Module2 Sessions 16 35 Facility Location Facility location

Module-2 Sessions 16 -35

Facility Location � Facility location: �Plant location is the function of determining location for a plant for maximum operating economy and effectiveness. � Steps in Location Selection: � in choosing a plant location, the entrepreneur would do well to proceed step by step, the steps being; 1. Within the country or outside; 2. Selection of the region; 3. Selection of the locality or community; 4. Selection of the exact site.

Cond. 1. Deciding on Domestic or International Location 2. Selection of Region � Existence of Complementary and Competing Industries � Finance and Research Facilities i. Availability of Raw Materials ii. Nearness to the Market iii. Availability of Power iv. Transport Facilities � Local Taxes and Restrictions v. Suitability of Climate � Momentum of an Early Start vi. Government Policy � Personal Factors vii. Competition Between Status 3. Selection of Community � Availability of Labour � Civic Amenities for Workers � Availability of Water and Fire-fighting Facilities 4. Selection of the Site � Soil, Size and Topography � Disposal of Waste

Issues in Facility Location �Proximity to customers �Business climate �Total cost �Infrastructure �Quality of labor � Suppliers �Political risk �Governmental Barrier �Environmental regulation �Competitive Advantage

Location Models � Factor rating �Centre of gravity �Break-even analysis � Qualitative factor analysis

Factor Rating Method Example Two refineries sites (A and B) are assigned the following range of point values and respective points, where the more points the better for the site location. Sites Major factors for site location Pt. Range A 123 150 54 24 45 4 8 5 5 Total pts. 418 B 156 100 63 96 50 5 4 50 20 544 Best Site is B

Centre of Gravity Method Where: Cx = X coordinate of centroid Cy = Y coordinate of centroid dix = X coordinate of the ith location diy = Y coordinate of the ith location Vi = volume of goods moved to or from ith location

Example – Several automobile showrooms are located according to the following grid which represents coordinate locations for each showroom Y Q (790, 900) D (250, 580) A (100, 200) (0, 0) X Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month?

Plant Location Methodology: Example of Centroid Method (Continued): Determining Existing Facility Coordinates To begin, you must identify the existing facilities on a twodimensional plane or grid and determine their coordinates. Y Q (790, 900) D (250, 580) A (100, 200) (0, 0) You must also have the volume information on the business activity at the existing facilities. X

You then compute the new coordinates using the formulas: You then take the coordinates and place them on the map: Y Q (790, 900) D (250, 580) Z A (100, 200) (0, 0) X New location of facility Z about (443, 627 )

Project Assignment �Visit the website of 5 major organizations in your region. Find out where their facilities are located. Form discussion groups to analyze the rationale behind the location of these facilities

Reference for problems �Aswathappa and K. Sridhar Bhat �Kindly go through the solved examples