FACILITY LOCATION
FACILITY LOCATION
The facilities location problem is an
important strategic level decision making for an organization. The selection of location is a key-decision
as large investment is made in building plant and machinery. It is not
advisable or not possible to change the location very often. So an improper
location of plant may lead to waste of all the investments made in building and
machinery, equipment.
Before a location for a plant is
selected, long range forecasts should be made anticipating future needs of the
company. The plant location should be based on the company’s expansion plan and
policy, diversification plan for the products, changing market conditions, the
changing sources of raw materials and many other factors that influence the
choice of the location decision. The purpose of the location study is to find
an optimum location one that will result in the greatest advantage to the
organization.
FACTORS
AFFECTING LOCATION DECISION
- Proximity
to markets
Every company is expected to serve its
customers by providing goods and services at the time needed and at reasonable
price organizations may choose to locate facilities close to the market or away
from the market depending upon the product. When the buyers for the product are
concentrated, it is advisable to locate the facilities close to the market.
2. Supply of raw material:
It is essential
for the organization to get raw material in right qualities and time in order
to have an uninterrupted production. This factor becomes very important if the
materials are perishable and cost of transportation is very high.
3. Transportation facilities:
Speedy transport facilities ensure
timely supply of raw materials to the company and finished goods to the
customers. The transport facility is a prerequisite for the location of the
plant. The choice of transport method and hence the location will depend on
relative costs, convenience, and suitability.
4. Infrastructure availability:
The basic infrastructure facilities like
power, water and waste disposal, etc., become the prominent factors in deciding
the location. Certain types of industries are power hungry e.g., aluminum and
steel and they should be located close to the power station or location where
uninterrupted power supply is assured throughout the year. Supply of water in
large amount and good quality, and mineral content of water becomes an
important factor. A waste disposal facility for process industries is an
important factor, which influences the plant location.
5. Labor and wages:
The problem of securing adequate number
of labor and with skills specific is a factor to be considered both at
territorial as well as at community level during plant location. Productivity
of labor is also an important factor to be considered. Prevailing wage pattern,
cost of living and industrial relation and bargaining power of the unions’
forms in important considerations.
6.
Government policy:
The policies of the state governments
and local bodies concerning labor laws, building codes, safety, etc., are the
factors that demand attention. central and state governments in our country
offer the package of incentives to entrepreneurs in particular locations. The
incentive package may be in the form of exemption from a safes tax and excise
duties for a specific period, soft loan from financial institutions, subsidy in
electricity charges and investment subsidy.
7. Climatic conditions:
The geology of the area needs to be
considered together with climatic conditions (humidity, temperature). Climates
greatly influence human efficiency and behavior. Some industries require
specific climatic conditions e.g., textile mill will require humidity.
8. Community infrastructure and amenity:
All manufacturing activities require
access to a community infrastructure, most notably economic overhead capital,
such as roads, railways, port facilities, power lines and service facilities
and social overhead capital like schools, universities and hospitals.
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