Operations Management
Module 3: Numerical Questions (Location Strategy)
Q1. Subway, with more than 25,000 outlets in the U.S., is planning for a new restaurant in Buffalo,
New York. Three locations are being considered. The following table gives the factors for each
site.
a. At which site should Subway open the new restaurant?
b. If the weights for Space and Traffic density are reversed, how would this affect the
decision?
Q2. Ken Gilbert owns the Knoxville Warriors, a minor league baseball team in Tennessee. He
wishes to move the Warriors south, to either Mobile (Alabama) or Jackson (Mississippi). The table
below gives the factors that Gilbert thinks are important, their weights, and the scores for Mobile
and Jackson.
a. Which site should he select?
b. Jackson just raised its incentive package, and the new score is 75. Why doesn’t this impact
your decision in part (a)?
Q3. Daniel Tracy, owner of Martin Manufacturing, must expand by building a new factory. The
search for a location for this factory has been narrowed to four sites: A, B, C, or D. The following
table shows the results thus far obtained by Tracy by using the factor-rating method to analyze
the problem. The scale used for each factor scoring is 1 through 5.
a. Which site should Tracy choose?
b. If site D’s score for Energy costs increases from a 3 to a 5, do results change?
c. If site A’s Weather score is adjusted to a 4, what is the impact? What should Tracy do at
this point?
Q4. Hyundai Motors is considering three sites—A, B, and C—at which to locate a factory to build
its new-model automobile, the Hyundai Sport C150. The goal is to locate at a minimum cost site,
where cost is measured by the annual fixed plus variable costs of production. Hyundai Motors
has gathered the following data:
The firm knows it will produce between 0 and 60,000 Sport C150s at the new plant each year, but,
thus far, that is the extent of its knowledge about production plans.
a. For what values of volume, V, of production, if any, is site C a recommended site?
b. What volume indicates site A is optimal?
c. Over what range of volume is site B optimal? Why?
Q5. Peggy Lane Corp., a producer of machine tools, wants to move to a larger site. Two alternative
locations have been identified: Bonham and McKinney. Bonham would have fixed costs of
$800,000 per year and variable costs of $14,000 per standard unit produced. McKinney would
have annual fixed costs of $920,000 and variable costs of $13,000 per standard unit. The finished
items sell for $29,000 each.
a) At what volume of output would the two locations have the same profit?
b) For what range of output would Bonham be superior (have higher profits)?
c) For what range would McKinney be superior?
d) What is the relevance of break-even points for these cities?
Dr. Navneet Bhatt
Q6. The following table gives the map coordinates and the shipping loads for a set of cities that
we wish to connect through a central hub.
a) Near which map coordinates should the hub be located?
b) If the shipments from city A triple, how does this change the coordinates?
Q7. A chain of home health care firms in Louisiana needs to locate a central office from which to
conduct internal audits and other periodic reviews of its facilities. These facilities are scattered
throughout the state, as detailed in the following table. Each site, except for Houma, will be
visited three times each year by a team of workers, who will drive from the central office to the
site. Houma will be visited five times a year. Which coordinates represent a good central location
for this office? What other factors might influence the office location decision? Where would you
place this office? Explain.
Q8. A small rural county has experienced unprecedented growth over the past 6 years, and as a
result, the local school district built the new 500-student North Park Elementary School. The
district has three older and smaller elementary schools: Washington, Jefferson, and Lincoln. Now
the growth pressure is being felt at the secondary level. The school district would like to build a
centrally located middle school to accommodate students and reduce busing costs. The older
middle school is adjacent to the high school and will become part of the high school campus.
Dr. Navneet Bhatt
a) What are the coordinates of the central location?
b) What other factors should be considered before building a school?
Q9. The Burger Doodle restaurant chain purchases ingredients from four different food suppliers.
The company wants to construct a new central distribution centre to process and package the
ingredients before shipping them to their various restaurants. The following figure shows the
locations of the four suppliers, A, B, C, and D, and the annual number of trailers loads that will
be transported to the distribution centre.
Using the centre-of-gravity method, determine a possible location for the distribution centre.
Dr. Navneet Bhatt