Here, logistics and Facility Location for Business is discussed. Logistics Meaning and Concept Decision Related to Logistics Facility Location Concept Issues in Facility Location Plant Location Methods Case Study: Tata Nano Aditya Deshpande deshadi805@gmail.com

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LOGISTICS and
FACILITY LOCATION
Prepared by:
ADITYA DESHPANDE
(Scholar in Operations, Pune)

2. CONTENT
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1. Logistics Meaning and Concept
2. Decision Related to Logistics
3. Facility Location Concept
4. Issues in Facility Location
5. Plant Location Methods
6. Case Study: Tata Nano
08-Jan-19

3. Logistics Meaning and Concept
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 Art and Science of obtaining, producing, distributing
material and product in proper place and in proper
quantities……. By Association of Operations Management
 How items move from manufacturing plant to consumer
 Here Aim- How to???
1. Analyze where to locate warehouses and plants
2. Evaluate movement of materials to and from these
location
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4. Logistics Meaning and Concept
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 International Logistics: Managing these functions at Global
Scale
 Example: Sweatshirt purchased at Mumbai, Kolkata comes
from Fujian, China travelled over 8000 kms
 To keep price down, trip from China to India must be
efficient- thus involves International Logistics
 Some Big names- FedEx, DHL, Ekart, etc.
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Logistics Meaning and Concept
Total 8 Tasks
1. Manufacturing
2. Supply Chain
3. Cargo to Warehouse
4. Inventory at Site
5. Delivery to Retailer
6. Retailer Destination
7. End Product
8. End Distribution
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6. Logistics related Decisions
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How to do
it BEST
Plant Customer
Logistics
Main Managerial Question
 Key decision area – How to transport???
 Here Logistics System Design Matrix is helpful- Provide
best alternative for among modes of transport
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7. Logistics related Decisions
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Logistics System Design Matrix
 Total six modes of transport:
Highway, Rail, Pipeline, Air, Water, and Hand Delivery

8. Logistics related Decisions
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1. Highway (Truck): Offers great flexibility for any location not
separated by water; speedy type and mostly used
2. Water (Ships): Very high capacity and lowest cost, transit
time slow used for bulk items –oil, coal, chemicals
3. Air: fast but expensive, for light, small items
4. Rail: low cost but times be long; depends on infra mainly
5. Pipeline: Highly limited to liquids, gases, slurry solids, initial
cost vey high
6. Hand Delivery: High labor cost, last step in Supply Chain
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9. Logistics related Decisions
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1. Small few companies uses single mode of transport
2. Multimodal solutions are norm and finding correct
multimodal strategies is important
3. Co-ordination and Scheduling plays big role with Integrated
Information System (IIS)
4. Standardized containers used for transfer to ship/train to
trucks
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10. Facility Location Concept
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08-Jan-19
 Place where the facility will be set up for
producing goods or services.
 Need for location selection may arise when
1. When a business is newly started
2. When existing business unit has outgrown its
original facilities, expansion is not possible
3. When volume of business or the extent of
market necessitates establishing branches
4. When lease expires and the landlord does
not renew the lease
5. Other social or economic reasons

11. Issues in Facility Location
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Total 14 Factors for Facility Location
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1. Proximity to Customers
2. Business Climate
3. Total Costs
4. Infrastructure
5. Quality of Labor
6. Suppliers
7. Other Facilities
8. Free Trade Zones
9. Political Risk
10. Government Barriers
11. Trade Blocks
12. Environment Regulation
13. Host Community
14. Competitive Advantage

12. Plant Location Methods
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Many techniques available each has separate area of
specialization and uses
1. Factor Rating System
2. Transportation Method of LP
3. Centroid Method
4. Cost-Profit-Volume Analysis
5. Analytical Hierarchy Process AHP
Here only Factor Rating and Centroid Methods are discussed
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13. Plant Location Method- Factor Rating System
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08-Jan-19
• Most widely used- simple and quick
• Can include non-quantitative considerations
• A weight for each site is assigned for different factors
• Total of each site is calculated so which scores higher is
best suitable location
Example
DESHADI Solutions want to chose their next plant location
Having total 3 proposed sites at Mumbai, Delhi, Nagpur
each.

14. Plant Location Method- Factor Rating System
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08-Jan-19
Location Factor Weightage Mumbai Delhi Nagpur
Raw Material Cost 0.3 80 60 70
Fuel Cost 0.15 50 70 90
Work Culture 0.25 70 95 65
Local Infra Cost 0.15 90 80 75
Transport Cost 0.15 40 60 60
Question
• Here, total sum of weightage is 1 and scores given are
out of 100 so total score for any city is 500
• These scores and weightage given as per company
requirement and from feedback from various
departments like Mfg, Sales, Purchase, etc.

15. Plant Location Method- Factor Rating System
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Solution
Location
Factor
Weight
Mumbai Delhi Nagpur
Rating Total Rating Total Rating Total
Raw
Material
Cost
0.3 80 24 60 18 70 21
Fuel Cost 0.15 50 7.5 70 10.5 90 13.5
Work
Culture
0.25 70 17.5 95 23.75 65 16.25
Local Infra
Cost
0.15 90 13.5 80 12 75 11.25
Transport
Cost
0.15 40 6 60 09 60 09
Total 68.5 Total 73.25 Total 71
Highest total for Delhi so Delhi would be best choice for plant

16. Plant Location Method- Centroid Method
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08-Jan-19
• Considers distance between sites and volume shipped
• For intermediate or distribution warehouses
• Assume inbound and outbound cost as equal
• Requires co-ordinates of cities location X, Y axes
Example
DESHADI Solutions want to chose their next mobile tower
location in Pune
Having total 3 sites at Pimpri, Kondhwa, Shivaji-Nagar
Need to find next site

17. Plant Location Method- Centroid Method
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Where:
1. Cx = X coordinate of centroid
2. Cy = Y coordinate of centroid
3. dix = X coordinate of the ith location
4. diy = Y coordinate of the ith location
5. Vi = volume of goods moved to or from ith location
• Centroid is found by two equations

18. Plant Location Method- Centroid Method
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Location X Y
No of
Users
Pimpri 100 200 1250
Kondhwa 790 900 1900
Shivaji-Nagar 250 580 2300
Question
Cx =
(100∗1250+790∗1900+250∗2300)
1250 + 1900 + 2300
Cy =
(200∗1250+900∗1900+580∗2300)
1250 + 1900 + 2300
Cx = 443.49
Cy = 627.89

19. Plant Location Method- Centroid Method
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08-Jan-19
Cx = 443.49
Cy = 627.89
Solution

20. Case Study:
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08-Jan-19
• Tata well known group in
India
• TATA NANO- ambitious
project for making family
car at lakh rupees
• Initial site at SINGUR
• Later shifted to SANAND
Great case study
for facility location
SINGUR
SANAND

21. Case Study:
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08-Jan-19
Background
Tata purchased 1000 acres land in 2006 at Singur, West Bengal
for Nano Car manufacturing selection due to:
1. To avail financial subsidies, tax benefits
2. Low cost land availability
3. Cheap labor
4. Raw material availability
But, land acquired was from farmers
Total 2000 Crore Project
Then Effect
Protest by local, "Save Farmland“ movement began
Political disagreement delayed actual start of production by
ONE Year (planned 2007, actual 2008) Loss of 500 Crore
Tata Nano

22. Case Study:
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TATA MOTORS Shifts to Gujrat
Alternative proposals by different states like Andhra Pradesh,
Jharkhand, Orissa, Maharashtra, Gujrat
Based on study of various factors and weightages GUJRAT
SANAND is selected for site
Location Factor
1. Economical labor, land
2. Proximity to ports (EXIM)
3. Finance incentives
4. Government stability and support
5. Speed of government regulations
West Bengal’s Loss= Gujrat’s Gain

23. Case Study:
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Case Study Findings
Without Socio-Political Stability,
Industrial Growth is Distance Dream.
That is why, scientific study of factors and their weightages
is most important for Facility Selection.

24. 08-Jan-19
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Thank YOU