5.4 - Operations Management - Location Decisions

Practice flashcards for key concepts related to location decisions in Operations Management.

What factors generally influence the location of a business?

Factors influencing location include quantitative factors (like availability and cost of land and labor) and qualitative factors (such as management preferences and local knowledge).

What are quantitative factors affecting location decisions?

Quantitative factors include availability, suitability and cost of land; cost and availability of labor; proximity to markets and raw materials; government incentives; and feasibility of e-commerce.

Why do businesses consider proximity to the market when selecting a location?

Businesses choose locations near markets for convenience, especially in retail and service industries, and to reduce high transportation costs for bulk-increasing industries.

What is the significance of government incentives in location decisions?

Governments may attract businesses to certain areas by offering financial incentives, particularly in enterprise zones, while unfavorable regulations can drive firms to relocate.

What are qualitative factors affecting location decisions?

Qualitative factors include management preferences, local knowledge, infrastructure, political stability, government restrictions, ethical issues, and clustering for comparison shopping.

How does political stability affect location decisions?

Political stability is crucial, as instability can disrupt business operations, regardless of other favorable location factors.

What is outsourcing?

Outsourcing is the practice of transferring business functions to an external firm within the same country.

What does reshoring mean in the context of production location?

Reshoring refers to bringing back previously offshored business functions to the home country.

What are the advantages of outsourcing?

Advantages of outsourcing include improved quality output, reduced costs, focus on core activities, and increased workforce flexibility.

What are some disadvantages of outsourcing?

Disadvantages include potential sub-standard quality, difficulties in quality management, increased supervision time, potential redundancies, and negative ethical perceptions.

What is STEEPLE analysis?

STEEPLE analysis examines external factors affecting business decisions, including Social, Technological, Economic, Environmental, Political, Legal, and Ethical factors in location decisions.

What are some reasons for insourcing?

Firms may insource if the quality of outsourced work is sub-standard or if cost-saving benefits of subcontractors no longer exist.

What is clustering in business location?

Clustering refers to firms locating near other businesses that cater to similar or complementary markets to enhance customer access and sales.

What are some qualitative factors involving local infrastructure in location decisions?

Infrastructure includes essential facilities needed for operations, which can influence employee commuting and overall business efficiency.

Why might a company choose to reshore its operations?

Reasons for reshoring include better quality supervision, government support to bring jobs back, and rising transportation costs making local production more logical.