METAS Adventist College (NEHU)

Facility Location Planning

Prepared By,
Mr. Nishant Agrawal
Session Outline

 What is facility location ?

 Operations Strategies for Multiple Facilities

 Factors affecting Facility Location Planning

 Dimensional Analysis

 Brown and Gibson Model for Site location

 Locating Foreign Operations Facilities

 Facility location
 It is a branch of operations 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 house

 Wrong location of facility may lead to failure of the complete project

 Overall objective of an organization is to satisfy and delight customers with its

product and services.

Operations Strategies for Multiple
Facilities

Different
Product /
Service

Strategies
Facilities

Different
Different
Geographical
Process
Area
Separate Facilities for Different Product / Service
 Companies 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 confusion

 Ex. ICICIC which is into banking , insurance , mutual funds has separate
network of office for each of these segments.

Separate Facilities to serve different geographical areas

 Ex. 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 analysis
 Dimensional 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 M

 C1N, 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

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 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

decisions
 Whether 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

locations
 Brown & Gibson Model

 This 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 refinery

 Objective … e.g. labour costs, raw material costs.

 Subjective…e.g. union activities

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

 CFMI specifies the measure of critical factors for the plant site I

 OFMI specifies the measure of objective factors for the plant site I

 SFMI specifies the measure of subjective factors for the plant site I

 D specifies the objective factor decision weight

Factors affecting Facility Location Planning

Availabilit
y of
power
supply
Good
Transport Governmen
ation t Policy
facilities

Facility
Location
Availability Planning Environmen
of cheap t and
labor Community

Easy
Low
availability
construction
of cheap
cost
land
Locating Foreign Operations Facilities

Trade
Barriers
Good
Transport Internationa
ation l Customers
facilities

Facility
Location
Planning Internationa
l
Incentives
Competition
s

Low Costs Regulations