Theory on facility

location
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FACILITY LOCATION

 Facility Location is the right location for the manufacturing

facility, it will have sufficient access to the customers, workers,
transportation, etc.
 Facility location determination is a business critical strategic
decision. There are several factors, which determine the
location of facility among them competition, cost and
corresponding associated effects.
 Factors influencing facility location
 Customer Proximity: Facility locations are selected closer to
the customer as to reduce transportation cost and decrease time
in reaching the customer.
 Business Area: Presence of other similar manufacturing units
around makes business area conducive for facility
establishment.
  Availability of Skill Labor: Education, experience and skill of
available labor are another important, which determines
facility location.
 Suppliers: Continuous and quality supply of the raw materials
is another critical factor in determining the location of
manufacturing facility.
 Environmental Policy: In current globalized world pollution,
control is very important, therefore understanding of
environmental policy for the facility location is another critical
factor
 Free Trade Zone/Agreement: Free-trade zones promote the
establishment of manufacturing facility by providing
incentives in custom duties and levies. On another hand free
trade agreement is among countries providing an incentive to
establish business, in particular, country
STEPS IN LOCATION SELECTION 
 Define the Location Objectives and Associated Constraints
  Identify the Relevant Decision Criteria
 Relate the Objectives to the Criteria Using Appropriate
Models 
 Do Field Research to Get Relevant Data and Use the Models to
Evaluate Alternative Locations
 Select the Location that Best Satisfies the Criteria  
Theory on facility location
 Weber’s Theory of Industrial Location:
Alfered Weber a German economist was the first economist who
gave scientific exposition to the theory of location and thus filled
a theoretical gap created by classical economists. He gave his
ideas in his Theory of Location of Industries’ which was first
published in German language in 1909 and translated into
English in 1929. His theory, which is also known as ‘Pure
Theory’ has analytical approach to the problem.
• Weber’s Problems:
Weber was faced with many serious problems. He wanted to find
out why did industry moved from one place to another and what
factors determined the movement. After considerable thinking he
came to the conclusion that causes be responsible for this
migration could be Regional Factors Primary Causes and
Agglomerative and deglomerative factors (Secondary Factors).

• Classification of Material
 Ubiquities material
 Localised material 
  most important basis for formulating the
theory
1. Regional Factors (Primary Causes)
 Locational Figure
 Laws of Transportation
 Causes of Deviation of Location

2. Agglomerative and Deglomerative Factory (Secondary Causes

 Split in Location
 Locational Coupling
 Criticism of Weber’s Theory

• Unrealistic Assumptions
• Labour Centres Notion Defective
• Ideas about Fixed Points of Consumption
• Vague Generalisations
• Not a Deductive Theory
 Sargent Florence’s Theory of Location
• Professor Sargent has followed the inductive method in
formulating his theory of location. Sargent’s theory is more
practical and realistic than that given by Weber. After properly
analyzing statistical data, Sargent tried to ascertain the
tendency of location of industries.
• On the basis of production census he has tried to find out the
statistical measures of location and has not accepted the
traditional view of the geographical context, not the region or
area as such but the working population in that area is more
important. Sargent has used two new concepts in his theory of
location.
Factors
• Location factor
The location factor index is calculated by using the following
formula:

• We take an example to explain the use of this formula. Suppose

that the population of industrial workers in a country is 500;
workers engaged in a given area is 200 and workers engaged in
a particular industry (cement, etc.) are 100.
• The location factor index will be calculated in the following
manner:
 Coefficient of localization
• The coefficient of localization can be calculated in the
following manner:
Criticism of Sargent Florence’s Theory
 Ignorance of causes of location
 Difficulty of knowing propensity of localization
  Ignorance of favourable local conditions
 Absence of knowledge of productive capacity
Thank you