Unit 3 Discussion Board
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Uploaded by MateHawk13816
Kody Ness
SCM610: Logistics/SCM Inventory and Distribution
November 29
th
, 2023
Unit 3: Efficiency in the Supply Chain
When looking to implement a facility in a new location, businesses should be sure to conduct the
right studies to ensure future success. There are several factors that play a key role in whether success can be achieved. Evaluations should be done deliberately to include as much information as possible, so as not to make a decision simply based on a whim or hunch. While overall cost is an important factor in the decision-making process, there are other characteristics that should be analyzed before coming to a final verdict on location selection. I will outline some of these factors below and how the company can use research on these factors to make an informed decision on operating in a new area. One factor that can influence a company’s decision is the location of the majority of their customers. “Facility locations are selected closer to the customer as to reduce transportation cost and decrease time in reaching the customer” (Managementstudyguide.com, 2023). The location of raw materials that may be used for manufacturing should also be taken into consideration, as the ability to receive materials and manufacture products quickly may help to increase sales and sustain high customer satisfaction levels. This factor can also be combined with being in close proximity to their customers, also aiding in speeding up the time it takes for a product to reach its final destination. The company can utilize a gravity model to find the optimal location for its next facility in a specific region. “Given the quantity coming from supply sources and market demand, the model identifies the geographic location in a region that minimizes the total transportation cost” (Chopra, 2018). The approach places all of the suppliers and markets on a grid, pinning the coordinates of each of these locations. Once these are found, the company can add up the sum of the total shipments at each location and then find the center point for both the X and Y axis using the formulas listed below provided
by OFI Enterprises (Blok, 2022):
The X value for the Center Point = Sum(X value * Shipments) / Sum of Shipments
The Y value for the Center Point = Sum(Y value * Shipments) / Sum of all Shipments
Finding the center point is crucial in locating the best possible location for minimizing transportation costs at each of the designated locations on the grid. It makes each location equally important, not leaving any of them out of the equation. If this is done properly, the company can find a specific location within all of their coordinates that keeps quantity flowing from their suppliers and also allows products to be distributed to consumers in a timely manner. The ability to receive resources from suppliers, minimize transportation costs, and keep their customers happy should all be high priority factors for the company when pinpointed their ideal location.
References
Blok, P. (2022, April 19). Center of Gravity Technique for Locating a Distribution Center
. OFI Your Partner for Supply Chain Education & Consulting. https://ofienterprises.com/center-of-gravity-technique-for-locating-a-distribution-center/
Chopra, S. (2018). Supply Chain Management: Strategy, Planning, and Operation
(7th ed.). Pearson Education (US). https://coloradotech.vitalsource.com/books/9780134732459
Managementstudyguide.com. (2023). Facility location - Factors Influencing the Decision
. Management Study Guide. https://www.managementstudyguide.com/facility-location.htm
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