Question

this case is from “introduction to business”Madura Jeff

Case: Selecting the Best Plant Site Richard Capozzi, an entrepreneur in the high-fashion Italian shoe industry, is planning to relocate his manufacturing operation to the western part of the United States. He is currently considering two different locations. One possible location is outside Los Angeles, and the other is in Oklahoma City. In analyzing the plant size decision, he is considering several factors. The cost of land is high in Los Angeles. However, local government officials are willing to make tax concessions. This plant location is accessible to transportation; a railroad is adjacent to the plant and an eight-lane interstate is close. Capozzi has identified the West Coast region as his target market for this type of shoe. An artist by trade, he has developed a unique design that should create mass-market appeal in this geographic area. The Oklahoma City location has several advantages. Land cost is lower than in Los Angeles. Also, a large supply of trained labor is available in this region. Another key consideration Capozzi must deal with is raw material availability. The raw material is imported from Italy and is received at the port of entry in Los Angeles. If the operation were located in Oklahoma City, additional ground transportation would be necessary. Transportation costs would, therefore, be lower for the Los Angeles plant, a fact that weights heavily in Capozzi's decision. Questions 1. What will influence the plant site decision for Capozzi, and which alternative appears to be optimal? 2. How can each relative factor be rated or evaluated to determine the optimal plant location? 3. How should the decision regarding plant layout and design be determined? 4. What resources will Capozzi need to implement the production plan? w material 5. Describe the techniques for assessing quality and explain how they might apply to a shoe manufacturer. 6. Do you think this particular type of operation could benefit from economies of scale? Explain. 3

Answer 1

1. The plant site decision for Capozzi will be influenced by factors like cost of facility, transportation and logistics, labour costs, availability of skilled labour , local policies, regulations and incentives, ease of arranging raw materials and accessibility to trade facilities and market.

The alternative of establishing business in Los Angeles is more optimal as it has more benefits in terms of incentives and regulations, transportation and logistics, and access to raw materials.

2. Each relative factor can be rated or evaluated based on their importance to the business. In this case, availability of raw materials, transportation costs and infrastructural support are important and carry more weight. Both the location alternatives can be rated based on the scores on this factors and multiplied by the weights signifying importance. The location which has the higher sum of weights multiplied by score are more relevant to be chosen.

3. The design regarding plant layout and design can be determined based on the mandatory rules and regulations to be followed, determining the environmental impacts, considering the efficiency of the plant layout and flow of materials and processes, costs involved in plat layout and design, scope for scaling and optimum utilization of resources.

4. The resources Capozzi will need to implement the production plan are raw materials, resources like power supply, machinery, financial resouces and skilled labour. Expertise and management will be required to implement the production plan along with the supply of regular basic infrastructure facility and transportation.