Facility Location Planning

Prepared By,Mr. Nishant Agrawal

Facility Location PlanningMETAS Adventist College (NEHU)

Session OutlineWhat is facility location ?Operations Strategies for Multiple FacilitiesFactors affecting Facility Location PlanningDimensional Analysis Brown and Gibson Model for Site locationLocating Foreign Operations Facilities

Facility locationIt is a branch ofoperations research with the optimal placement of facilities to minimize transportation costs.Facility Location is the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation.The facility location decision is very important for big business houseWrong location of facility may lead to failure of the complete projectOverall objective of an organization is to satisfy and delight customers with its product and services.

Operations Strategies for Multiple Facilities

Separate Facilities for Different Product / ServiceCompanies which are into diversified product / service ranges prefer to have separate facilities for each of these. Each facility take care entire population. This is done to avoid confusionEx. ICICIC which is into banking , insurance , mutual funds has separate network of office for each of these segments. Separate Facilities to serve different geographical areasEx. Pepsi and Coca Cola offer a perfect example of this strategy. Both these companies have bottling plants scattered all over the country. This strategy reduce overall transportation costs. Prompt actions can be taken to deal with sudden changes in demand.Ex. Banks, courier services

Separate Facilities for Different Processes Many color TV manufacturers have separate facilities for manufacturing pictures tubes.Reliance which are into backward integration. Which manufacture their own raw materials

Dimensional analysisDimensional Analysis (also called Factor-Label Method or the Unit Factor Method) is a problem-solving method that uses the fact that any number or expression can be multiplied by one without changing its value.C1M, C2M, , CzM are the different costs associated with a site MC1N, 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:

If this is > 1, site N is superior

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.

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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 decisionsWhether to expand the existing capacity and facilities.Whether to look for new locations for additional facilities.Whether to close down existing facilities to take advantage of some new locationsContinue....

Brown & Gibson ModelThis is one of the few models which integrates both objective and subjective factors in decision making.This model is more elaborate & considers three classes of site location factors:Critical e.g. water for refineryObjective e.g. labour costs, raw material costs.Subjectivee.g. union activities

For each plant site I a location measure is calculated :-

CFMI specifies the measure of critical factors for the plant site IOFMI specifies the measure of objective factors for the plant site ISFMI specifies the measure of subjective factors for the plant site ID specifies the objective factor decision weight

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Factors affecting Facility Location Planning

Locating Foreign Operations Facilities

Thank You..!!!

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