Ch 10 Service Facility Location Mc Graw-Hill Irwin Copyright

Ch. 10 Service Facility Location Mc. Graw-Hill/Irwin Copyright © 2008 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

10 -2 Learning Objectives n n n Explain the different between competitive clustering and saturation marketing. Explain the impact of the Internet on location decisions. Describe how a geographic information system (GIS) is used in service location decisions. Differentiate between a Euclidian and metropolitan metric approach to measuring travel distance. Locate a single facility using the cross-median approach.

10 -3 1. Service Facility Location Planning n n Competitive positioning: prime location can be barrier to entry. Demand management: diverse set of market generators. Flexibility: plan for future economic changes and portfolio effect. Expansion strategy: contiguous, regional followed by “fill-in, ” or concentrated.

10 -4 1. Strategic Considerations n n n Competitive Clustering (Among Competitors) (e. g. Auto Dealers, Motels) Saturation Marketing (Same Firm) (e. g. An Bon Pain, Ice Cream Vendors) Marketing Intermediaries (e. g. Credit Cards, HMO) Substitute Communication for Travel (e. g. telecommuting, e-Commerce) Separation of Front from Back Office (e. g. ATM, shoe repair) Impact of the Internet on Service Location (e. g. Amazon. com, e. Bay, Fed. Ex)

10 -5 1. Strategic Location Considerations Front Office Is travel out to customer or customer travel to site? External Customer Can electronic media (consumer) substitute for physical travel? Availability of labor? Internal Are self-service kiosks an Customer alternative? (employee) Back Office Is co-location necessary? How is communication accomplished? Can employees work from home? Is offshoring an option?

10 -6 1. Site Selection Considerations 1. Access: Convenient to freeway exit and entrance ramps Served by public transportation 2. Visibility: Set back from street Surrounding clutter Sign placement 3. Traffic: Traffic volume on street that may Indicate potential impulse buying Traffic congestion that could be a hindrance (e. g. . , fire stations) 4. Parking: Adequate off-street parking 5. Expansion: Room for expansion 6. Environment: Immediate surroundings should complement the service 7. Competition: Location of competitors 8. Government: Zoning restrictions Taxes

10 -7 2. Regression Model for Motel Location (p. 231) n n n Competitive Factors: Room rate, hotels within one mile, competitive room rate Demand Generators: College, Hospital beds within one mile, Annual tourists Area Demographics: Family income, residential population Market Awareness: State population per inn, Distance to nearest inn Physical Attributes: Sign visibility, Distance to downtown, Accessibility Y= 39 + (-5. 41)STATE + (5. 86)PRICE + (-3. 09)INCOME + (1. 75) COLLEGE

10 -8 3. Geographic Representation (GIS) Location on a Plane Y Destination j Yj Euclidean Origin i Yi Metropolitan 0 Xi Xj X

10 -9 4. Effect of Optimization Criteria City A 10 15 3 2 5 * -10 * -5 5 10 15 -10 City B 20 1. Maximize Utilization 1 (City C: elderly find distance a barrier) 2. Minimize Distance per Capita (City B: centrally located) 3. Minimize Distance per Visit (City A: many frequent users) 25 * -5 -15 City C

10 -10 4. Single Facility Location Using Cross Median Approach 3 (W 3=3) 2 (W 2=1) 1 (W 1=7) 4 (W 4=5)

10 -11 4. Single Facility Location Using Cross Median Approach 3 (W 3=3) 2 (W 2=1) 1 (W 1=7) 4 (W 4=5) Solution is line segment y=2, x=2, 3

10 -12 Topics for Discussion n n Pick a particular service, and identify shortcomings in its site selection. What are the characteristics of a service that would make communication a good substitute for transportation? What are the benefits of using intermediaries in the service distribution channel? Go to http: //www. mapinfo. com/ and find the definition of “location intelligence. ” What use can be made of geographic information?

10 -13 Interactive Exercise The class breaks into small groups and each group comes up with examples of service facility locations that seem to defy the analytical models discussed in the chapter. E. g. COSTCO, 風城，台茂， 柑仔店，新竹凱薩，光復高中餐廳