case study on facility location planning

we will take an example of paradise recycling company operating in north india

paradise Recycling Services Inc. has expanded its collection services into a new
area which is himachal pradesh.
The business wants to set up a series of collection facilities for recyclable pr
oducts, such as cans, newspapers, and cardboard boxes in selected districts of h
. p. It wants to locate its facilities so they are convenient, but at the same t
ime it doesn't want to put a depot in every city in the area. Location analysis
is an ideal means of helping Paradise serve its clients well at as low a cost as
possible.
it uses location analysis to show what its options are.
the selection of appropriate location depending on the size of the industry ca
n be done in two stagees
1- evaluaton of various geographic areas and the selection of an optimum area
2- with in each area there is a choice of proper site which can be urban ,sub ur
ban ,or rural are gererally know as ind. zones
Thus in the process of loc ana. 1stly sum appropriate geo. areas is selected n f
rm dat area a proper site is sel. 4 d establishment of d plant . d analysis 4 d
choice opf appropriate area n coresponding site is based on a no. of measures di
scribed below
MEASURES 4 D SEL. OF LOCATION:
the fundamental objective of facility location analysis is to max. d profit by m
in the total cost of production process n marketing cost of finished product
TOTAL COSTS= FIXED COST+OPERATIONAL COSTS
fixed costs include expenditure on land building machines and other equipments e
tc. operational costs are d expendituresincurred on inputs, transformation proce
ss n d distribution of output.d contribution of d various factors to d total cos
t will vary from place to place eg. a possible advantage of cheap labour at some
place may be offset by more expenditure on fuel, power, taxes etc. similarly d
contri of various fartors also depend on d nature of product eg. in oil n chemic
al product d labour cost represent only a small proportion of total costs wherea
s it is quite high in garment n texitle industry
Thus the selection of an area n finally a site for a plant needs a careful study
if a good job is to be done
the ana lysis canbe didived into 2 catagerios
1- involving quantitative factors
2- comparison of qualitative factors
1- analysis based on quantitative factors
under ths d various methods used are
A- comparetive cost chart - this is based on location cost summary chart a compa
ritive chart of total cost involved in setting up a plant is prepared
the comapany strategically evaluated varios 10 location

LOCATION ANALYSIS
A location profile of the area helps the business understand the trade-off betwe
en population coverage and number of recycling depots. With fewer depots, a smal
ler number of people is within a given coverage radius, but costs are lower. At
the same time, locating more facilities (in the most strategic manner possible)
helps to bring the recycling service close to more people, but at higher cost. T
he graph below shows the balance between percent of population within range of a
depot, and number of depots. For example, the graph shows that four depots loca
ted strategically would be within 4 district which covers of 70% of the area's p
opulation.
GRAPH

PARADISE Recycling COMP. has already determined the threshold level of business
it needs, so knowing the trade-off between population coverage and number of dep
ots simplifies the company's decision. The company believes it can achieve its t
hreshold if at least 70% of the area's population is within 4 depots of 4 distri
cts. A location analysis of the area shows the number (four, see graph above) an
d location (see map below) of depots it needs to do this.
GRAPH 2

Thus the selection of an area n finally a site for a plant needs a careful study
if a good job is to be done
the ana lysis canbe divided into 2 catagerios
1- involving quantitative factors
2- comparison of qualitative factors
1- analysis based on quantitative factors
under ths d various methods used are
A- comparetive cost chart - this is based on location cost summary chart a compa
ritive chart of total cost involved in setting up a plant is prepared. for examp
le the company has chosen the 7 districts for setting up their 4 plant or depots
. the 7 districts chosen are solan shimla una hamirpur mandi kullu n bilaspur.
chart 5.1
consider 7 locations solan shimla una hamirpur mandi kullu n bilaspur. and 5 fac
tors 1,2,3,4,5 on which d choice of corresponding location depends these can be
expenditure on land building labour raw material n transport.in d given chart d
relevant operative cost associated with each of d factor is taken on vertical ax
is n locations on horizontal axis. the total cost of each location is then added
n is represented by d height of d column for each location. company selected d
locations
for which d total cost is minimum which are solan kullu bilaspur una.

B - DIMENSIONAL ANALYSIS
DIMENSIONAL anlysis is a useful technique for comparing d merits of several avai
lable locations where an assesment of factors may involve a comparison of figure
s other than those relating to cost.it is also experienced dat in many situation
s even if v r able to identify d various factors influencing locational choices,
d problem of quantification remains. besides dis dere is problem of selecting w
eights associated with each factor in analysis. in d case of qualitative factors
d location can be ranked as high medium or low.
suppose v consider 3 factors land, building and labour in evaluating the merit o
f 7 locations which r soln shimla hamirpur mandi kullu una bilaspur, having the
weights(1,2,2) the costs associated with each factor are as given below:
chart 5.2
as it is clear from d chart dat if d building n labour are considered to be more
imp. say two times of land, den locations 1,5,6,7 appears to be attractive. no
w suppose we decide to introduce 2 more factors in d study of locations namely c
ommunity relation n d cost of transportation. it is very difficult to find accur
ate value of costs associated with these factors. in such cases a system of rati
ng on a scale 1 to 100 is used. rating of 1 indicates a location very high i.e i
t is d best possible results whereas a score 100 shows d worst posssible result.
in other words score of 1 means low level of cost asso. with sat factor n score
of 100 indicates high level of cost. d problem of rating each factor on a scale
r of 1 to 100 is termed as dimensional problem. a comparison of location using a
bsolute cossts of some factors n rating scores for other factors is not valid be
coz in dat case 2 dimensions will be mixed together indiscriminately. to make d
comparison valid all d factors should be in dnsame dimensions. let us change d
cost dimensions of land labour n building to scale dimensions to have d followi
ng observations:
chart 5.3
it is clear from d chart dat total score is minimum in case of solan kullu bilas
pur n una. so thesse locations would be perfect for setting d plant.

ANALYSIS BASED ON QUALITATIVE FACTORS:

QUALITATIVE factors related wid facility location analysis are also known as in
tangibla factors. dese are d factors to which cost values cannot be assigned eg.
lack of good schools, union activity, community attitude etc.these factors can
be termed as adequate or inadequate, significant or insignificant, good, excelle
nt, etc, for respective locaations. in this particular case also these factors h
ad been analysed. the locations selected for plant setup were having good qualit
ative factors.
conclusion:
After going through all these methods of facility Location planning it gives d c
ompany, a means of quickly and efficiently making decisions that shape its opera
tions in the area. Use of location analysis helps company's management to feel c
onfident that their operations provide the service levels needed, with resource
use that is as efficient as possible.