OPERATIONS MANAGEMENT

FACILITIES LOCATION

FACILITIES LOCATION
Strategic, long term and non-repetitive decision for any organisation. Most of the fixed and some of the variable costs are determined by the

location decisions.
Efficiency, effectiveness, productivity and profitability of the facility are

affected by location decision.

Location decisions are based on a host of factors

- some subjective, qualitative and intangible. - some objective, quantitative and tangible.
Location decisions are affected by many factors

- Internal factors technology used, capacity, financial position, and the work force required. - External factors economic, political and social conditions.

When does a location decision arise?

New facility is to be established. Facility or plant operations and subsequent expansions are restricted by a

poor site.
Growth volume of business makes it advisable to establish additional facilities

in new territory.
Decentralisation and dispersal of industries reflected in the Industrial policy

resolution so as to achieve an overall development of a developing country.

Original advantages of the plant have been outweighed due to new

developments
New economic, social, legal, or political factors could suggest a change of

location of the existing plant.

Shifting a Plant
Once a facility is set up at a location, it is very

difficult to shift later to a better location because of

Economic reasons total costs, profits, availability

of raw materials, labour, power, transportation facilities, markets etc. Social reasons employee welfare, employment opportunities etc. Political reasons- pursuance of a policy of decentralisation, regional and developmental planning. Security considerations military invasions, sabotage from anti-social elements etc. Policy matters anti-pollution etc.

Steps in Facilities Location

Two Phases Phase I General territory selection Phase II Exact site/Community selection
Location Factors Market Raw Material Phase I X X Phase II

Power
Transportation Climate and Fuel Labour and Wages Laws and Taxation Community Services and Attitude Water and waste Ecology and Pollution Capital Availability Vulnerability to enemy attack

X
X X X X

X
X X X X X X

X X

X X

Requirements governing choice of city location

Availability of adequate supply of labour force.

High proportion of skilled employees.

Rapid public transportation and contact with suppliers and

customers. Small plant site or multi-floor operation. Processes heavily dependent on city facilities and utilities. Good communication facilities like telephone, fax, post offices. Good banking and health care delivery systems.

Requirements governing choice of suburban location

Large plant site close to transportation or population

centre. Free from some common city building zoning (industrial areas) and other restrictions. Freedom from higher parking and other city taxes etc. Labour force required resides close to plant. Community close to, but not in, large population centre. Plant expansion easier than in the city.

Requirements governing choice of country/rural location

Large plant site required for either present demands or

expansions. Dangerous production processes. Lesser effort required for anti-pollution measures. Large volume of relatively clean water. Lower property taxes, away from urban land ceiling act restrictions. Protection against possible sabotage or for a secret process. Balanced growth and development of a developing or underdeveloped area. Unskilled labour force required. Low wages required to meet competition.

Subjective techniques
Three Techniques
Industry Precedence Basic assumption is that if a

location was best for similar firms in the past, it must be best for now also. Preferential Factor Location decision is dictated by personal factor. It depends on individual whims or preferences. Dominant Factor To locate at the source.