Allocation of a new Location

In the last weeks we talked a lot about how to design a warehouse, a production site that it works efficiently. But what we didn’t talk about yet is where geographically this warehouse or production site should stand.

This decision is very important, cause of the high investment and the high impact on the results of the whole company (strategic level). Consequently this is planned over a longer period of time and can be explained over hundreds of posts. But simplified it consists out of more or less two phases:

  1. Characterizing the different locations in several dimensions:


  • Structure of the market
  • Competitors in the area
  • Possible delivery area

Production factors:

  • Production factor costs (energy, staff, rents)
  • Infrastructure
  • Political factors (stability of the law)

Performance factors

  • Productivity


  1. Comparing the characteristics with the requirements of the company
  • Fixed Requirements
  • Minimum standards
  • Wishing requirements

-> If a location fulfills all those requirement it is possibly suitable and can be examined in detail

This important decision can be supported by some mathematical tools:

  • Balance Scorecard (put weights on different factors…)
  • Vogels approximation method
  • Various more network design models…

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