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10 OM Decisions - Part 4

This is the 4th post of a 10 part series providing a high level 30,000 ft overview of the 10 operations management (OM) decisions. If you need a refresher on the different levels of leadership you can catch up here quickly. So let’s zoom through the questions again before we circle back to Factors Impacting Location

1. Goods and Services 2. Quality Management 3. Process and Capacity Design 4. Location

5. Layout 6. HR and Job Design 7. Supply Chain Mgmt 8. Inventory 9. Scheduling 10. Maintenance


Decisions can be as micro or macro as applicable as you want to make them. Whether, you're choosing a location for a product or for a new facility you can still make the decision with the same logic. Fundamentally, you have four high level steps to help establish direction.


1: What criteria for this decision is important to your operation. Another way to poise the question is, what is the purpose of this decision. These are the most frequently heard (macro):

  • "We've outgrown our location" > You need more space

  • "We need to be closer to our customer" > You need a specific location

  • "We need to reduce our overhead" > You need a cheaper location

  • "Transportation costs are killing us" > You need a better location

From a 3PL or distribution center it may sound a little different (micro)

  • "We constantly run out of stock at the location" > You need more space

  • "It takes too long to get that item" > You need a closer location

  • "Our cost to pick is too high" or "It takes too long to pick an order" > You need a more efficient configuration of your locations

2: Next you need to identify critical factors. These factors may include but definitely not limited to accessibility of material, proximity, transportation costs, and space requirements. These items should be at the forefront of the decision making process as well.


3: Next you'll establish a list of possible locations. Each location will need an evaluation of rules or restrictions, labor costs and availability, tax structure.


4: Lastly, you will have to evaluate the options. While there are many ways to do this, I have found the way that benefits my high level decision making most by using a Cost-Volume-Profit (CVP) Analysis. The tool that is most critical and helps a lot more when making decisions as a group is a standard weighted decision matrix.


Keep in mind if you are using a decision matrix the weight of each critical factor should be established or voted on. As much as we like making decisions by ourselves especially when we feel like it's our decision to make, we should consider other perspectives. If you want to learn more about group decision making conduct some research on the Delphi Technique

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