LOCATION PLANNING
AND ANALYSIS; DESIGN
OF WORK SYSTEM; AND
PROJECT MANAGEMENT
CHAPTER 4
OBJECTIVES
ü Identify the factors of selecting a
location and how these are used
to create a good layout
ü Identify or define the various types
of layout
ü Discuss the advantages and
limitations for each of the layout
type
NEED FOR
LOCATION
DECISIONS üMarketing Strategy
üCost of Doing Business
üGrowth
üDepletion of Resources
NATURE OF LOCATION DECISIONS
ØStrategic Importance of location decisions
ü Long term commitment/costs
ü Impact on investments, revenues, and operations
ü Supply chains
ØObjectives of location decisions
ü Profit potential
ü No single location may be better than others
ü Identify several locations from which to choose
ØLocation Options
ü Expand existing facilities
ü Add new facilities
ü Move
MAKING
ØDecide on the criteria
LOCATION
ØIdentify the important factors
DECISIONS
ØDevelop location alternatives
ØEvaluate the alternatives
üIdentify a country or countries for location.
üIdentify general region
üIdentify a small number of community
alternatives
üIdentify site alternatives
ØEvaluate and make selection
LOCATION DECISION FACTORS
Country
Factors
Regional
Factors
Community
Factors
Site-related
Factors
DISCUSSION
In April 2025, The LEGO Group celebrated the grand opening of
LEGO Manufacturing Vietnam in Binh Duong province, southern
Vietnam. LEGO Manufacturing Vietnam is the company’s sixth
factory worldwide and second in Asia. Built to support long-term
growth in the region and bring more LEGO® play experiences to
children around the world, it is also the LEGO Group’s most
environmentally sustainable factory to date.
Discuss the location decision for their newest factory.
FACTORS RELATING TO FOREIGN LOCATIONS
FACTORS AFFECTING LOCATION DECISIONS
Regional Factors
Ø Location of raw materials
Ø Location of markets
Ø Labor factors
Ø Climate and taxes
Community Factors
Ø Quality of life
Ø Services
Ø Attitudes
Ø Taxes
Ø Environmental regulations
Ø Utilities
Ø Developer support
Micro-factories
üMicrofactory: Small factory with a
narrow product focus, located near
major markets.
üIn some industries, small, automated
microfactories with narrow product
focuses will be located near major
markets to reduce response time.
Site-related Factors
Ø Land
Ø Transportation
Ø Environmental
Ø Legal
A comparison of service/ retail
considerations and manufacturing
considerations
Other trends in Locations
üForeign producers locating in U.S.
Ø“Made in USA”
ØCurrency fluctuations
üJust-in-time manufacturing
techniques
üInformation Technology
[Link]
[Link]
Other trends in Locations
ü Reshoring:
ØTo incentivize both American and foreign
companies to establish manufacturing
operations here
ØImposing tariffs on imported goods provides
a financial rationale for companies to rethink
their offshoring strategies.
Øto rebuild a robust industrial ecosystem that
produces goods domestically for world
markets.
ü Near-shoring: China -> India
ü Friend-shoring: Mexico
(Render and Heizer, 2022; 2025)
Cost-Profit-Volume Analysis
üDecision based on which location will
EVALUATING have the lowest total cost (or the highest
LOCATIONS profit) for the expected level of output.
Transportation Model
üDecision based on movement costs of
raw materials or finished goods
Factor Rating
üDecision based on quantitative and
qualitative inputs
Center of Gravity Method
üDecision based on minimum distribution
costs
Reading: Stevenson (2018): Chapter 8 +
exercises
COST-PROFIT-
VOLUME ANALYSIS
The procedure for locational cost-
profit-volume analysis involves these
steps:
üDetermine the fixed and variable costs associated
with each location alternative.
üPlot the total-cost lines for all location alternatives
on the same graph.
üDetermine which location will have the lowest total
cost/the highest profit.
COST-PROFIT-
VOLUME ANALYSIS
Assumptions:
üFixed costs are constant for the range of probable
output.
üVariable costs are linear for the range of probable
output.
üThe required level of output can be closely
estimated.
üOnly one product is involved.
Example 2
A farm implements dealer is seeking a fourth warehouse location to
complement three existing warehouses. There are three potential
locations: Charlotte, NC; Atlanta, GA; and Columbia, SC.
Charlotte would involve a fixed cost of $4,000 per month and a
variable cost of $4 per unit; Atlanta would involve a fixed cost of
$3,500 per month and a variable cost of $5 per unit; and Columbia
would involve a fixed cost of $5,000 per month and a variable cost
of $6 per unit. Use of the Charlotte location would increase system
transportation costs by $19,000 per month, Atlanta by $22,000 per
month, and Columbia by $18,000 per month. Which location would
result in the lowest total cost to handle 800 units per month?
Given: Volume = 800 units per month
Example 3
A manufacturer of staplers is about to lose its lease, so it must move
to another location.
Two sites are currently under consideration. Fixed costs would be
$8,000 per month at site A and $9,400 per month at site B. Variable
costs are expected to be $5 per unit at site A and $4 per unit at site
B. Monthly demand has been steady at 8,800 units for the last
several years and is not expected to deviate from that amount in the
foreseeable future. Assume staplers sell for $6 per unit.
Determine which location would yield the higher profit under these
conditions.
Factor Rating
Center of Gravity Method
28
Center of Gravity
Method – Example
29
31
Process Selection
and System Design
EXERCISES
Chapter 8 - Textbook
CONSTRAINTS ON HUMAN
RESOURCE STRATEGY
LABOR PLANNING
Ø Labor planning is determining
staffing policies that deal with
(1) employment stability, (2)
work schedules, and (3) work
rules.
JOB
Ø Job design specifies the tasks that
DESIGN constitute a job for an individual or
a group.
Ø Five components of job design:
ü(1) job specialization,
ü(2) job expansion,
ü(3) psychological components,
ü(4) self-directed teams,
ü(5) motivation and incentive
systems.
Ø People’s capabilities and
limitations
Ø The study of the human interface
with the environment and machines.
ERGONOMICS Ø Ergonomics means “the study of
AND THE work.”
WORK
ENVIRONMENT
WORKING CONDITIONS
Ø Working conditions are an important aspect of job design.
Ø Physical factors such as temperature, humidity, ventilation,
illumination, and noise can have a significant impact on worker
performance in terms of productivity, quality of output, and accidents.
Ø In many instances, government regulations apply.
Eg: OSHA in the US
Ø Ethical issues affect operations through work methods, working
conditions and employee safety, accurate record keeping, unbiased
performance appraisals, fair compensation, and opportunities for
advancement.
COMPENSATION
PROJECT MANAGEMENT
Chapter 17 - Textbook