Learning Objectives
LO 15-1: Utilize location analysis techniques to compare the attractiveness of potential manufacturing or service locations.
When utilizing the weighted factor rating technique one identifies all factors considered important to the facility location decision. Weights are assigned to each factor and a performance score is given for each factor for each location being considered. The factor score is multiplied by its weight and the weighted scores are added. The location with the highest score is selected. Another technique is the center-of-gravity technique or centroid method. Essentially, this technique finds a central location that minimizes the total transportation costs between the proposed facility and any number of markets the proposed facility will serve.
LO 15-2: Compare the five modes of transportation.
Trucks have low fixed and variable costs relative to other modes and compare favorability to rail and air for distances of less than 1,000 miles. Primary disadvantages are weather and traffic problems. Rail carriers are relatively slow and inflexible, but do compete favorably for long distances and for heavy or bulky shipments. Air carriers are very expensive, but are very fast. The amount of freight that can be hauled is very small relative to the other modes. Water carriers are very inexpensive and are very slow and inflexible. Water carriers are generally used to haul heavy, bulky, low-value materials such as coal. Pipeline carriers are a very specialized mode of transportation. Pipelines can only haul materials that are liquid or gas.
LO 15-3: Discuss warehouse risk pooling and use of the square root rule.
Warehouse risk pooling is the relationship between the number of warehouses, system inventories, and customer service. Basically, this means that the more centralized a warehouse system becomes, i.e., fewer warehouses, the lower the safety stock required to achieve a given system-wide customer service level. The effect of risk pooling can be estimated numerically by the square root rule. This rule states that as the number of warehouses in a system changes, the system inventory required is equal to the original system inventory times the ratio of the square root of the new number of warehouses to the square root of the original number of warehouses.
LO 15-4: Describe the benefits of returns management.
The benefits of a well-managed returns process are customer goodwill, the customers’ perception of product quality, and their perception of purchase risk. Furthermore, returned products can create value as original products, refurbished products, or repair parts. Finally, from a quality perspective, returned items can provide insight into quality and design issues.
LO 15-5: Discuss the environmental benefits of logistics sustainability.
The environmental benefits of logistics sustainability are reduced carbon emissions, improved supply-chain effectiveness, and environmental performance. For example, the environmental impact from returned products can be reduced through activities such as recycling, reusing materials and products, or refurbishing used products.
Chapter Outline
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