Practice Problems: Chapter 8, Location Strategies

Problem 1: A major drug store chain wishes to build a new warehouse to serve the whole Midwest. At the moment, it is looking at three possible locations. The factors, weights, and ratings being considered are given below:

Ratings Factor $earness to markets *abor cost Ta,es $earness to suppliers hich cit0 should the0 choose1 Problem 2: 2alfour3s is considering building a plant in one of three possible locations. The0 have estimated the following parameters for each location: eights %& ) -) -& !eoria ' + + -& "es Moines ( + . / #hicago ) ' ( -&

*ocation aco, Te,as Tijuana, Me,ico Fa0etteville, Arkansas

Fi,ed #ost 56&&,&&& 5+&&,&&& 5-&&,&&&

4ariable #ost 5).() 5%.() 5+.&&

For what unit sales volume should the0 choose each location1

Problem 3: 7ur main distribution center in !hoeni,, A8 is due to be replaced with a much larger, more modern facilit0 that can handle the tremendous needs that have developed with the cit03s growth. Fresh produce travels to the seven store locations several times a da0 making site selection critical for efficient distribution. 9sing the data in the following table, determine the map coordinates for the proposed new distribution center.

:tore *ocations Mesa =lendale #amelback :cottsdale Apache >unction :un #it0 !ima

Map #oordinates ;,,0< ;-&,)< ;6,+< ;',(< ;-),-&< ;-6,6< ;-,-%< ;),)<

Truck Round Trips per "a0 6 6 % / ) 6 -&

Problem 4: A compan0 is planning on e,panding and building a new plant in one of three countries in Middle or ?astern ?urope. The general manager, !atricia "onegal, has decided to base her decision on si, critical success factors: technolog0 availabilit0 and support, availabilit0 and @ualit0 of public education, legal and regulator0 aspects, social and cultural aspects, economic factors, and political stabilit0. 9sing a rating s0stem of - ;least desirable< to ) ;most desirable< she has arrived at the following ratings ;0ou ma0, of course, have different opinions<. An which countr0 should the plant be built1

#ritical :uccess Factor Technolog0 availabilit0 and support Availabilit0 and @ualit0 of public education *egal and regulator0 aspects :ocial and cultural aspects ?conomic factors !olitical stabilit0

Turke0 ' ' % ) ' '

:erbia 6 ' ' 6 6 %

:lovakia ' 6 ) ' 6 6

Problem 5: Assume that !atricia decides to use the following weights for the critical success factors: Technolog0 availabilit0 and support Availabilit0 and @ualit0 of public education *egal and regulator0 aspects :ocial and cultural aspects ?conomic factors !olitical stabilit0 ould this change her decision1 &.6 &.% &.&.&.&.%

Problem 6: !atricia3s advisors have suggested that Turke0 and :lovakia might be better differentiated b0 either ;a< doubling the number of critical success factors, or ;b< breaking down each of the e,isting critical success factors into smaller, more narrowl0 defined items, e.g., Availabilit0 and @ualit0 of public education might be broken into primar0, secondar0, and postBsecondar0 education. Cow would 0ou advise Ms. "onegal1

'

ANS Problem 1:

!"S:

Ratings Factor $earness to markets *abor cost Ta,es $earness to suppliers eights %& ) -) -& !eoria ' + + -& :um of "es Moines ( + . / #hicago ) ' ( -& !eoria +& '& -%& -&& 6'&

eighted Ratings "es Moines -'& '& -6) /& 6() #hicago -&& %& -&) -&& 6%)

eighted ratings:

Therefore, it appears that based upon the weights and rating, "es Moines should be chosen.

Problem 2: Transition between aco and Tijuana:

6&&, &&& + ;).() x< = +&&, &&& + ;%.() x< 6 x = )&&, &&& x = -//, &&& Transition between aco and Fa0etteville:

6&&, &&& + ;).() x< = -&&, &&& + ;+.&& x< %&&, &&& = %.%) x ++,+++ = x

Problem 3: $ew "istribution #enter should be located at: ;-&D6< + ;6D6< + ;'D %< + ;-)D/< + ;-6D)< + ;-D6< + ;)D-&< %)) = = (..( 6 + 6 + % + / + ) + 6 + -& 6% ;)D6< + ;+D6< + ;( D %< + ;-&D/< + ;6D)< + ;-%D6< + ;)D-&< %-' = = /./. 6 + 6 + % + / + ) + 6 + -& 6%

Cx =

Cy =

Problem 4:

#ritical :uccess Factor Technolog0 availabilit0 and support Availabilit0 and @ualit0 of public education *egal and regulator0 aspects :ocial and cultural aspects ?conomic factors !olitical stabilit0 E

Turke0 ' ' % ) ' ' %6

:erbia 6 ' ' 6 6 % -.

:lovakia ' 6 ) ' 6 6 %%

2ased upon her ratings of the critical success factors, !atricia should choose Turke0. From a practical perspective, given the small difference between the scores for Turke0 and :lovakia, and the subjectivit0 of the ratings themselves, !atricia would be better advised to develop additional critical success factors, more carefull0 weigh the individual factorsF or, in general, to ac@uire more information before making her decisions.

Problem 5:

#ritical :uccess Factor Technolog0 availabilit0 and support Availabilit0 and @ualit0 of public education *egal and regulator0 aspects :ocial and cultural aspects ?conomic factors !olitical stabilit0

gt &.6 &.% &.&.&.&.%

Turke0 ' ' % ) ' ' -.% &.+ &.% &.) &.' &.+

:erbia 6 ' ' 6 6 % &.. &.+ &.' &.6 &.6 &.' 6.-

:lovakia ' 6 ) ' 6 6 -.% &./ .) &.' &.6 &./ 6./

E 6..

$o, in this case, use of the weighting factors does not change the recommendation. 7ne might again suggest that additional information be considered in making the decision. Problem 6: ;a< "oubling the number of critical success factors. There are two issues here. First, from a practical perspective there are a limited number of trul0 GcriticalH success factors I and these should be the ones presentl0 being considered. An0 additional factors should be of secondar0 or tertiar0 importance. :econd, given the subjective nature of the rating process, adding additional factors would also increase the overall margin of error of the final ratings to a degree that ma0 eliminate an0 gain in differentiation arising from the use of the additional factors. The use of a ma,imum of seven to nine critical success factors is usuall0 appropriate. ;b< =iven that one3s abilit0 to estimate or rate an aggregate is usuall0 better than one3s abilit0 to estimate or rate the individual components of the aggregate, this approach is unlikel0 to provide much help.