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Facility location

Facility location. Facilities location/plant location can be defined as selection of suitable location or site or place where plant will start functioning. Signi ficance: the location can alter the total prodn & distn cost. We need strategy to maximize the benefit of location of the firm.

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Facility location

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  1. Facility location

  2. Facilities location/plant location can be defined as selection of suitable location or site or place where plant will start functioning. • Significance: the location can alter the total prodn & distn cost. We need strategy to maximize the benefit of location of the firm.

  3. Types of facilities • Heavy manufacturing : heavy facilities are the plants which are large n require a lot of space n r expensive to construct e.g. car plant. construction cost, mode of transportation for shipping heavy items, waste disposal , labor availability r considered for heavy plant location • Light industry: light ind r small, cleaner plants that produce electronic equipment and components parts. it is not necessary to be near the raw material becoz bulk qty n storage is not reqd they require only the proximity to customers

  4. Warehouses and distn centre:in warehouses , no manufacturing is been done nor they r into sale of product. there construction cost and land cost tends to be less important as they req no raw material, no waste

  5. Factors affecting location analysis • Location of mkt • Location of raw material • Infrastructure: eg aluminum ind r power intensive so these ind must be located closed to power generation sites. • Transportation cost • Availability of labor • Govt policies • Climate factors

  6. Community attitude • Safety measures • Availability of land • Topography of land: the soil should be capable to sustain the load of plant foundation. • If plant is to be located in other country • Govt stability • Exchange rates • Govt rules and regulations

  7. Climate • Culture • Import & export regulation

  8. Site evaluation process A search team or individual r hired for site selection for diff facilities and the evaluation process requires large amt of data n information relative to diff location factors

  9. Location analysis technique • Location factor rating: in this the factors important in location decision are identified . Each factor is assigned weight from 0-10 and that prioritizes the factor and reflects the importance. the factor rating and location rating r considered and on the basis of their product the decision is taken.

  10. Factor Rating Example Factor Factor Location Product Inter-company integration 4 8 32 Availability & cost of labour 3 2 6 services 3 6 18 materials 5 2 10 transport 1 3 3 car parking space 5 4 20 Expansion potential 4 1 4 Zoning & legal regulations 3 10 30 Cost of land 2 7 14 New development areas 2 6 12 Living conditions 2 5 10 Total 159

  11. Location break even analysis: it refers to the use of cost volume analysis to make economic comparison of location alternatives. By identifying the FC n VC for each location they r plotted on graph to determine the low cost.it is basically related with the selection of location that has low total cost for d expected prodn volumes.

  12. Point rating method: in this method , each location factor is assigned the point out of d defined limit .e.g. unfavorable one (0-35), average(35-65), favourable(65-100). And d location which has the max pt is d best location • Dimensional analysis: relative merit (ratio) of diff cost r considered to identify the plant location. in this case , d plant site having a less cost is selected. To obtain relative merits of one plant site on another , ratio of each cost for

  13. Plant site is taken n each cost ratio is givenweightage .these ratios r multiplied to obtain a fig on relative merit of 2 plant sites. • Brown and Gibson model :this method considers 3 types of factors critical, objective and subjective. critical factors r the one which is d base for decision n which determines whether or not a location would b considered further for evaluation or not .

  14. Location Analysis Techniques • Dimensional Analysis: Relative merits of different costs considered • Brown & Gibson Model: 3 types of factors – critical, objective, & subjective. Location measure: LMi=CFMi*[D*OFMi+(1-D)*SFMi] CFMi=measure of critical factors (value 0 or 1) OFMi=measure of objective factors (0<SFMi<1 SFMi=measure of subjective factors all for plant site I D specifies objective factor decision weight(0<D<1)

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