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Abstract

One significant consideration when examining a business venture is to define the network for the product. The network design should take into account the number, size, and location of suppliers, producers, distributors, wholesalers, and retailers.

There are many specific factors to examine when considering the location of one particular component of the network, for example, a value added processing facility. These include: 1) labor climate, 2) transportation availability, 3) proximity to markets/customers, 4) quality of life, 5) taxes/industrial development incentives, 6) supplier networks, 7) land costs/utilities, and 8) company preference.

There are a number of these factors that can be easily examined in a linear programming spreadsheet model to help make a location decision. These include the availability and cost of raw materials, the capacity and operating costs of the proposed processing facilities/plants, the transportation costs to ship from raw material sources to the plants and from the plants to the customers, and customer demand.

The spreadsheet model allows consideration of a number of important factors, and the inputs to the model can be changed easily to allow for examining many different scenarios. For example, the model can demonstrate the benefits of a certain location over another based on such things as available freight rates and land or labor costs. However, when making a final decision, other important factors such as labor climate and quality of life, etc. should also be taken into consideration.

Executive Summary

One significant consideration when examining a business venture is to define the network for the product. The network design should take into account the number, size, and location of suppliers, producers, distributors, wholesalers, and retailers.

There are many specific factors to examine when considering the location of one particular component of the network, for example, a value added processing facility. These include: 1) labor climate, 2) transportation availability, 3) proximity to markets/customers, 4) quality of life, 5) taxes/industrial development incentives, 6) supplier networks, 7) land costs/utilities, and 8) company preference. Within each of these there are additional items to consider.

There are a number of these factors that can be easily examined in a linear programming spreadsheet model to help make a location decision. These include the availability and cost of raw materials, the capacity and operating costs of the proposed processing facilities/plants, the transportation costs to ship from raw material sources to the plants and from the plants to the customers, and customer demand.

Several case studies illustrate that a spreadsheet model can be one useful tool when making a location decision for a processing facility. It allows consideration of a number of important factors, and the inputs to the model can be changed easily to allow for examining many different scenarios. For example, the model can demonstrate the benefits of a certain location over another based on such things as available freight rates and land or labor costs. In fact, the case studies reveal that lower plant to customer freight rates from a location outside of North Dakota are not enough to offset the higher operating and fixed costs for a plant there. However, when making a final decision, other important factors such as labor climate and quality of life, etc. should also be taken into consideration.