Facility location - A Topic from Production and Operation Management

The function of determining where the plant should be located for maximum operating economy and effectiveness.

1. Facility Location Presented By Pandey Bramhesh Guided By Mansi Trivedi

2. CONTENT FACTORS AFFECTING FACILITY LOCATION IMPORTANCE OF FACILITY LOCATION TECHNIQUES OF FACILITY LOCATION 2

3. FACTORS AFFECTING FACILITY LOCATION 3 Availability of the Raw Material Those areas where procurement of the raw material can be easily done are better than the others. It may bring following advantages: Reduction in transportation cost Continuous and efficient supply of the material Reduced carrying and storage cost Integration with Others Parts of Organisation A newly established unit should be adequately connected with the rest of the establishment. Initially, there will be some hurdle in the growth that needs to be taken care of.

4. FACTORS AFFECTING FACILITY LOCATION Proximity to the Market The local demand and the potential growth should also be considered while selecting the ideal location of the plant. Normally the market, where demand is maximum is selected so that the goods may reach to consumer in no time and transportation cost can also be saved. 4 Proxmity to the Suppliers and the Resources Many organization are themselves suppliers of the main parts to their other manufacturing units . Or in some instances, the same may also be procured from an outside source. In both the cases, preference is given to the place where both the suppliers and the resources are located close to the set-up.

5. FACTORS AFFECTING FACILITY LOCATION Safety Requirements Few plants may not only be themselves exposed to certain threats but the neighborhood may also be exposed to the same. In such cases, normally a remote locality is preferred for the set-up. 5 Availability of Useful Services Services which are highly crucial are gas, electricity, water, drainage, disposal of waste and communication. Utilities, Taxes and Real Estate Costs Some important factors including the basic utility, local administration and taxes, land costs, relocation costs are also to be accounted.

6. FACTORS AFFECTING FACILITY LOCATION Safety Requirements The most common problem that a company can face while estimating the sales target is the impact of competitors on the market. One should try to avoid locating in area that is already characterized by fierce competition. Depending on the product or the service, that the company deals in the strategy should be adopted 6

7. CONTENT FACTORS AFFECTING FACILITY LOCATION IMPORTANCE OF FACILITY LOCATION TECHNIQUES OF FACILITY LOCATION 7

8. IMPORTANCE OF FACILITY LOCATION 8 Fixation of the Production Technology Issues relating to the production technology and cost structures are answered once the location is finalized. For example, if the site is established in an undeveloped economy, then the project is bound to be labour intensive and majority of process are to be carried out in manual form and the costs associated will also be less. Determine Nearness of Location from the Market Location of plant depend on the size and structure of the market. Small organization is located where the requirement of land and capital is less, the location which is close to market is preferred On other hand large organization put their plant in the outer part o f city

9. IMPORTANCE OF FACILITY LOCATION 9 Better Service to the Customers Location of plant also affects the ability of company to provide timely and uninterrupted service to the customer. For example, location of a transport company should be close to the highway with the connectivity lines to the main city to provide uninterrupted supply of material. Withstand Competition Location that brings the reduction in the transportation cost, reduces the labour cost and brings economies to scale is preferred to withstand competition.

10. IMPORTANCE OF FACILITY LOCATION 10 Select the best location The geographic location that comes up with the maximum facilities at lower cost is selected. In case, error in selection of location happens, it results in shut down or shifting the location.

11. CONTENT FACTORS AFFECTING FACILITY LOCATION IMPORTANCE OF FACILITY LOCATION TECHNIQUES OF FACILITY LOCATION 11

12. TECHNIQUES OF FACILITY LOCATION 12 Location Break-Even Analysis Simple Median Model

13. Location Break-Even Analysis Various alternatives for the location are compared in terms of cost and volume and also an economic comparison is made. Fixed and variable cost for each location are identified and the same are plotted on a graph. Same comparison can be made mathematically also. The location having least cost is selected. 13 Three steps that are followed for such analysis: - Determination of the fixed and the variable costs for all the locations. Plotting of cost on vertical axis and volume on the horizontal axis of graph. Location having least cost is selected.

14. Simple Median Model The best location is finalized from the short-listed ones. The quantum of the transportation cost is the main aspect. Under this model, a new facility is created, so as to reduce the transportation cost between the new establishment and the existing ones. Model is based upon an assumption that the movement of the goods can take place either on X-axis or on Y-axis. Any diagonal movement is prohibited. 14

15. 15 Thank You…!