This document discusses factors to consider when selecting a manufacturing facility location. It identifies key location factors like customer proximity, available skilled labor, suppliers, and environmental regulations. It also outlines common errors in location selection such as personal biases or inadequate analysis. Finally, it provides steps for the location selection process, including defining objectives, criteria, evaluating alternatives through models and data collection, and selecting a site that best meets the objectives and criteria. Cost is another important consideration, and the document presents a cost-volume analysis comparing total costs at four potential locations.

1. EMMANUEL P JOY

2. FACILITY LOCATION
• Facility Location is the right location for the
manufacturing facility, it will have sufficient
access to the customers, workers,
transportation, etc.
• Facility location determination is a business
critical strategic decision. There are several
factors, which determine the location of facility
among them competition, cost and
corresponding associated effects.

3. Cont..

4. Factors influencing facility location
• If the organization can configure the right
location for the manufacturing facility, it will
have sufficient access to the customers,
workers, transportation, etc. For commercial
success, and competitive advantage following
are the critical factors:

5. Cont..
• Customer Proximity: Facility locations are
selected closer to the customer as to reduce
transportation cost and decrease time in
reaching the customer.
• Business Area: Presence of other similar
manufacturing units around makes business
area conducive for facility establishment.

6. • Availability of Skill Labor: Education, experience
and skill of available labor are another important,
which determines facility location.
• Free Trade Zone/Agreement: Free-trade zones
promote the establishment of manufacturing
facility by providing incentives in custom duties
and levies. On another hand free trade
agreement is among countries providing an
incentive to establish business, in particular,
country.
Cont..

7. • Suppliers: Continuous and quality supply of
the raw materials is another critical factor in
determining the location of manufacturing
facility.
• Environmental Policy: In current globalized
world pollution, control is very important,
therefore understanding of environmental
policy for the facility location is another
critical factor.
Cont..

8. ERRORS IN LOCATION SELECTION
• Facility location is critical for business
continuity and success of the organization. So
it is important to avoid mistakes while making
selection for a location.
• Errors in selection can be divided into two
broad categories
»behavioral
»non-behavioral

9. • Behavioral errors are decision made by
executives of the company where personal
factors are considered before success of location,
for example, movement of personal
establishment from hometown to new location
facility.
• Non-behavioral errors include lack of proper
investigative practice and analysis, ignoring
critical factors and characteristics of the industry.
Cont..

10. STEPS IN LOCATION SELECTION
1. Define the Location Objectives and
Associated Constraints
• The location objectives and associated
constraints are defined on the basis of the
views and requirements of the promoters,
owners, employees, suppliers and customers of
the firm.

11. 2. Identify the Relevant Decision Criteria
• Firms should select a location by
formulating relevant decision criteria. The
criteria should include several economic
factors such as labor and material costs,
and non-economic factors such as impact
of the plant on the surrounding
environment.
Cont..

12. 3. Relate the Objectives to the Criteria Using
Appropriate Models
• Using the models like break-even analysis,
linear programming, and qualitative factor
analysis, the relevant decision criteria should
be evaluated. Though it is preferred to model
the location decision process in a systematic
and quantitative manner, it is difficult to
quantify the intangible criteria. Therefore, the
judgment of responsible managers is taken into
consideration to obtain a solution.
Cont..

13. 4. Do Field Research to Get Relevant Data and
Use the Models to Evaluate Alternative
Locations
• Firms should collect the possible primary and
secondary data to evaluate different alternative
locations. Primary data is the data that is collected
for a specific purpose for the first time. Firms
mainly use survey methods like personal
interviews, telephonic interviews, and mail
interviews to collect the primary data. Secondary
data is the data that is already available but might
have been collected for some other purpose or by
some other institutions.
Cont..

14. 5. Select the Location that Best Satisfies the
Criteria
• A location, which can meet the defined
objectives, is able to satisfy the criteria
and provides benefits to the community
should be selected.
Cont..

15. COST COMPETITION & Hidden factors
• Effect of location on revenues
• Effect of location on variable cost
• Effect of location on fixed cost

16. Cost-Volume Analysis
Fixed and variable costs for
four potential locations
L o c a t i o n F i x e d
C o s t
V a r i a b l e
C o s t
A
B
C
D
$ 2 5 0 , 0 0 0
1 0 0 , 0 0 0
1 5 0 , 0 0 0
2 0 0 , 0 0 0
$ 1 1
3 0
2 0
3 5

17. Fixed
Costs
Variable
Costs
Total
Costs
A
B
C
D
$250,000
100,000
150,000
200,000
$11(10,000)
30(10,000)
20(10,000)
35(10,000)
$360,000
400,000
350,000
550,000

18. 800
700
600
500
400
300
200
100
0
Annual Output (000)
$(000)
8 10 12 14 166420
A
B
C
B Superior
C Superior
A Superior
D

19. THANK YOU