What are the factors that affects the issues of facility location and why the organization need to consider those factors?
Logistics and the supply chain involves more complex activities that require optimal strategic decisions in order to run the business operation more efficiently and effectively. The facility location is the most strategic and critical in the planning process. Facility location is the process of identifying the best suitable geographic location for a service or production facility. Selecting a suitable location for the facility will helps you to run your operations more economically and effectively. Show
its a branch of operations research with the optimal placement of facilities to minimize operational cost. facility location helps you to find the right suitable location for the manufacturing/production facility. Facility Location | 7 Key Factors that InfluenceFactors that Influence Facility Location:
Facility location planning is a critical strategic decision taken by the operations department.davidjaison View all posts bydavidjaison | Website There are many factors that can determine where an organization will locate its facilities. For any given situation, some factors become more important than others in how facility location affects an organization’s performance. For example, when a company needs to open a new manufacturing facility, there are several factors that determine which location reduces the company’s operating costs while providing a great level of responsiveness to the market.
Location Factor RatingOne method to assist in choosing the best location is the Location Factor Rating (also known as Weighted Scoring Model). The various factors important in this decision are decided upon and each is given a weight between zero and 1.0 to reflect each factor’s importance. Every site is then evaluated in comparison with each other and given a score. Weighted scores are calculated by multiplying each score by its corresponding weight. When weighted scores are summed up, the highest weighted score reflects the location which is the most attractive based on all factors. Example Location FactorWeightSite #1Site #2Site #3Proximity to Suppliers0.3808580Business Environment0.25659055Wage Rates0.15725565Community0.1656040Proximity to Customers0.1559070Labour Pool0.05404565Proximity to Airport0.05605580Weighted Scores In this example, site #2 shows the highest score when evaluated against site #1 and #3. So, we choose site #2. Centre of Gravity MethodIn order to minimize transportation costs, the centre of gravity method may be used to locate a facility that serves several area (or other facilities) such as a warehouse or distribution centre. This method uses an (X-Y) coordinate system to cover the geographical map of the areas under study, and identifies the x and y coordinates for the location of the new facility based on the coordinates of the other facilities and the volume (quantity) of demand for each area (facility). For example, in the following figure, each blue star represents a market area that needs to be served, and the size of area also shows the demand quantity for that market. We are looking for the whereabouts (i.e., x̄ and ȳ) of the location for our facility to be set up to serve all these markets while minimizing our total transportation costs. Figure 8.1: Three market areas on an X-Y coordinate axis.In the following, we show the formulas and use them in an example: Figure 8.2: Centre of Gravity formula.x̄ = the x coordinate for the new facility ȳ = the y coordinate for the new facility xi = x coordinate of destination (market) i yi = y coordinate of destination (market) i Qi = quantity to be transported to destination i Example Using the center of gravity method and the information on the location of the potential markets, determine where the new facility should be located to minimize the total transportation cost. Note that a selected point in the middle of each region is representing the regional market. What are the factors that affects the issues of facility location?The seven factors affecting a location decision in operations management are facilities, competition, logistics, labor, community and site, political risk and incentives, according to Reference for Business.
What are the factors affecting facility location and layout?Some of the key factors that influence facility location are the following:. Proximity to customers, suppliers, and skilled labor.. Environmental regulations.. Financial incentives offered by state and local development authorities.. Quality-of-life considerations.. Potential for future expansion.. What are the factors influencing plant location facility location on the basis of organization?Let us discuss these in some details.. (i) Availability of Raw Materials:. (ii) Proximity to Market:. (iii) Infrastructural Facilities:. (iv) Government Policy:. (v) Availability of Manpower:. (vi) Local Laws, Regulations and Taxes:. (vii) Ecological and Environmental Factors:. (viii) Competition:. What are the factors to consider in facilities planning?Effective planning for facilities must give equal consideration to each of these components.. Demographics. ... . Condition. ... . Operational Framework. ... . Cost and Funding.. |