Choosing the Right Location and Layout

1. Choosing the Right Location and Layout a decision is the action an executive must take when he has information so incomplete that the answer does not suggest itself…Admiral Radford

2. SCORE Business Plan • Marketing Plan Market research Economics Product Customers Competition Niche Strategy Promotion Promotional Budget Pricing Sales Forecast

3. SCORE Business Plan II. Operational Plan Production Location Legal Environment Personnel Inventory Suppliers Credit Policies Managing Your Accounts Receivable Managing Your Accounts Payable

4. Location- Source of Competitive Advantage • Choosing the Region • Choosing the State Proximity to markets Proximity to needed Raw materials Wage Rates Labor Supply Needs Business Climate Tax Rates Internet Access Total Operating Costs

5. Location (cont’d) • Choosing the City Population Trends Competition Clustering (concentrations of interconnected companies, specialized suppliers, and service providers) Compatibility with the community Local laws and regulations (zoning: a system that divides a city into small cells or districts to control the use of land, buildings and sites) Transportation networks Police and fire protection Cost of utilities and public services Quality of life • Choosing the Site

6. Criteria for Retail and Service Businesses Trade area size Retail compatibility Degree of competition Index of retail saturation Reilly’s Law of Retail Gravitation Transportation network Physical, racial, or emotional barriers Political barriers Customer traffic Adequate parking Reputation Room for expansion Visibility Location (cont’d)

7. Location (cont’d) Retail compatibility: the benefits a company receives by locating near other businesses that sell complementary products and services or generate high volumes of traffic

8. Location (cont’d) Index of retail saturation: a measure of the potential sales per square foot of store space for a given product within a specific trading area: ratio of a trading area’s sales potential for a product or service to its sales capacity IRS= (CxRE)/RF, where IRS is index of retail saturation C is number of customers in trading area RE is average retail expenditure per person for the product in the trading area RF is total square feet of selling space allocated to the product in the trading area

9. Location (cont’d) Reilly’s Law of Retail Gravitation: a business’ ability to draw customers is directly related to the extent to which customers see it as a ‘destination’ and is inversely related to the distance customers must travel to reach it. BP=d/1+SQRPb/Pa, where BP, distance from location A to break pt d, distance between locations A and B Pb, population surrounding B Pa, population surrounding A

10. Location (cont’d) Location Options for Retail and Service Businesses • Central Business District • Neighborhood locations • Shopping Centers and Malls • Near Competitors • Outlying Areas • Home-Based Businesses

11. Shopping Centers and Malls Neighborhood shopping centers Community shopping centers Power centers Theme or festival centers Outlet centers Lifestyle centers Regional shopping malls Super regional shopping malls Location (cont’d)

12. Location (cont’d) Evaluation criteria for mall: • Is there a good fit with other products sold in the mall? • Who are other tenants? Which are anchor stores? • Demographically, is the center a good fit for your products/services? • How much foot traffic does the mall generate? The specific site? • How much vehicle traffic does the mall generate? (major population center, volume of tourists, volume of drive-by traffic) • What is mall’s vacancy rate? Turnover rate? • How much is rent and how is it calculated? • Is the mall successful?

13. Location (cont’d) Location Decision For Manufacturers • Foreign Trade Zones: specially designated area in or near a customs port of entry that allows resident companies to import materials and components from foreign countries; assemble, process, manufacture or package them and then ship the finished product back out while either reducing or eliminating tariffs and duties. • Empowerment Zones: an area designated as economically disadvantaged in which businesses get tax breaks on the investments they make within zone boundaries. • Business Incubators:an organization that combines low-cost, flexible rental space with a multitude of support services for itssmall business residents

14. Layout and Design Considerations • Size • Construction and External Appearance (simple, clean and current, variety) • Entrances • Americans with Disabilities Act • Signs • Building Interiors-ergonomics: the science of adapting work and the environment to complement employees’ strengths and to suit customers’ needs • Lighting and Scent

15. Layout: Maximizing Revenues, Increasing Efficiency or Reducing Costs Retailers grid layout

16. Layout (cont’d) Retailers free-form layout

17. Layout (cont’d) Retailers boutique layout

18. Layout (cont’d) Retailers Space Values for a Small Store

19. Layout for Manufacturers Factors in Manufacturing Layout: • Type of product • Type of production process • Ergonomic considerations • Economic considerations • Space availability within the facility

20. Layout (cont’d) Types of Manufacturing Layouts • Product Layouts: according to the sequence of operations performed on a product • Process Layouts: according to the general function they perform, without any regard to the particular product or customer • Fixed-Position Layouts: in which materials do not move down a production line but rather, because of size or bulk, are assembled on the spot • Functional Layouts: combinations

21. Principles of Lean Manufacturing Planned materials flow pattern Straight-line layout whenever possible Straight, clearly marked aisles Backtracking kept to a minimum Related operations located close together Minimum amount of in-process inventory on hand Easy adjustment to changing conditions Minimum materials handling distances Minimum of manual handling of materials and products Ergonomic work centers Minimum distances between work stations and processes No unnecessary rehandling of materials Minimum handling between operations Minimum storage Materials delivered just in time Materials efficiently removed from the work area Maximum visibility to spot problems and improve safety Orderly materials handling and storage Good housekeeping; minimum clutter Maximum flexibility Maximum communication Layouts (cont’d)

22. Dell Heavy lifting Flexible manufacturing Teamwork Speed testing Lean inventory Victoria’s Secret ‘Landing Strip’ Central hub Classier color scheme Bring catalog to life A menu of choices Layout (cont’d)