LOCATION AND LAYOUT

Globalization→ changing trends

→Capitalist approach
→ no equal opportunities for employment. Technology advancement cannot be there where raw
materials are cheap
→ No efficiency
→ Dependent on others

FACTORS FOR LOCATION DECISION

→ Lifestyle
→ Availability of labor force/ raw materials
→ Proximity to market/ customers
→ Government regulations
→ transport facility (seaport)
→ Utilization of resources from parent company

3 CATEGORIES FOR GOING FOR LOCATION DECISION

1. Expansion
2. New location
3. Relocation (closes down the current one) → rapid growth, demand forecasted is thrice

Expansion: Mass producers do expansion and new location.

Relocation:

ADVANTAGES/ DISADVANTAGES

Pros:
Expansion: Management division for expansion, cost is low because workers are same, workers are
divided between different locations. Co-existing things would become better, less time consuming.

New location: New customers, new market, more availability of funds, transportation cost would
considerably be reduced, infrastructure would be changed, adopt new organizational cultures, use new
facilities that you previously could not.

Relocation: Future prospects if demand is high, better equipment and labor force, working in the area
where demand is high, infrastructure, new technology.
 Location Fixed cost Variable cost per unit

A 150,000 450
B 130,000 550
C 140,000 525
The number of units they planned to produce is 15,000 units

LOCATION DECISION ON THE BASIS OF TRANSPORTATION MODEL

Plant Capacity Warehous Demand

A 7000 e
B 10,000 T 7000
C 8000 U 4500
Khi, 25,000 V 6000
Lhr W 7500
25,000

Ren T U V W
t
A 5 8 6. 7
5
B 9 6 7 5
Lhr 10 12 3 4
Khi 3.5 4.5 7 9
Transportation cost per unit

T U V W Capacity
A 57 8 6.5 7 7000
B 9 6 4.5 7 5.5 5 10,000
Lhr 10 12 3 0.5 4 7.5 8000
Requirements 7K 4.5K 6K 7.5K

Lhr→ Total cost= 132,000

T U V W Capacity
A 57 8 6.5 7 7000
B 9 6 4.5 7 5.5 5 10,000
khi 3.5 4.5 7 0.5 9 7.5 8000
Requirements 7K 4.5K 6K 7.5K

KHi → Total cost= 171,500 5x7000+6x4500+7x5500+7x0.5K+9x7.5K