Name Abebayehu G/Selassie

ID# GR/1047/22
BUSA 510
Operations Management
Assignment 5 (Chapter 5)

1. How is FedEx’s location a competitive advantage? Discuss

FedEx's location is competitive advantage. It is so because it is in middle of U.S. that makes the delivery quicker.
The suitability of weather helps the business in better performance as there are less closing issues. Many products
that are made in China, are sold in United States. Unlike its competitors, FedEx is a holding company that provides
transportation, e-commerce, and business services. The company offers a one-stop-shop solution for its customers
through its vast network of subsidiaries. This strategy gives FedEx a significant competitive advantage over its
rivals.

The decision about the location is one of the most important decisions taken by the decision makers, because of
its long-term impact on the company. The secret of choosing the right location lies in knowing the factors that
are most important to the firm's success and finding a location that satisfies them the most.

2. Why have many manufacturing facilities relocated from Western Europe to Asia? Discuss the motives and risks.

Much manufacturing moved to Asia in search of lower production costs. Over time, they have also become more
competitive—and in more technologically advanced industries.
..Such placement of businesses in Asian countries is leading to cost reduction and larger profit making...'
yes...that's the answer why that Europe business migrated to Asian countries (which actually mainly is China).
For the Europeans and US business people this is the best opportunities of all in maximizing the profits and
avoiding all the operational costs difficulties. Why Nokia and Microsoft invested so much and producing world
productions in India and China? Labor alone is only contributing to one of the main concerned in their business
plan. But how about the growing of Europe's industries positioning in their own countries? Not only the labor
cost is higher, but the union too is too powerful and the government even relented to their demand such as
having days off in their factories. Other costs factors such as raw materials and production costs too contributed
to the migration of their business to Asian countries. But China open economic liberation is indeed contributed
to the major migration from developed countries to China. If you asked any major manufacturing companies in
the world, China is the main target for their business transfer as happen to almost all the major players. Again on
Germany, since the merging of West and East Germany in the late 80s, it contributed to the economic growth
and also the low cost of labor (need to check again) with the population growth is very high. That means there
should not have medium cost labor shortage problem. German technology and stringent but stingy management
as always shown by their top manufacturers such as Robert Bosch, Mercedes, BMWs and Audi are the best to be
referred and studied about. Mind you too, German people are absolutely very focus and discipline, just like their
football team. Consistency is the results of all that and such quality contribute to their outstanding economic
maneuvering when dealing with their own domestic business manufacturing. It should always stay put in
German, not else where. That's the reason why their industries are so successful till now.

3. How does factor weighting incorporate personal preference in location choices?

Depending on the business and market conditions, the organizations can have all facilities under single or
multiple units. It includes both the location of the plant and the facilities within the plant.
Country decision,
1. Political risks, government rules, attitudes, incentives
2. Cultural and economic issues
3. Location of markets
4. Labor talent, attitudes, productivity, costs
5. Availability of supplies, communications, energy
6. Exchange rates and currency risks.
Region / community Decisions

1. Corporate desires
2. Attractiveness of region
3. Labor availability, costs, attitudes towards unions
4. Costs and availability of utilities
5. Environmental regulations
6. Government incentives and fiscal policies
7. Proximity to raw materials and customers
8. Land/construction costs.

Site decision

1. Site size and cost

2. Air, rail, highway, and waterway systems
3. Zoning restrictions
4. Proximity of services/supplies needed
5. Environmental impact issues.

Labor productivity

- Wage rates are not the only cost.

- Lower production may increase total cost.
- Exchange rates and currency risks
- Can have a significant impact on cost structure.
- Rates change over time.

Costs

- Tangible: Easily measured costs such as utilities, labor, materials, taxes.

- Intangible: Less easy to quantify and include education, public transportation, community, quality-of-life,
- Location decisions based on costs alone can create difficult ethical.

Political risk, values, and culture

- National, state, local governments attitudes toward private and intellectual property, zoning, pollution,

Employment stability may be in flux.

- Worker attitudes towards turnover, unions, absenteeism.

- Globally cultures have different attitudes towards punctuality, legal, and ethical issues.
- Factors That Affect Location.

Proximity to markets

- Very important to services.

- JIT systems or high transportation costs may make it important to manufacturers.

Proximity to suppliers
 - Perishable goods, high transportation costs, bulky products.

Proximity to competitors

- Called clustering.
- Driven by resources such as natural, information, capital, talent.
- Found in both manufacturing and service industries.

Depending on the business and market conditions, the organizations can have all facilities under single or
multiple units. It includes both the location of the plant and the facilities within the plant.
Generally, the location decision is taken to set up a new plant, relocate or expand the existing plant.
The decision depends on several factors that impact the business in the short and long run. These factors may be
the Industry’s size, nature and product.
The goal behind selecting a suitable location is to create accessibility to:
1. Customers
2. Workers
3. Transportation
4. Materials, etc
Installation of facilities involves massive investment and cannot be changed frequently. Due to poor location
decisions, relocating to another place may lead to a heavy investment loss.
Facility location has a significant impact on different types of costs. These costs include Direct, Indirect, Fixed
and Variable costs. The organization aims to deliver products at minimum cost to its customers.
Therefore, the Industrialists are going for a strategic and logical approach to choose the best location. It also
helps in the smooth and efficient working of the organization.
Objectives of Facility Location
A good site location helps in reducing costs and amplifies the profit earned. The industries invest their valuable
time in search of an ideal site for the following purposes: –
• Revenue Potential from that Site
• Availability of Resources
• Tax advantages
• Reducing Cost and Production Time
• Convenient Transportation Facilities
• Suitable Environment for Employees
• Meet the Maximum Demands of Customers
• Maximum Space Utilization
Criteria
Facility location is a critical decision area and cannot depend on a single criterion. Essential criteria for selecting
the location of a site are as follows: –
1. Costs
The cost perspective is an essential criterion concerning the location of a facility. Any wrong
decision will adversely impact the company’s finances.
2. Competition
Effective location decision helps in achieving a competitive advantage in the markets. As
Industries can control costs and offer products at reasonable prices to the consumers.
3. Hidden Effects
The plant’s location affects many factors in the long run in a direct or indirect manner. To remain
competitive, organizations must strategically locate their facilities.Numerous factors might affect
the location decision. The suitable location is determined by analysing various factors, parameters
and issues.
4. What are the advantages and disadvantages of a qualitative (as opposed to a quantitative) approach to
location decision making? The location decision is strategic in nature and difficult to reverse so it is
taken by high level of employees.
Advantage and disadvantages of qualitative approach location decision making,
 Advantage

• Produce in-depth analysis

• Specific themes and patterns identified
• Rich data leading to further research

Disadvantages
• It's a time-consuming process. ...
• You can't verify the results of qualitative research. ...
• It's a labour-intensive approach. ...
• It's difficult to investigate causality. ...
• Qualitative research is not statistically representative.

Location Decision in operation management is finding an ideal geographical region to install a Facility or
Plant. It is a vital component in facility planning as it greatly impacts the organization's Profitability, Cost
and Success.

5. Quickly review the location of shops and services in your local shopping center.
Can you find examples of clustering in the retail sector?

Around in our area there is fresh corner shop which is located many places in main area in the city,
which have mainly two categories of foods, fruit and vegetables and dairy and meet products.
By clustering their stores according to product grouping (planograms), they are saving both time and
money then, they provide to there target market more effectively and efficiently, they create also
uniformity on there product and familiarity for their customer. Because of all these they build that
service multiple stores.

6. What are the major factors that firms consider when choosing a country in which to locate?

1. Political risks, government rules, attitudes, incentives

2. Cultural and economic issues
3. Location of markets
4. Labor talent, attitudes, productivity, costs
5. Availability of supplies communication, energy
6. Exchange rates and currency risks
7. What factors affect region/community location decisions?
1. Corporate desires
2. Attractiveness of region
3. Labor availability and costs
4. Costs and availability of utilities
5. Environmental regulations
6. Government incentives and fiscal policies
7. Proximity to raw materials and customers
8. Land/construction costs
8. Although most organizations may make the location decision infrequently, there are some organizations that
make the decision quite regularly and often. Provide one or two examples. How might their approach to the l
location decision differ from the norm?
9. List factors, other than globalization, that affect the location decision.
1. Labor Productivity
2. Exchange rates and currency risk
3. Costs
4. Political risk, values, and culture
5. Proximity to marketers
6. Proximity to suppliers
7. Proximity to competitors (clustering)
10. How can the center-of-gravity method be used to find the best locations for local services such as public
libraries, medical centers, or post offices? What constraints should be considered when the method is used in
large, congested cities?
The center of gravity method is used for locating single facilities that considers existing facilities, the distances
between them, and the volumes of goods to be shipped between them.
In logistics, the Centre of Gravity analysis is a method of calculating the ideal location for a centralized
distribution center. It makes it possible to optimize the supply chain. This method considers existing warehouse
facilities and calculates the perfect location based on: Markets, Volume of goods, Shipping, Transport costs,
Labor market situation and cost , Industry knowledge.
There are some limitation when we are in the large conjected city. Because of transportation of goods. When we
talk about libraries, if its very congested cities the voice of the city may disturb. Maintaining pharmaceutical
products on their restricted temperature is also challenge.

11. “Manufacturers locate near their resources; retailers locate near their customers.” Discuss this statement,
with reference to the proximity- to-markets arguments covered in the text. Can you think of a counter-example in
each case? Support your choices.

The location decision has a direct effect on an operation’s costs as well as its ability to serve customers. Also,
location decisions, once made, are difficult and costly to undo. The costs of moving an operation are often
significant and run the risk of inconveniencing customers and staff. It is always best to get the location decision
right first time.
The example is Midroc cement factory. The factory is located to the resource (raw material area.) and the
retailers for those cement is in the city.

12. Why shouldn’t low wage rates alone be sufficient to select a location?
Because of different reason low wage rates shouldn’t be sufficient to select location. It really depends on
manufacturing industry type and cheaper wage rate may not compensate the high shipping/customs costs you
must pay to send your product to the area where demand is high.
Also, low wage workers may not have enough capacity for the work to be done. It may need special types of
knowledge or materials for production, weather as well as the rule of the country.