Ch.10 Service Facility Location

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

10-2

Learning Objectives 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.

10-31. Service Facility Location Planning

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

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, eBay, FedEx)

10-51. Strategic Location Considerations

Front Office Back Office

External Customer(consumer)

Is travel out to customer or customer travel to site?

Can electronic media substitute for physical travel?

Is co-location necessary?

How is communication accomplished?

InternalCustomer(employee)

Availability of labor?

Are self-service kiosks an alternative?

Can employees work from home?

Is offshoring an option?

10-61. Site Selection Considerations

1. Access: 4. Parking: Convenient to freeway exit and Adequate off-street parking entrance ramps 5. Expansion: Served by public transportation Room for expansion2. Visibility: 6. Environment: Set back from street Immediate surroundings

Surrounding clutter should complement the Sign placement service3. Traffic: 7. Competition: Traffic volume on street that may Location of competitors Indicate potential impulse buying 8. Government: Traffic congestion that could be a Zoning restrictions hindrance (e.g.., fire stations) Taxes

10-72. Regression Model for Motel Location (p.231)

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) COLLEGEY= 39 + (-5.41)STATE + (5.86)PRICE + (-3.09)INCOME + (1.75) COLLEGE

10-83. Geographic Representation (GIS)

Location on a Plane

Y Destination j

Yj Euclidean

Origin i

Metropolitan

0Xi Xj

Yi

X

d x x y yij i j i j ( ) ( )/

2 21 2

d x x y yij i j i j

10-94. Effect of Optimization Criteria

1. Maximize Utilization (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)

City A

City B City C -1

0

-5

5

10

1

5

-15 -10 -5 5 10 15 20 25

3

2

1

*

*

*

10-104. Single Facility Location Using Cross Median

Approach

01

234

56

0 2 4 6

X miles

Y m

iles

1 (W1=7)

2 (W2=1)

3 (W3=3)

4 (W4=5)

10-114. Single Facility Location Using Cross Median

Approach

01

234

56

0 2 4 6

X miles

Y m

iles

1 (W1=7)

2 (W2=1)

3 (W3=3)

4 (W4=5)

Solution is line segment y=2, x=2,3Solution is line segment y=2, x=2,3

10-12

Topics for Discussion 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