Map
Framework

Location funnel: from strategy to site

The question it answers

Before opening a new plant or warehouse, in what order should an owner or operations director decide: strategy first, then region, then the exact site?

Origin
Chopra, 2019
Diagram type
Process by phase
Level of analysis
Firm
Topics
Supply chain & operations
Delivery lorry pulling a chain of linked glass boxes, icon for supply chain

Diagram

Location funnel: from strategy to site

  1. Narrowing down in four phases
  2. Phase 1: define the supply chain strategyCompetitive strategy, competitors and existing network, capital limits, what to do in-house or outsource, and whether to grow by acquiring, building or partnering.
  3. Phase 2: define the regional facility configurationForecast demand by country or region, average costs at regional level, tariffs and tax incentives, desired response time. Output: which regions, how many facilities, what capacity.
  4. Phase 3: select desirable potential sites in each regionCheck hard infrastructure (suppliers, transport, communication, utilities, warehousing) and soft infrastructure (skilled workforce, turnover, community receptivity to business).
  5. Phase 4: choose the location and allocate marketsEstimate demand and costs per site, with tariffs and tax incentives; maximise total profit while allowing for the factors that cannot be quantified.

When to use it, and when not to

Use it when

Use it when opening new facilities or restructuring a network, for instance after a merger or when transport costs shift sharply. Chopra says network decisions must be revisited as market conditions change.

Pitfalls

Pitfall

Choosing the cheapest place and forgetting strategy. Chopra notes that cost leaders tend to pick the lowest-cost site even far from their markets, while firms competing on responsiveness locate close to customers, even at higher cost. Factories typically stay put for a decade or more, whereas warehouses the firm does not own can be changed within a year.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Chopra, S. (2019) Supply chain management: strategy, planning, and operation (7th global edn). Harlow: Pearson.No DOIpearson.comCited in 4 articles