CHAPTER FOUR

THE LOCATION AND LAYOUT

DECISION
 The Location decision
• The location decision involves deciding on a
specific site in a given community or region
where the production facility should be
placed.
When is the Location Decision Required?
• When expanding on the existing
capacity.
• When market forces change. Ug Universities
locating in city centres.

• When there is change in the source

of major inputs
• When you start a new business.
 Importance of Location Decisions to the
Business

• To avoid reverse costs. = Are costs of

relocating

• It determines revenue generation.

• It determines the operating costs.
• It determines quality production.
• It determines market accessibility.
Considerations when deciding on location of
Business:
• Harmonizing with the overall business strategy
and other functional objectives.
• Meeting the production cost objectives of the
business.
• Maximizing revenue generation and market
satisfaction.
• Other factors eg locating a business near ones home for prestige
purposes.
 Procedures in Evaluating possible Location
Alternatives:
• 1. Spatial levels of Evaluation
– International level
– National Level
– Regional Level
– Community level
– Site Level
 National Level
(a) Economic Potential
– The extent of the market in terms of real purchasing
power.
– Cost of production.
– Regulatory requirements
– Fiscal policies
– Exchange rate policies
– Balance of Payments
(b) Political Factors ie political stability
(c) Social-Cultural Practices
- Religious beliefs, Tolerance of the people, View of
foreigners, Tastes and preferences.
 Regional Level Evaluation
• Evaluate several regional factors:
– Are dominant raw materials available?
– Are raw materials easier to transport?
– How high are the costs of transportation?
– Is suitable labour available?
– At what cost is labour available?
– Are there any attractive regional incentives
offered?
 Community Level Evaluation
• Assess how hospitable is a given community
to the proposed project.
– Assess the cultural background and beliefs of the
community. Eg Bujagali community rejected the Dam project
– Assess the perceived impact the project will have
on the quality of life of the community. Eg If negative
project is rejected like if it increases prostitution, pollution, noise,
traffic, congestion.

- Assess the existing social amenities. Ie check the

availability of schools, sports facilities, security, churches.
 Site Level Evaluation
• Here actual site factors are assessed:
– Natural factors eg soil fertility, climatic conditions.
– Drainage
– Regulatory requirements eg in regard to
expansion, NEMA rules.
 2.Quantitative Evaluation
(a) Break – Even Analysis
(b) Factor Rating Analysis
 FACILITY LAYOUT
• Facility layout is a rational consequence of
making a location decision.
• Once a facility has been located, then its layout
must be designed.
• Facility Layout refers to the physical arrangement
of productive resources of the production facility.
• Layout considers how resources are organised in
different departments and how sections are
placed relative to one another.
• Layout design determines the organisation of
plant, machinery, equipment, people, raw
materials, in the different areas of the
organisation.
• Their organisation determines the flow of
work through the departments.
 Why is the facility layout decision
important?
• It influences the cost of production within the
production facility.
• It influences the perception of quality by the
customers and hence customer satisfaction.
• Layout influences the rational utilization of
available resources eg put store on floor 8 is expensive to get gds.
• Layout can act as motivator to the workforce
• Layout minimizes cost of re-locating once set up.
 Different approaches to layout design
• 1. Process focused layout
Is where machines, equipment and people are
organized around processes / functions.
-Equipment is arranged by type and not by sequence
- The system is highly flexible to demand needs
and is not vulnerable to shut downs by mechanical
failure.
- The system is cheap since a function that is not
busy can be temporarily closed down
 Disadvantages of Process focused layout

• The system is complex and costly to run

• Movement of work force is substantial
• Due to uneven flow of work, capacity
utilization is usually low, material handling is
slow, output can be low.
 Examples:
• Hospitals with several units like outpatients,
casualty, maternity, pediatrics, = Each of these
provides a unique service to the customer.
• Universities have faculties like Technology,
Social Sciences, Fine Art, Commerce, in which
different study programme are organized.
• Banks with customers that have different needs
like cash deposit, withdrawals, bank
statements, buying forex.
 2. Product Focused Layout
• Machines, equipment, human beings and
other resources allow for continuous flow of
work through the production process
– Output is standardized
– Specialized manpower is deployed
– Flow of work is even and continuous
– Output is predictable
 Disadvantages:
• The dull repetitive tasks lead to low staff
morale.
• Once the layout is set up it cant be altered
• Set up costs are high
• Flexibility can be very hard to achieve
• There is pre-determined production.
• The system has to run continuously.
 Examples:
• Beer bottling line where uniform bottles are
washed, dried and the same beer is
carbonated, filled into bottles, closed, labeled
and crated on a continuous basis.
 3. Fixed Position layout
• This layout is used when it is expensive and difficult
to move the product being produced.
• It is cheaper to move resources to the place of work
• It is used where the product being made is large
and immobile.
• Examples:
• Construction sites, aircraft manufacture, road buildin, ship
building.
• For services we can have home patients care.
 4. Hybrid layout system
• This is a combination layout where two or more
layout are combined e.g. Process and Product
focused layouts.
• Here the process layout is used for various
components and product layout is used in the
final assembly.
• Since different layouts are combined, then both
intermittent and continuous operations that are
used