The need for selecting a suitable location arises because of three situations.
Dimensional analysis consists in computing the relative merits (cost ratio) for each of the cost items for two alternative sites. For each of the ratios an appropriate weightage by means of power is given and multiplying these weighted ratios to come up with a comprehensive figure on the relative merit of two alternative sites,
C1M, C2M, …, CzM are the different costs associated with a site M on the ‘z’ different cost items.
C1N, C2N, …, CzN are the different costs associated with a site N and W1, W2, W3, …, Wz are the weightage given to these cost items, then relative merit of the M and site N is given by:
(C1M/ C1N)W1X (C2M/ C1N)W2 ,..., (CZM/ CZN)WZ
If this is > 1, site N is superior and vice-versa. When starting a new factory, plant location decisions are very important because they have direct bearing on factors like, financial, employment and distribution patterns. In the long run, relocation of plant may even benefit the organization. But, the relocation of the plant involves stoppage of production, and also cost for shifting the facilities to a new location. In addition to these things, it will introduce some inconvenience in the normal functioning of the business. Hence, at the time of starting any industry, one should generate several alternate sites for locating the plant. After a critical analysis, the best site is to be selected for commissioning the plant.
The plant Location of warehouses and other facilities are also having direct bearing on the operational performance of organizations.
The existing firms will seek new locations in order to expand the capacity or to place the existing facilities. When the demand for product increases, it will give rise to following decisions:
The different operations strategies under the above circumstances could be:
For example, a high quality precision product-line should not be located along with other product-line requiring little emphasis on precision. It may not be proper to have too many contradictions such as sophisticated and old equipment, highly skilled and semi-skilled personnel, delicates processes and those that could permit rough handlings, all under one roof and one set of managers. Such a setting leads to much confusion regarding the required emphasis and the management policies.
Product specialization may be necessary in a highly competitive market. It may be necessary to exploit the special resources of a particular geographical area. The more decentralized these pairs are in terms of the management and in terms of their physical location, the better would be the planning and control and the utilization of the resources.
For an established organization in order to add on to the capacity, following are the ways:
All these factors are applicable to service organizations, whose objectives, priorities and strategies may differ from those of hardcore manufacturing organizations.
With the advance in telecommunications technology, a firm can be in virtual proximity to its customers. For a software services firm much of its logistics is through the information/ communication pathway. Many firms use the communications highway for conducting a large portion of their business transactions. Logistics is certainly an important factor in deciding on a location whether in the home country or abroad. Markets have to be reached. Customers have to be contacted. Hence, a market presence in the country of the customers is quite necessary.
Many firms based in USA and UK in the service sector and in the manufacturing sector often out sources part of their business processes to foreign locations such as India. Thus, instead of one’s own operations, a firm could use its business associates’ operations facilities. The Indian BPO firm is a foreign-based company’s ‘virtual service factory’. So a location could be one’s own or one’s business associates. The location decision need not always necessarily pertain to own operations.
REASONS FOR GALOBAL/FOREIGN LOCATION
The other tangible reasons could be as follows:
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Production And Operations Management Tutorial
Introduction To Production And Operation
Plant Location And Layout
Production Planning And Control
Work Study (time And Motion Study)
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