FINALS OPMA

• Key Factors in Facility Location Decision-Making

  • Proximity to sources of supply
  • Proximity to customers
  • Community factors
  • Labor factors
  • Other factors (quality of life, access to major transportation arteries, construction costs, proximity of the competition, and opportunities for future expansion)
• Methods for Finding the Best Facility Location

  1. Factor Rating
  2. Centre of Gravity Method
• The Centre of Gravity method is used when there are multiple locations that need to be considered.
• Factor Rating

  • also known as Weighted Scoring Model
  • General approach to evaluating locations that includes quantitative and qualitative inputs
• Center of Gravity Method

  • Locating a distribution center that minimizes distribution cost or travel time to various destinations
• Regional Factors

  1. Location of raw materials

  2. Location of markets

  3. Labor factors
• Primary reasons why firms locate near or at the source of raw materials

  1. Necessity

  2. Perishability

  3. Transportation costs
• Multiple Plant Manufacturing Strategies

  1. Product plant strategy

  2. Market area plant strategy

  3. Process plant strategy

  4. General-purpose plant strategy
• Key Factors for Global Locations

  1. Trade agreements
  2. Technology
• Evaluating Location Alternatives

  1. Locational Cost-Profit-Volume Analysis
  2. Transportation Model
  3. Factor rating
  4. Center of gravity method
• Locational Cost-Profit-Volume Analysis

  • Technique for evaluating location choices in economic terms
• Total cost = FC + v x Q
• FC – fixed cost

  v – variable cost per unit

  Q – quantity or volume of output

  R – revenue per unit
• Total profit = Q(R-v) - FC
• Transportation Model

  • Finds amount to be shipped from several points of supply to several points of demand
  • Solution will minimize total production and shipping costs
  • A special class of linear programming problems
• Quality

  Ability of a product or service to

  consistently meet or exceed

  customer expectations
• Dimensions of Quality

  Product Quality:

  Performance

  Aesthetics

  Special features

  Conformance

  Reliability

  Durability

  Perceived quality

  Serviceability
• Dimensions of Quality

  Service Quality:

  Convenience

  Reliability

  Responsiveness

  Time

  Assurance

  Courtesy

  Tangibles
• Determinants of Quality

  1. Design

  2. How well the product or service conforms to the design

  3. Ease of use

  4. Service after delivery
• Consequences of Poor Quality

  1. Loss of business

  2. Liability

  3. Productivity

  4. Costs
• Cost of Quality

  1. Appraisal costs
  2. Prevention costs
  3. Failure costs
• Appraisal Costs

  • Costs of activities designed to ensure quality or uncover defects
• Prevention Costs

  • Costs of preventing defects from occurring
• Failure Costs

  • Costs caused by defective parts or products or by faulty services
  • Internal or external
• Quality Awards

  • Baldrige Award
  • European Quality Award
  • International Asia Pacific Quality Award
  • Deming Prize
• Malcolm Baldrige National Quality Award Categories

  Leadership

  Strategic Planning

  Customer and Market Focus

  Information and Analysis

  Human Resource Focus

  Process Management

  Business Results
• Quality Certification

  ISO 9000 and 14000
• Quality Tools

  Flowchart

  Check sheets

  Histograms

  Pareto analysis

  Scatter diagrams

  Control charts

  Cause-and-Effect Diagrams
• Quality of that product is determined by two primary factors

  1. Design Quality
  2. Process Quality
• Design quality can be described as the quality that a product has in terms of the actual characteristics of the product.
• Performance

  • Primary operating characteristic
• Durability

  • Ability to withstand damage
• Reliability

  • Long lasting; how long before a breakdown occur
• Features

  • Extra characteristics, bells, and whistles
• Serviceability

  • How easy it is to fix and how willing the organization is to repair the product
• Reputation

  • Perceived image in the marketplace
• Aesthetics

  • The appearance of the product, feel, smell, taste
• Process quality refers to the ability of the organization to produce the good or service having perfect quality at each stage of the process, or in other words, manufacturing defect-free products.
• Process Quality Elements

  • Raw Materials
  • Equipment
  • Employees
  • Technology
• Factors affecting Location Decisions

  Manufacturing:

  ✓ Availability of

  abundant energy

  and water supply

  ✓ Proximity to raw

  materials

  ✓ Transportation

  costs