Facility location planning

General procedures for facility location

planning:
1.Priliminary screening:
Preliminary screening is to identify feasible
sites in planning process. For some kind of
facilities, particular environmental or labour
consider action are crucial.
Resources
Labour skill and productivity.
Land availability and cost.
Raw materials.
Subcontractors.
Transportation facilities.
Utility availability and rates.
Local conditions
Community receptivity to business.
Construction cost.
Quality of life.
Taxes.
Organized industrial complexes.
 Sources of information
After identifying several key locations requirements, management
undertakes a search to find alternative locations that are consist
with these requirements. Local chamber of commerce provide
literature promoting expansion possibilities in various state and local
communities.
Other sources
The national industrial conference board.
The U.S. department of conference.
The U.S. small business administration.
The U.S. census of manufactures.
the data include geographical breakdowns of labor availability,
population, transportation facilities, type of commerce and similar
information.
 Detailed analysis
Once the preliminary screening narrows
alternative sites to just a few, more
detailed analysis begins. At each potential
site a labor survey may be conducted to
assess the local skill. Where community or
consumer response in question, pilot,
studies or systematic survey may be
under taken. Among all many
consideration, each company identify
which ones are most pertinent for their
location strategies.
 Factor rating
It is a decision procedure in which each alternative is rated
according to each factor relevant to the decision and
each is weighted according to the importance.
Factor rating are frequently used to evaluate location
alternatives because
1.Their simplicity facilitates communication about why one
site is better than another
2.They enable to bring divers locational consideration in to
the evaluation process
3.They foster consistency of about judgment about location
alternatives.
Typically the first step in using factor rating
is to list the most relevant factors in the
location decisions.
 Need for facility location planning
Revenue and costs are both affected to by facility location.
A technique called break even analysis helps related
cost and revenue to facility location.
Break even analysis
It is a graphical algebraic representation of the relationship
among volume of out put, cost and revenues. As the
volume of out put increases cost and revenue will also
increases.
Costs
1.Fixed cost
2.Variable cost
 Break even with discounting
revenue and cost
Revenues or costs may be nonlinear rather
than linear functions of output volume or
the function may increase in jumps rather
than smoothly. Indeed purpose of break
even analysis is to reveal how the
organization costs and revenues changes
with volume of output.
Information from the break even chart can
now be used for managerial decisions.
Once the desired level of profitability for
the year has been started, we can show
the volume of output required to achieve it.
We can also identify how many facilities and
shifts will be needed and we can estimate
operating costs and working capital
requirement.