LOcation Planning

1. LOCATION
PLANNING

2. Location Planning
 Decision are very important for all
types of business unit. This is because
it affects the cost, selling prices, and
demand of the product. It is a none
recurring heavy expenditure. Large
companies take the help of different
professionals like Lawyers,
Accountants, Environmentalist, etc.,
for selecting the proper location of
plant.

3. FACTORS THAT INFLUENCE
LOCATION POSITIONING
Raw Materials
Proximity to the Market
Climate
Culture

4. MODELS FOR EVALUATING BEST
LOCATION
Cost Profit Analysis For
Locations
The Center Of Gravity Model
Transportation Model
Factor Rating

5. MODELS FOR EVALUATING BEST
LOCATION
Cost Profit Analysis For
Locations
 Represented numerically or
graphically.
Total cost= FC=v(Q)
Where FC=Fixed Cost, v=Variable Cost per Unit, Q= Number
of Units

6. MODELS FOR EVALUATING BEST
LOCATION
The Center Of Gravity Model
 This technique is used in
determining the location of a
facility which will either reduce
travel time or lower shipping
costs. Distribution cost is seen
as a linear function of the
distance and quantity shipped.

7. MODELS FOR EVALUATING BEST
LOCATION
The Center Of Gravity Model
 involves the use of a visual map and
a coordinate system; the coordinate
points being treated as the set of
numerical values when calculating
averages.

8. MODELS FOR EVALUATING BEST
LOCATION
Transportation Model
 The transportation model uses the
principle of 'transplanting' something,
like taking a hole from one place and
inserting it in another without change.
First it assumes that to disturb or
change the idea being transported in any
way will damage and reduce it somehow.
It also assumes that it is possible to take
an idea from one person's mind into
another person's so that the two people
will then understand in exactly the same

9. Transportation Model
 The transportation model is a
valuable tool in analyzing and
modifying existing transportation
systems or the implementation of
new ones. In addition, the model is
effective in determining resource
allocation in existing business
structures.

10. MODELS FOR EVALUATING BEST
LOCATION
Factor Rating
 involves qualitative and
quantitative inputs, and
evaluates alternative based on
comparison after establishing a
composite value for each
alternative.

11. MAIN FACTORS AFFECTING
LOCATION DECISIONS
Regional Factors
Community Considerations

12. Regional Factors
 The three most important reasons for
a firm to locate in a particular region
includes:
Raw materials
Perishability
Transportation Cost

13. Community Considerations
 They must include facilities for
education, shopping,
recreation and transportation
among others. From a
business standpoint these
factors include utilities, taxes
and environmental regulation.

14. STEPS IN COST PROFIT
VOLUME ANALYSIS
1. Determine the fixed and variable cost
associated with each location
alternative.
2. Plot the total- cost lines for all location
alternatives on the same graph.
3. Determine which location will have the
lowest total cost for the expected level
of output. Alternatively, determine
which location will have the highest
profit.

15. MULTIPLE PLANT
MANUFACTURING STRATEGIES:
1. Product Plant Strategy
2. Market Area Plant Strategy
3. Process Plant Strategy
4. General Purpose Plant
Strategy

16. Product Plant Strategy
 Products or product lines are
produced in separate plants, and each
plant is usually responsible for
supplying the entire domestic market.
 It is a decentralized approach as each
plant focuses on a narrow set of
requirements that includes
specialization of labor, materials, and
equipment along product lines.

17. Product Plant Strategy
 Specialization involved in this strategy
usually results in economies of scale
and, compared to multipurpose plants,
lower operating costs.
 The plant locations may either be
widely scattered or placed relatively
close to one another.

18. Market Area Plant Strategy
 Here, plants are designed to serve a
particular geographic segment of a
market.
 The individual plants can produce
either most, or all of the company's
products and supply a limited
geographical area.

19. Market Area Plant Strategy
 The operating costs of this strategy
are often times higher than those of
product plants, but savings on
shipping costs for comparable
products can be made.
 This strategy is useful when shipping
costs are high due to volume, weight,
or other factors.

20. Market Area Plant Strategy
 It can also bring the added benefits of
faster delivery and response times to
local needs.
 It requires a centralized coordination
of decisions to add or delete plants, or
to expand or downsize current plants
because of changing market
conditions.

21. Process Plant Strategy
 Here, different plants concentrate on
different aspects of a process.
 This strategy is most useful when
products have numerous components;
separating the production of
components results in less confusion
than if all the production were done in
the same location.

22. Process Plant Strategy
 A major issue with this strategy is the
coordination of production throughout
the system, and it requires a highly
informed, centralized administration in
order to be an effective operation.
 It can bring about additional shipping
costs, but a key benefit is that
individual plants are highly specialized
and generate volumes that brings
economies of scale.

23. General Purpose Plant Strategy
 It allows for a quick response to
products and market changes, but can
be less productive than a more
focused approach.
 A benefit to this approach is the
increase in learning opportunities that
happens when similar operations are
being done in different plants.
Solutions to problems as well as
improvements made at one plant can
be shared with the other plants