Scribd
Upload
41 views

Service Facility Location: Sachin Modgil IMI-K

The document discusses factors to consider when locating services facilities. Location impacts both customer attraction and service delivery. Strategic factors include competitive clustering, saturation marketing, and substituting communication for travel. Front and back offices may be separated, with considerations for customer and employee access. Specific site factors are access, visibility, traffic, parking, expansion capacity, surroundings, competition, regulations, labor availability, and complementary services nearby. Quantitative models for location include cross-median and Huff models, which calculate optimal locations based on demand points, travel times, and probabilities of customer travel.

Uploaded by

Harsh Vivek
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
41 views

Service Facility Location: Sachin Modgil IMI-K

The document discusses factors to consider when locating services facilities. Location impacts both customer attraction and service delivery. Strategic factors include competitive clustering, saturation marketing, and substituting communication for travel. Front and back offices may be separated, with considerations for customer and employee access. Specific site factors are access, visibility, traffic, parking, expansion capacity, surroundings, competition, regulations, labor availability, and complementary services nearby. Quantitative models for location include cross-median and Huff models, which calculate optimal locations based on demand points, travel times, and probabilities of customer travel.

Uploaded by

Harsh Vivek
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 30

Service Facility Location

Sachin Modgil IMI-K


Introduction

• From marketing perspective service location


focuses on attracting customers to a site because
of convenience (fast food restaurant on a high
traffic street) or physical attributes (resort on a
beautiful beach)

• Location also effects the service delivery design


and has an impact on employees

Sachin Modgil IMI-K


Strategic Location Considerations
Competitive clustering
It is a reaction to the observed behaviour when they
are choosing among competitors- e.g. Buying a new
or used car- customer make comparison and choose
the area of many dealers present

Saturation Marketing
Clustering the same brand from the same firm in very
close distance and do not give chance to others to
grow.

Sachin Modgil IMI-K


Strategic Location Considerations
Marketing Intermediaries
Retailer extends the Bank’s credit to its customers is an
intermediary in the distribution of the credit.

Substitution of Communication for Travel


Telemetry- Practo/Docsapp

Separation of Front from Back Office


For many services the front and back office need not
be co-located (e.g. dry cleaning, shoe repair, banks and
ATMs.
Sachin Modgil IMI-K
Considerations in Locating the Front and
Back Office
Front Office Back Office

Is travel out to customer or Is service performed on


customer travel to site? person or property?
External
Can electronic media Is co-location necessary?
Customer substitute for physical How is communication
(consumer) travel? accomplished?
Is location a barrier to entry?
Availability of labor? Are economies of scale
Are self-service kiosks an possible?
Internal
alternative? Can employees work from
Customer home?
(employee) Is offshoring an option?

Sachin Modgil IMI-K


Site Consideration
1. Access: 4. Parking:
Convenient to freeway exit and Adequate off-street parking
entrance ramps 5. Expansion:
Served by public transportation Room for expansion
2. Visibility: 6. Environment:
Set back from street Immediate surroundings
Surrounding clutter should complement the
Sign placement service
3. 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
9. Labour Availability
10. Complements: Complementary
service nearby
Sachin Modgil IMI-K
Geographic Representation

Location on a Plane
Y

Destination j
Yj Euclidean

 
1/ 2
dij  ( xi  x j )  ( yi  y j )
2 2

Origin i
Yi

Metropolitan
dij  xi  x j  yi  y j
0 X
Xi Xj
Sachin Modgil IMI-K
Cross Median Approach

A copying service has decided to open the office


in central business district of the city. The
manager has identified 4 office buildings that
will generate a major portion of the business.
The figure on next slide shows the location of
these demand points on xy coordinate system.
Weights are attached to each point and
represent the potential demand per month in
hundreds of orders.
Sachin Modgil IMI-K
Cross Median Approach

Sachin Modgil IMI-K


Cross Median Approach

•Median
  = = 7+1+3+5/2 = 16/2 = 8
• The weights attached to each demand point are summed
in descending order till the time median value of 8 is
reached or exceeded.

• The median value of 8 is reached when the weight of


location 2 is added to the weight of location 1: thus t, the
first x median is established at the value of two miles.
• Same way east to west the second x-median is
established at value of 3 miles.

Sachin Modgil IMI-K


Cross Median Approach

Sachin Modgil IMI-K


Median Value for Xs

Sachin Modgil IMI-K


Median Value for Ys

Sachin Modgil IMI-K


Total weighted distance for Locations A &B

Sachin Modgil IMI-K


Cross Median Approach

Sachin Modgil IMI-K


Facility Location Using Cross Median Approach

Total weighted travel distance calculated for point A


and Point B is equal to 35 miles in both instances thus,
any location at either point A or point B or along the
line between them will be acceptable.

A location solution can be a line (i.e city street) , a


point (i.e an intersection), or an area (i.e a city block).
Therefore this approach have quite a flexibility.

Sachin Modgil IMI-K


Huff Retail Location Model
First, a gravity analogy is used to estimate
attractiveness of store j for customers in area
i.
Aij= Attraction to store j for customers in area i
Sj = Size of the store (e.g. square feet)
Tij= Travel time from area i to store j
lambda = Parameter reflecting propensity to travel

Sj
Aij  
T ij
Sachin Modgil IMI-K
Huff Retail Location Model

Second, to account for competitors we


calculate the probability that customers from
area i will visit a particular store j.

Aij
Pij  n

A
j 1
ij

Sachin Modgil IMI-K


Huff Retail Location Model

Third, annual customer expenditures for


item k at store j can now be calculated.

Pij = Probability customers from area i travel to store j


Ci = Number of customers in area i (e.g. census track)
Bik = Annual budget for product k for customers in area i
m = Number of customer areas in the market region

 
m
E jk   Pij Ci Bik
j 1
Sachin Modgil IMI-K
Huff Retail Location Model

Fourth, market share of facility j for product k


purchased at store can now be calculated.

E jk
M jk  m

 (C B
i 1
i ik )

Sachin Modgil IMI-K


Example

The west Texas area in the plot above is served by a


grocery store in community D. A proposed store with
three times the floor space is being considered for
location in community C. Assume that monthly
expenditures per customer average about $100. Then,
using the metropolitan metric for travel and λ= 2, use
the Huff model to estimate the impact on monthly
expenditures and market share for the existing store in
community D if the proposed store in community C is
constructed

Sachin Modgil IMI-K


Plot

Sachin Modgil IMI-K


Step-1- Determine Tij

Sachin Modgil IMI-K


Step-2- Determine Aij

Second, using equation below, calculate the attraction matrix with


λ= 2. For example, the attraction of community A to the proposed
location at C (with S= 3 to account for the
larger floor space) would be calculated as:

Sj
Aij  
T ij
Sachin Modgil IMI-K
Step-2- Determine Aij

Sj
Aij  
T
ij
Sachin Modgil IMI-K
Step-3- Determine Pij
Third, using equation below, calculate the probability using
the total attraction as the denominator. For example, the
probability of residents in community A traveling to the
proposed grocery store location at C would be calculated as

Aij
Pij  n

A
j 1
ij
Sachin Modgil IMI-K
Step-3- Determine Pij
Third, using equation below, calculate the probability using
the total attraction as the denominator. For example, the
probability of residents in community A traveling to the
proposed grocery store location at C would be calculated as

Aij
Pij  n

A
j 1
ij
Sachin Modgil IMI-K
Step-3- Determine Pij

Aij
Pij  n

A
j 1
ij
Sachin Modgil IMI-K
Step-4- Determine Eij and Mij

E jk
M jk 
 
m m
E jk   Pij Ci Bik
j 1 Sachin Modgil IMI-K
 (C B
i 1
i ik )
Step-4- Determine Eij and Mij

E jk
M jk  m

Sachin Modgil IMI-K


 (C B
i 1
i ik )

You might also like