Location Strategies – Test Bank | Ch8 – 10th Global

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Operations Management, 10e, Global Edition (Heizer/Render)

Chapter 8 Location Strategies

1) FedEx chose Memphis, Tennessee, for its central location, or "hub," primarily because of the incentives offered by the city of Memphis and the state of Tennessee.

Diff: 1

Topic: Global company profile

Objective: no LO

2) Generally, the objective of the location decision is to maximize the firm's profit.

Diff: 1

Topic: The strategic importance of location

Objective: LO8-1

3) Lists have been developed that rank countries on issues such as "competitiveness" and "corruption."

Diff: 1

Topic: Factors that affect location decisions

Objective: LO8-1

4) When innovation replaces cost as a firm's focus for location decisions, the presence of other state-of-the-art firms is a plus, not a negative, for the firm's competitiveness.

Diff: 2

Topic: The strategic importance of location

Objective: LO8-1

5) The ratio of labor cost per day to productivity, in units per day, is the labor cost per unit.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

6) For a location decision, labor productivity may be important in isolation, but low wage rates are a more important criterion.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

7) Unfavorable exchange rates can offset other savings in a location decision.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

8) An example of an intangible cost, as it relates to location decisions, is the quality of education.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

9) In location decisions, intangible costs are easier to measure than tangible costs.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

10) Location decisions are based on many things, including costs, revenues, incentives, attitudes, and intangibles, but not on ethical considerations.

Diff: 1

Topic: Factors that affect location decisions

AACSB: Ethical Reasoning

Objective: LO8-1

11) Manufacturers may want to locate close to their customers, if the transportation of finished goods is expensive or difficult.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

12) One reason for a firm locating near its competitors is the presence of a major resource it needs.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

13) The graphic approach to location break-even analysis displays the range of volume over which each location is preferable.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-4

14) The factor-rating method can consider both tangible and intangible costs.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

15) The center-of-gravity method finds the location of a centralized facility, such as a distribution center, that will maximize the organization's revenue.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

16) The transportation model calculates an optimal shipping system between a central facility and several outlying customers.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

17) Service firms choose locations based, in part, on the revenue potential of a site.

Diff: 2

Topic: Service location strategy

Objective: LO8-6

18) Starbucks Coffee's approach to choosing new café locations is largely based on executive intuition, not sophisticated models and site selection technology.

Diff: 1

Topic: Service location strategy

Objective: LO8-6

19) Labor cost and labor availability often drive the location decision in the call center industry.

Diff: 2

Topic: Service location strategy

Objective: LO8-6

20) The location decisions of goods-producing firms will generally pay more attention to parking, access, and traffic counts than will service location decisions.

Diff: 2

Topic: Service location strategy

Objective: LO8-6

21) Industrial location decisions often assume that costs are relatively constant for a given area.

Diff: 2

Topic: Service location strategy

Objective: LO8-6

22) Starbucks Coffee's use of geocoded demographic and consumer data in site selection decisions is an example of the use of a Geographic Information System, or GIS.

Diff: 2

Topic: Service location strategy

Objective: LO8-6

23) FedEx chose Memphis, Tennessee, as its U.S. hub because

A) the city is in the center of the U.S., geographically

B) the airport has relatively few hours of bad weather closures

C) it needed a means to reach cities to which it did not have direct flights

D) the firm believed that a hub system was superior to traditional city-to-city flight scheduling

E) All of the above are true.

Diff: 1

Topic: Global company profile

Objective: no LO

24) Which of the following statements regarding FedEx is true?

A) Its hub in Memphis, Tennessee, was selected because of its low cost.

B) Memphis, Tennessee, is the only hub in the company's global flight network.

C) FedEx believes the hub system helps reduce mishandling and delays due to better controls.

D) FedEx uses a hub system in the U.S., but a city-to-city network in other countries.

E) Memphis is FedEx's only hub airport in the United States.

Diff: 1

Topic: Global company profile

Objective: no LO

25) Industrial location analysis typically attempts to

A) reduce costs

B) maximize sales

C) focus more on human resources

D) be environmentally friendly

E) none of the above

Diff: 1

Topic: Strategic importance of location

Objective: LO8-1

26) Transportation costs can account for as much as what % of a product's selling price?

A) 5%

B) 10%

C) 15%

D) 20%

E) 25%

Diff: 2

Topic: Strategic importance of location

Objective: LO8-1

27) Changing locations can alter total operating expenses by as much as what %?

A) 10%

B) 15-25%

C) 30-40%

D) 50%

E) 60% and above

Diff: 2

Topic: Strategic importance of location

Objective: LO8-1

28) Which of the following was not a factor in determining the location of Intel's Arizona plant?

A) skilled labor availability

B) U.S. laws to protect intellectual property

C) tax breaks from local and regional government

D) proximity to Intel's California headquarters

E) All of the above were key factors.

Diff: 2

Topic: Strategic importance of location

Objective: LO8-1

29) Which of the following is the correct DESCENDING order for country competitiveness, according to the text?

A) U.S., Israel, Italy, Mexico, Egypt

B) U.S., Israel, Mexico, Egypt, Italy

C) Israel, U.S., Italy, Mexico, Egypt

D) Israel, Italy, U.S., Egypt, Mexico

E) None of the above is the correct descending order.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

30) __________ and __________ are to key country success factors as __________ and __________ are to key region success factors.

A) Cultural issues, location of markets; site size and cost, zoning restrictions

B) Exchange rates, labor availability; site size and cost, environmental impact

C) Labor cost, currency risk; land costs, proximity to customers

D) Land costs, proximity to customers; labor cost, air and rail systems

E) All of the above are accurate relationships.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

31) Which of the following workers is the most productive?

A) $50 wages, 10 parts produced

B) $10 wages, 1 part produced

C) $30 wages, 5 parts produced

D) $100 wages, 21 parts produced

E) $500 wages, 100 parts produced

Diff: 2

Topic: Factors that affect location decisions- labor productivity

AACSB: Analytic Skills

Objective: LO8-2

32) A employee produces 15 parts during a shift in which he made $90. The labor content of the product is

A) $90

B) $5

C) $6

D) $.167

E) none of the above

Diff: 2

Topic: Factors that affect location decisions- labor productivity

AACSB: Analytic Skills

Objective: LO8-2

33) Instead of comparing the salaries of Detroit autoworkers to foreign autoworkers to determine if Union labor prices are the cause of Detroit's financial woes, which of the following should be used?

A) labor content per vehicle

B) labor productivity

C) total production

D) A or B

E) None of the above, salary is the best comparison.

Diff: 2

Topic: Factors that affect location decisions- labor productivity

Objective: LO8-2

34) The reason fast food restaurants often are found in close proximity to each other is

A) they enjoy competition

B) location Clustering near high traffic flows

C) low cost

D) availability of skilled labor

E) all of the above

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

35) While Volkswagen uses __________ to evaluate location alternatives, a local grocery chain would rather use __________ to determine where to locate its distribution center.

A) transportation model, center-of-gravity

B) transportation model, factor rating

C) break-even analysis, center-of-gravity

D) break-even analysis, transportation model

E) center-of-gravity, transportational model

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

36) Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution, and employment stability may change over time. The term associated with this phenomenon is

A) bureaucratic risk

B) political risk

C) legislative risk

D) judicial risk

E) democratic risk

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

37) A location decision for an appliance manufacturer would tend to have a(n)

A) cost focus

B) labor focus

C) revenue focus

D) environmental focus

E) education focus

Diff: 2

Topic: Strategic importance of location

Objective: LO8-1

38) A location decision for a traditional department store (Macy's) would tend to have a(n)

A) cost focus

B) labor focus

C) revenue focus

D) environmental focus

E) education focus

Diff: 2

Topic: Strategic importance of location

Objective: LO8-1

39) Globalization of the location decision is the result of all of the following except

A) market economics

B) higher quality of labor overseas

C) ease of capital flow between countries

D) high differences in labor costs

E) more rapid, reliable travel and shipping

Diff: 2

Topic: Factors that affect location decisions

AACSB: Multicultural and Diversity

Objective: LO8-1

40) In location planning, environmental regulations, cost and availability of utilities, and taxes are

A) global factors

B) country factors

C) regional/community factors

D) site-related factors

E) none of the above

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

41) A manufacturing firm finds a location that has a significant cost advantage over alternatives, but rejects that location because the educational infrastructure was insufficient to train the firm's workers in its special production technologies. The firm's action illustrates the link between __________ and location.

A) innovation

B) clustering

C) tax incentives

D) globalization

E) proximity

Diff: 1

Topic: The strategic importance of location

Objective: LO8-1

42) Which of the following is usually not one of the top considerations in choosing a country for a facility location?

A) availability of labor and labor productivity

B) exchange rates

C) attitude of governmental units

D) zoning regulations

E) location of markets

Diff: 2

Topic: Factors that affect location decisions

AACSB: Multicultural and Diversity

Objective: LO8-1

43) When making a location decision at the country level, which of these would be considered?

A) corporate desires

B) land/construction costs

C) air, rail, highway, waterway systems

D) zoning restrictions

E) location of markets

Diff: 2

Topic: Factors that affect location decisions

AACSB: Multicultural and Diversity

Objective: LO8-1

44) Which of these factors would be considered when making a location decision at the region/community level?

A) government rules, attitudes, stability, incentives

B) cultural and economic issues

C) zoning restrictions

D) environmental impact issues

E) proximity to raw materials and customers

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

45) When making a location decision at the region/community level, which of these would be considered?

A) government rules, attitudes, stability, incentives

B) cultural and economic issues

C) cost and availability of utilities

D) zoning restrictions

E) air, rail, highway, waterway systems

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

46) Which of these factors would be considered when making a location decision at the site level?

A) government rules, attitudes, stability, incentives

B) cultural and economic issues

C) zoning regulations

D) cost and availability of utilities

E) proximity to raw materials and customers

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

47) Tangible costs include which of the following?

A) climatic conditions

B) availability of public transportation

C) taxes

D) quality and attitude of prospective employees

E) zoning regulations

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

48) Intangible costs include which of the following?

A) quality of prospective employees

B) quality of education

C) availability of public transportation

D) all of the above

E) none of the above

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

49) Operations managers will need to consider ethical and social responsibility issues when location decisions involve

A) child labor issues

B) sweatshop conditions

C) allegiance to the firm's current location

D) corruption

E) all of the above

Diff: 2

Topic: Factors that affect location decisions

AACSB: Ethical Reasoning

Objective: LO8-1

50) A firm is seeking a new factory location, and is considering several countries worldwide. In some of these countries, child labor is prevalent; in others, working conditions and worker safety are inferior to conditions in the U.S. An operations manager paying attention to __________ will factor these issues into the location decision.

A) ethical and social responsibility issues

B) key success factors

C) factor-rating systems

D) geographic information systems

E) regression models

Diff: 1

Topic: Factors that affect location decisions

AACSB: Ethical Reasoning

Objective: LO8-1

51) Which of the following statements regarding "proximity" in the location decision is false?

A) Service organizations find that proximity to market is the most critical primary location factor.

B) Manufacturers want to be near customers when their product is bulky, heavy, or fragile.

C) Perishability of raw materials is a good reason for manufacturers to locate near the supplier, not the customer.

D) Reduction in bulk is a good reason for a manufacturer to locate near the supplier.

E) Clustering among fast food chains occurs because they need to be near their labor supply.

Diff: 1

Topic: Factors that affect location decisions

Objective: LO8-1

52) Which of the following is the best example of the proximity rule that, for service firms, proximity to market is the most important location factor?

A) Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances.

B) Few people will travel out-of state for a haircut.

C) Patients will travel very long distances to have their hernia surgeries performed at Shouldice

Hospital.

D) Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers.

E) Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal's source.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

53) Which of the following worker characteristics would likely be least important for U.S. firms looking to open up call centers in different countries?

A) willing to accept low wages

B) have a high level of education

C) speak English

D) possess an in-depth knowledge of American popular culture

E) are young

Diff: 2

Topic: Service location strategy

AACSB: Multicultural and Diversity

Objective: LO8-6

54) Community attitudes, zoning restrictions, and quality of labor force are likely to be considered in which of the following location decision methods?

A) transportation method

B) locational break-even analysis

C) center-of-gravity method

D) simulation

E) factor-rating method

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

55) Which of the following methods best considers intangible costs related to a location decision?

A) crossover methods

B) locational break-even analysis

C) factor-rating analysis

D) the transportation method

E) the assignment method

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

56) Evaluating location alternatives by comparing their composite (weighted-average) scores involves

A) factor-rating analysis

B) cost-volume analysis

C) transportation model analysis

D) linear regression analysis

E) crossover analysis

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

57) A clothing chain is considering two different locations for a new retail outlet. They have identified the four factors listed in the following table as the basis for evaluation, and have assigned weights as shown on the left. The manager has rated each location on each factor, on a 100-point basis, as shown on the right.

What is the score for Chester?

A) 10.00

B) 24.50

C) 25.75

D) 27.00

E) 100.00

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

58) An approach to location analysis that includes both qualitative and quantitative considerations is

A) locational cost-volume

B) factor-rating

C) transportation model

D) assignment method

E) make or buy analysis

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

59) On the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which

A) fixed costs are equal for two alternative locations

B) variable costs are equal for two alternative locations

C) total costs are equal for all alternative locations

D) fixed costs equal variable costs for one location

E) total costs are equal for two alternative locations

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-4

60) A full-service restaurant is considering opening a new facility in a specific city. The table below shows its ratings of four factors at each of two potential sites.

The score for Gary Mall is __________ and the score for Belt Line is __________.

A) 120; 120

B) 22; 24

C) 18; 120

D) 34; 28

E) none of the above

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

61) A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs 0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If demand is expected to be 10 million units, which plant offers the lowest total cost?

A) Plant A, because it is cheaper than Plant B for all volumes under 8,000,000 units.

B) Plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units.

C) Plant A, because it is cheaper than Plant B for all volumes.

D) Plant B, because it has the lower variable cost per unit.

E) Neither Plant A nor Plant B, because the crossover point is at 10 million units.

Diff: 1

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-4

62) The center-of-gravity method does not take into consideration the

A) location of markets

B) volume of goods shipped to the markets

C) value of the goods shipped

D) combination of volume and distance

E) center-of-gravity method considers none of the above

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

63) The center-of-gravity method is used primarily to determine what type of locations?

A) service locations

B) manufacturing locations

C) distribution center locations

D) supplier locations

E) call center locations

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

64) A regional bookstore chain is about to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis?

A) assembly line balancing

B) load-distance analysis

C) center-of-gravity model

D) linear programming

E) all of the above

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

65) East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided. What is the center of gravity?

A) X = 28.125; Y = 31.25

B) X = 22000; Y = 24000

C) X = 27.5; Y = 40

D) center of gravity = 28

E) none of the above

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

66) A county wants to build one centrally-located processing facility to serve the county's four recycling drop-off locations. The four drop-offs have characteristics as given in the table below. What is the approximate center of gravity of these four locations?

A) 4.75, 6.04

B) 17, 24

C) 33.5, 135.4

D) 6, 4.25

E) 570, 725

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

67) Production and/or shipping costs are always considered in which of the following location decision methods?

A) factor-rating method

B) transportation method

C) locational break-even analysis

D) center-of-gravity method

E) crossover analysis

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

68) The transportation method, when applied to location analysis

A) minimizes total fixed costs

B) minimizes total production and transportation costs

C) minimizes total transportation costs

D) maximizes revenues

E) minimizes the movement of goods

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

69) Which of the following is not among the eight components of revenue and volume for a service firm?

A) quality of the management

B) shipment cost of finished goods

C) purchasing power of the customer-drawing area

D) uniqueness of the firm's and the competitor's locations

E) competition in the area

Diff: 2

Topic: Service location strategy

Objective: LO8-6

70) Which of the following is among the eight components of revenue and volume for a service firm?

A) uniqueness of the firm's and the competitor's locations

B) quality of the competition

C) quality of management

D) purchasing power of the customer-drawing area

E) all of the above

Diff: 2

Topic: Service location strategy

Objective: LO8-6

71) Traffic counts and purchasing power analysis of drawing area are techniques associated with

A) an industrial location decision

B) a manufacturing location decision

C) a retail or professional service location decision

D) the factor rating method

E) the transportation method

Diff: 2

Topic: Service location strategy

Objective: LO8-6

72) Which of the following statements regarding Starbucks Coffee is false?

A) The firm plans to open three new cafes per day around the world.

B) The firm uses GIS to evaluate every site decision.

C) The firm's cafes are exclusively in traditional settings: malls, tourist areas, and airports.

D) The firm places cafes into ever more innovative locations.

E) The firm put cafes in Japan, even though that country had no GIS data available.

Diff: 1

Topic: Methods of evaluating location decisions

Objective: LO8-1

73) LaQuinta Motor Inns has a competitive edge over its rivals because it

A) uses regression analysis to determine which variables most influence profitability

B) picks better locations than its rivals

C) picks larger locations than its rivals

D) builds only along interstate highways

E) all of the above

Diff: 2

Topic: Service location strategy

Objective: LO8-1

74) Traffic counts and demographic analysis of drawing areas are associated with

A) industrial location decisions

B) manufacturing location decisions

C) service location decisions

D) the transportation method

E) none of the above

Diff: 2

Topic: Service location strategy

Objective: LO8-1

75) What describes a system that stores and displays information that can be linked to a geographic location?

A) AIS

B) LOC

C) GLOC

D) LIS

E) GIS

Diff: 2

Topic: Service location strategy

AACSB: Use of IT

Objective: LO8-1

76) Location analysis techniques typically employed by service organizations include

A) factor rating method

B) center-of-gravity method

C) purchasing power analysis of area

D) traffic counts

E) all of the above

Diff: 2

Topic: Service location strategy

Objective: LO8-1

77) Which of the following is most likely to affect the location decision of a service firm rather than a manufacturing firm?

A) energy and utility costs

B) attitude toward unions

C) parking and access

D) cost of shipping finished goods

E) labor costs

Diff: 2

Topic: Service location strategy

Objective: LO8-1

78) Which of the following is a location analysis technique typically employed by a service organization?

A) purchasing power analysis

B) linear programming

C) queuing theory

D) crossover charts

E) cost-volume analysis

Diff: 2

Topic: Service location strategy

Objective: LO8-1

79) A jewelry store is more likely than a jewelry manufacturer to consider __________ in making a location decision.

A) transportation costs

B) cost of raw materials

C) parking and access

D) climate

E) taxes

Diff: 2

Topic: Service location strategy

Objective: LO8-1

80) Which of the following is a location analysis technique typically employed by a manufacturing organization?

A) transportation method

B) queuing theory

C) correlation analysis and traffic counts

D) simulation

E) demographic analysis

Diff: 2

Topic: Service location strategy

Objective: LO8-1

81) Which of these assumptions is not associated with strategies for goods-producing location decisions?

A) Most major costs can be identified explicitly for each site.

B) Focus on identifiable cost.

C) High customer contact issues are critical.

D) Intangible costs can be evaluated.

E) Location is a major determinant of cost.

Diff: 2

Topic: Service location strategy

Objective: LO8-1

82) Which of the following is most likely to affect the location strategy of a manufacturing firm?

A) appearance/image of the area

B) utility costs

C) purchasing power of drawing area

D) competition in the area

E) parking availability

Diff: 2

Topic: Service location strategy

Objective: LO8-1

83) Geographic Information Systems can assist the location decision by

A) automating center-of-gravity problems

B) computerizing factor rating analysis

C) combining geography with demographic analysis

D) updating transportation method solutions

E) giving good Internet placement for virtual storefronts

Diff: 2

Topic: Service location strategy

AACSB: Use of IT

Objective: LO8-1

84) FedEx schedules its aircraft using a __________ system, which it credits with reducing package mishandling and delay in transit.

Diff: 1

Topic: Global company profile

Objective: no LO

85) __________ costs are readily identifiable and can be measured with precision.

Diff: 1

Topic: Factors that affect location decisions

Objective: LO8-1

86) When __________, in addition to creativity and R&D investments, is critical to operations strategy, cost may cease to be the primary focus of location criteria.

Diff: 1

Topic: The strategic importance of location

Objective: LO8-1

87) Political risk, cultural issues, and exchange rates are among those __________ that affect which country will be selected for a location decision.

Diff: 1

Topic: Factors that affect location decisions

Objective: LO8-1

88) Labor cost per unit is also referred to as __________.

Diff: 1

Topic: Factors that affect location decisions

Objective: LO8-1

89) When firms build supply chains that include foreign firms, __________ and __________ are issues that raise ethical and legal concerns with operations managers.

Diff: 1

Topic: Factors that affect location decisions

AACSB: Ethical Reasoning

Objective: LO8-1

90) __________ occurs when competing companies locate near each other because of a critical mass of information, talent, venture capital, or natural resources.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

91) The __________ method is popular because a wide variety of factors, from education to recreation to labor skills, can be objectively included.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

92) __________ is a cost-volume analysis to make an economic comparison of location alternatives.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-4

93) The __________ is a mathematical technique used for finding the best location for a single distribution point that services several stores or areas.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

94) The __________ is used to determine the best pattern of shipments from several points of supply to several points of demand.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-5

95) Industrial firms choose locations that minimize cost, but service firms look for locations with good demographics and traffic count because these variables are indicators of good __________.

Diff: 1

Topic: Service location strategy

Objective: LO8-1

96) Databases containing such variables as street maps, utilities, population age and income, and the software that analyzes such data for location decisions, are referred to as __________.

Diff: 1

Topic: Service location strategy

AACSB: Use of IT

Objective: LO8-1

97) Why does FedEx use a "hub-and-spoke" airline network, rather than a "point-to-point" network? Describe FedEx's approach to choosing the airports that serve as its hubs.

Diff: 2

Topic: Global company profile

Objective: no LO

98) State the fundamental objective of a firm's location strategy. How is this basic objective carried out by industrial or goods-producing firms; how does that differ for service firms? Answer in a clear, convincing paragraph.

Diff: 2

Topic: The strategic importance of location

Objective: LO8-1

99) Identify the changes that have fostered globalization.

Diff: 2

Topic: The strategic importance of location

AACSB: Multicultural and Diversity

Objective: LO8-1

100) Motorola is in an industry where there are intense pressures to keep costs low. Why did Motorola reject a possible location that offered low manufacturing costs?

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

101) Consider the list of Key Success Factors in your textbook. Why do some items appear at the country level only, while others are present at both country and regional levels? Select one KSF as an example, and use it in your discussion.

Diff: 3

Topic: Factors that affect location decisions

AACSB: Reflective Thinking

Objective: LO8-1

102) Identify five factors that affect location decisions at the site level.

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

103) What is the role of labor productivity in location decisions? Why is it more important than low wages in location decisions?

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

104) What is the impact of exchange rates on location decisions?

Diff: 2

Topic: Factors that affect location decisions

AACSB: Multicultural and Diversity

Objective: LO8-1

105) Why is "quality of life" an element of intangible costs associated with location decisions? Provide an example as part of your discussion.

Diff: 2

Topic: Factors that affect location decisions

AACSB: Reflective Thinking

Objective: LO8-1

106) "Proximity" or closeness implies that a firm should locate "close" to something. What are the three kinds of proximity described in the text? What are the basic conditions under which each is appropriate? What kinds of firms are likely to use each of these?

Diff: 3

Topic: Factors that affect location decisions

Objective: LO8-1

107) Consider the list of Key Success Factors in your textbook. From items on that list, select two which might involve ethical issues or issues of social responsibility, and cite a possible example of each. Write a brief explanation of each of your examples. Cite and describe a third example, from an area not covered by the KSFs.

Diff: 3

Topic: Factors that affect location decisions

AACSB: Ethical Reasoning

Objective: LO8-1

108) Identify those factors identified in the textbook as creating legal or ethical issues for operations mangers as they analyze location decisions.

Diff: 2

Topic: Factors that affect location decisions

AACSB: Ethical Reasoning

Objective: LO8-1

109) What is it called when competing companies locate next to each other? Why do they do this?

Diff: 2

Topic: Factors that affect location decisions

Objective: LO8-1

110) Identify the four major quantitative methods for solving location problems.

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3, LO8-4, LO8-5

111) What are the advantages and disadvantages of the use of factor-rating schemes?

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3, LO8-4, LO8-5

112) What kinds of location decisions are appropriate for use of crossover analysis? Write a brief paragraph explaining how crossover analysis (break-even analysis) can assist an operations manager choose among alternative sites in making a location decision.

Diff: 2

Topic: Methods of evaluating location decisions

Objective: LO8-4

113) What kinds of location decisions are appropriate for use of center-of-gravity analysis? What variable is being optimized in this analysis?

Diff: 2

Topic: Methods of evaluating location decisions

Objective: LO8-5

114) Is Starbucks Coffee a user of Geographic Information Systems? Support your answer with examples.

Diff: 1

Topic: Service location strategy

AACSB: Use of IT

Objective: LO8-5

115) How does the Starbucks Coffee case illustrate the general principles of service location strategy?

Diff: 1

Topic: Service location strategy

Objective: LO8-1

116) Service location strategies and goods-producing location strategies rely on very different sets of assumptions. What are the assumptions associated with goods-producing locations? How do these assumptions lead to a location strategy?

Diff: 2

Topic: Methods of evaluating location alternatives

Objective: LO8-3

117) How do service facility location decisions differ from industrial location decisions in terms of the techniques used to analyze them?

Diff: 2

Topic: Service location strategy

Objective: LO8-1

118) A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below.

a. Complete a numeric locational cost-volume analysis.

b. Indicate over what range each of the alternatives A, B, C is the low-cost choice.

c. Is any alternative never preferred? Explain.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-4

119) A farmers' cooperative association plans to build a new sugar mill in Southwestern Louisiana. The primary objective of the mill is to provide the farmers with a place to take their crop for processing that will reduce their transportation costs. The members of the co-op believe that the center-of-gravity method is appropriate for this objective. While there are over 200 sugar cane farms in the region, they are tightly clustered around six villages. Using the data below, use the center-of-gravity method to calculate the coordinates of the best location for this mill. On the grid below, plot the location of the six farm clusters and the calculated mill location. All mileage references use the city of Lake Charles as (0,0).

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

120) A clothing chain is considering two different locations for a new retail outlet. The organization has identified the four factors listed in the following table as the basis for evaluation, and has assigned weights as shown on the right side of this table. The manager has rated each location on each factor, on a 100-point basis (higher scores are better), as shown in the right-hand table.

a. Calculate the composite score for each alternative location.

b. Which site should be chosen?

c. Are you concerned about the sensitivity and subjectivity of this solution? Comment.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

121) A manufacturing company is considering two alternative locations for a new facility. The fixed and variable costs for the two locations are found in the table below. For which volume of business would the two locations be equally attractive? If the company plans on producing 50,000 units, which location would be more attractive?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-4

122) East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided.

a. Calculate the volume-weighted center of gravity.

b. Calculate the simple center of gravity (all cities weighted equally).

c. Explain why the two calculations differ.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

123) Location A would result in annual fixed costs of $300,000 and variable costs of $55 per unit. Annual fixed costs at Location B are $600,000 with variable costs of $32 per unit. Sales volume is estimated to be 30,000 units per year. Which location has the lower cost at this volume? How large is its cost advantage? At what volume are the two facilities equal in cost?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-4

124) Using the factor ratings shown below, determine which location alternative should be chosen on the basis of maximum composite score.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

125) A manager has received an analysis of several cities being considered for a new order fulfillment center (warehouse) for Shop at Home Network. The scores (scale is 10 points = best) are contained in the table below.

a. If the manager weights the factors equally, how would the locations be ranked?

b. If transportation costs and operating costs are given weights that are double the weights of the others, should the locations be ranked differently?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

126) A telecommunications firm is planning to lay fiber optic cable from several community college distance learning sites to a central studio, in such a way that the miles of cable are minimized. Some locations require more than one set of cables (these are the loads). Where should the studio be located to accomplish the objective?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

127) The owner of a millwork shop is considering three alternative locations for a new plant for building embossed-and-clad steel exterior doors for residences. Fixed and variable costs follow. Since the plant ships nationwide, revenue is assumed the same regardless of plant location. Plot the total cost lines in the chart provided below, and identify the range over which each location is best.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-4

128) A manufacturing firm is considering three potential locations for a new parts manufacturing facility. A consulting firm has assessed three sites based on the four factors supplied by management as critical to the location's success. Given the management-supplied factor weights and the consultant team scores, which location should be selected? Scores are based on 50 = best. Do the results surprise you in any way? Comment.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

129) Environmental Glass Products, Inc. wants to build a new centralized facility to receive household, commercial, and industrial glass for recycling. This center will be supplied by trucks coming from four "collection points," where recyclable glass is dropped off by individuals and businesses. The volume and the map coordinates for the four collection centers are shown below. Where should the collection center be located?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

130) A manufacturer of stamped metal auto parts has four parts factories in one city at the location coordinates shown below. Each coordinate unit represents a city block (roughly 100 meters). The yearly demand at each factory is also given.

Management has decided to build a new sheet metal mill, to supply these factories, at a location central to these plants. What should be the map coordinates of the new plant? On the grid below, graph the locations of the four parts factories and the proposed sheet metal mill.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

131) A small producer of music boxes wants to move to a larger facility. Two alternative facilities have been found. Site 1 has a fixed cost of $500,000 per year, with a variable cost of $25 per unit. Site 2 has a fixed cost of $800,000 per year, but a variable cost of $22 per unit.

a. Write out the equation for total cost for each site.

b. At what volume of output would the two locations have the same total cost?

c. For what range of output would Site 1 be superior?

d. For what range of output would Site 2 be superior?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-4

132) A small manufacturer is considering several locations for a new facility. They have identified four factors that they consider to be important for their location decision. They have decided to assign scores to the four factors, with a higher score indicating a more favorable location. Use the information in the following table to perform a factor rating to select the best location.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

133) A contractor for the military is looking for a new location for a supply depot. The depot will supply four bases whose tonnage (demand) and map coordinates are shown below. If management wants the depot to have a central location, what should be its map coordinates?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

134) A highway contractor needs to locate a single supply point to provide road building materials to four projects. The four projects, which are all approximately the same magnitude, are located at the following coordinates. Coordinate units are in miles.

a. On the grid below, plot the locations of the four road-building sites. Properly label all points.

b. What is the center of gravity?

c. If a single truck were sent from center-of-gravity to each project and back (four round trips), how many miles would be traveled? (Hint: use the Pythagorean Theorem C = ).

d. Add the calculated center of gravity to the grid.

a. Coordinates are (50, 10), (15, 60), (40,60), and (30, 20)

b. The supply point should be at (33.75, 37.50).

c.

31.94*2 + 29.29*2 + 23.35*2 + 17.9*2 = 204.96 total miles traveled

d. Coordinates are (33.75, 37.50

Diff: 3

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

135) Every month, a distribution center will deliver 14,000 units to Retailer A at coordinates (20, 10), 12,000 units, to Retailer B at coordinates (30, -15), and 20,000 units to Retailer C at coordinates (4, 4). Assuming no constraints on location, at what coordinates should the distribution center be located (rounded to two decimal places)?

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

136) A school district is considering where in town to house its central office (The office must also be located at an existing school for cost reasons). If there are five schools in the district, with locations and size given in the following table, use the COG method to determine at which school the central office should be placed to minimize the average distance between the office and students.

X=(5*2500+0*1000+0*10000+5*4500+2*7500)/25500 = 1.96

Y=(5*2500+5*1000+0*10000+0*4500+1*7500)/25500= .98

Rounding these gives (X,Y) of (2,1) which is closest to school E.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

137) A school district is considering four locations for a new high school. There are four factors the district is considering (Cost of land, distance to students, land size, and traffic flow). The district would like to compare results using two weighting systems. The first system would give each factor equal weight and the second would give the factors weights of .4, .2, .1, and .3 respectively. Fill in the missing information in the table and then use the factor rating method to determine which location is best for each weighting system.

Thus the district should select site D under W(1) and site C under W(2). Note that site D scores similarly to site C under W(2) and thus other factors (such as politics) could make site D an acceptable choice.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-3

138) A manufacturing company is considering three expansion options. The first is to do nothing (Option A). The next is to leave the current plant open and also open a new larger plant (Option B). Finally they could close the existing plant and open the new, larger one (Option C). Given the VC and FC from the table below calculate the range for which each option minimizes cost.

To solve for the crossover points students should set the total cost functions equal for the various options. This gives the following equations

50000+2x=100000+x, x=50000 units

50000+2x=60000+1.4x, x=16667 units

100000+x=60000+1.4x, x=100000 units

To check which function is the lowest cost for a given range students should test each function for its total cost. For example

A(0)=50000+2(0)=50000

B(0)=100000+1(0)=100000

C(0)=60000+1.4(0)=60000

Therefore for the range 0 to 16667 option A is cheapest.

A( 20000)=90000

B(20000)= 120000

C(20000)=88000

Therefore for the range 16667 to 50000 option C is cheapest.

A(60000)=170000

B(60000)=160000

C(60000)=144000

Therefore for the range 50000 to 100000 option C is cheapest

A(110000)=270000

B(110000)=210000

C(110000)=214000

Therefore for the range 100000 or more option B is cheapest

Combining these ranges shows that for production of under 16667 units A is cheapest, for between 16667 and 100000 C is cheapest, and for 100000 and above B is cheapest.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-4

139) A grocery chain is deciding on where to locate its new distribution center. The new DC will serve four grocery stores, each with a demand of 10,000 units. If the coordinates of the stores are (112,108), (110,50), (40, 85), and (10, 25) where should the DC be located? Suppose now that each store instead had demand of 20,000 units. Where should the DC go in this case?

X=(112+110+40+10)/4 =68

Y=(108+50+85+25)=67

Thus the DC should be located at (68,67) for both cases.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5

140) Suppose that a bus company is deciding where to locate its central hub. There are 6 possible destinations for the buses. Suppose that the center of town will be used as the reference for describing the possible destinations. A is located 5 miles South and 3 miles West. B is located 3 miles North and 2 miles East. C is located 1 mile South and 5 miles East. D is located 2 miles North and 3 miles West. E is located exactly in the center of town. F is located 10 miles North and 5 miles East. Assume that traffic to each destination will be equal. Where should the hub go so that travel time is minimized?

X= (-3+2+5-3+0+5)/6 =1

Y= (-5+3-1+2+0+10)/6=1.5

Converting back into direction yields 1 mile East and 1.5 miles North of the center of town should be the location for the hub.

Diff: 2

Topic: Methods of evaluating location alternatives

AACSB: Analytic Skills

Objective: LO8-5