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FACILITY LOCATION

Meaning of facility location:

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The function of determining where the plant should be located for maximum operating economy & effectiveness-R.C. Davis

Steps in Location selection:

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1.

2. 3. 4.

Decide firm locate domestically or internationally Selection of region Selection of community or locality Selection of site.

Selection of Region
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Availability of raw material Nearness to the market Availability of power Transport facility Suitability of climate Government policy

Selection of community/ locality:

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Availability of labour Existence of complimentary and competing industries Finance and research facilities Availability of water and fire fighting facility

Selection of site:
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soil area of land topography disposal of land whether rural, semi urban and urban

Locations models

Factor rating method

Point rating method

Break even analysis

Qualitative factor analysis

Center of gravity method

Factor rating model

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In this method each of the factors for location are rated and the rating of the competitive locations are considered. The products of the rating are added. The location which gets the maximum product of rating is selected.

Point rating model

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In this method, we decide a maximum possible score and see out of this how many points we can allocate to the locations under consideration. We compare the totaled ratings and decide the preference. The location which gets the maximum rating would be chosen.

Break even analysis

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Every manufacturing will have three major contributors to cost. Investments, recurring expenses and variable costs. We compare the total costs for the different locations select whichever location costs the least. we will have to consider the possible variations in production levels during the foreseeable time spans

Qualitative factor analysis

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This method is used when we think that economic criteria that we are using is not sufficient. Then we also see the qualitative aspects. Then we assign weights and after their multiplication we find the total and the location with highest score is get selected.

Center of gravity method

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This method is used mainly where transportation costs either for distribution of products or collection of materials from different suppliers is the main criteria. When both distance and load have to be considered for optimality in terms of cost, we use this method.

Errors in facility location

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Selection of region Selection of locality Selection of actual site.

Need for facility location:

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Starting a new factory Expansion of existing plant decentralization &diversification to meet increased demands for its products. The existing factory is not in a position to obtain renewal of lease. An undesirable location is to be abandoned.

Benefits of facility location

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To get a thorough knowledge of all the factors Benefits of alternate substitute materials Saving of transportation cost access to cheap labour prepared to face some minor hindrances.

Cont..
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Make available needed raw materials like water electricity. Helps in a smooth running of an organization, Also has very easy access to production, distribution and sale of the products.

Recent trends in facility location

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To locate plants away from cities. Industrial development is notified backward area.

Competition among states to develop industries.

Priority to suburban areas. Decentralization of industries

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