not be the best practice: cash infusion, function out of control,
catalyst for change, accelerate time to market
Disadvantages: financial costs, loss of control, increase in risk
- Offshoring = to move an activity to another country, usually with low-cost economy
Characteristics: significant wage differences between the home and offshore
countries; activity is based around info so that it can be teleworked either through
telephones (such as call centers) or the Internet (such as computer-aided design and
customer support); work is relatively standardized and hence easy to set up
Tegenovergestelde = backshoring due to the rise in wages, so it is not beneficial
anymore
Selecting sites
Specific site selection for CPO’s
- Size of the trading area – how far will customers travel to get to the operation?
- Market structure
