Facility Location Factors Affecting Planning

Birodh Adhiakari, SSMC, Chitwan Nepal

FACILITY LOCATION AND LAYOUT
PLANNING


FACILITY LOCATION
 Facility location is refers to the location of
service organizations.
 It is known as factory location in production
organizations.
 Facility location refers to selection of specific
site for establishment of the physical unit of
production process.
 The success of the organization is also
depends on the decision of facility location.
 It is a strategic decision of an organization.


NEED OF FACILITY LOCATION
 Selection of the location is long term decision
of organization.
 Once selection of the location is very expensive
and some infeasible to alter the location.
 So it plays the vital role in the organization.
 Selection the wrong facility location results:
o Low profit margin
o High cost of production
o Poor production efficiency
o High distribution cost
o Labour trouble
o Closure of organization.


 Facility location is importance for both
new and existing organizations.
 Existing company may need facility
location:
o Change in availability of resources

o Shift of demand .

o To expand new target market

o Development of new technology

o Socio Political and legal changes


 Facility location planning is more
importance of new organizations.
 Facility location planning involves three
strategic decisions:
o First to select a proper geographical
region
o Secondly, to select specific site within
this region
o Lastly, to find the actual site.


FACTORS AFFECTING FACILITY LOCATION
 Facility location planning is crucial for
every organization.
 A good facility location is that which
optimize the cost of production (
inputs, conversion process).
 It is the long term commitment, therefore
the top management should analyze the
SWOT analysis of the proposed location.


 The factors which affect the selection of
location are as follows:
o Primary Factors Affecting Plant Location
o Secondary Factors Affection Plant
Location.


 Primary Factors Affecting Plant Location
o Nature of Inputs ( Raw Materials)
o Nature of Outputs ( Product and Services)
o Nature of Technology Employed.


 Secondary Factors Affection Plant Location.
o Availability of Labours and their skill
o Transportation and Communication Facilities
o Availability of Services
o Suitability of Land and Climate
o Opportunity for Expansion
o Political, Cultural and Economic Situation and
Regional Regulation.
o Special Grants, Regional Tax and Import Export
Barriers


ANY CONFUSIONS ??


GENERAL PROCEDURE IN FACILITY
LOCATION


PROCEDURES IN FACILITY LOCATION
 Facility location is a strategic decision
regarding selecting a best plant location.
 It is a long term commitment of an
organization.
 A best selection of facility is a hub for
success of the organization besides that
wrong decision may negatively affects the
every steps of the organization.
 As a long term concerned decision there
is some of the procedures.


PROCEDURES IN FACILITY LOCATION
 There are various quantitative and
qualitative analysis to find out the best
alternatives.
 The general procedures in facility location
includes:
o Preliminary Screening

o Detailed analysis.


PRELIMINARY SCREENING
 This is the basic stage before selecting
the facility location.
 It includes:

o Proximate to customers, market, raw
materials ( Depends on the company)
o Business Climate .

o PEST Environment:

o Availability of labor, materials etc.

o Others-


DETAILED ANALYSIS:
 Detailed analysis includes both macro
analysis and micro analysis:
 This is the way of analyzing best location
by using different qualitative and
quantitative methods:
o Qualitative Models:

o Quantitative Models:


QUALITATIVE ANALYSIS
 Qualitative models are the
techniques of measuring non
monitory factors of proposed
facility/Plant location.
a. Simple Comparative Chart
Analysis:
b. Point/Factors Rating Method:


SIMPLE COMPARATIVE CHART ANALYSIS ( SCCA)
 SCCA is the technique of analyzing the
intangible factors of location.
It includes following steps:
 Identify the intangible factors .
 Compare/ranking the factors.
 Select the best alternative:
Intangible Factors Kathmandu Chitwan Dang
Labour Supply Suitable More Suitable Suitable
Business Climate Good Very Good Not Good
Attitude of Favorable Very Favorable Unfavorable
Community
Union activities More Important Less important Important


POINT/FACTOR RATING METHOD
 This methods also used for analyzing
intangible factors of location.
It includes following steps:
 Identify the relevant factors .
 Assign rate to each factors ( 1-5).
 Assign the rate for each alternatives (1-
10):
 Find the cumulative total rating.
 Select the location with highest total
score.


POINT/FACTOR RATING METHOD
Factors Factors Location A Location B Location C
Rating
Location Scores Location Scores Location Scores
Rate Rate Rate
Direct 5 10 50 8 40 10 50
Material
s
Direct 4 6 24 10 40 8 32
Labour
Powers 3 8 24 6 18 8 24

Taxes 1 2 2 4 4 5 5

Insuranc 2 4 8 5 10 4 8
e
Total 108 112 119


QUANTITATIVE MODELS
 The quantitative modes are used for
analyzing those factors which can be
measured in terms of money.
 It is basically mathematical models which
can be multiple use.
They are:
 Center Gravity Method:

 Linear Programming Method:

 Simulation Method:


LINEAR PROGRAMMING METHOD
 This method is widely used mathematical
model used for facility location planning.
 minimizes
This method is used as to
cost of transportation based on
the median load.

Transportation Models of linear
Programming.


SIMULATION MODELS
 Simulation is the models of creating real
working world and analyzing the same.
 Theoretical part will be differ from the
practical work condition.
 To eliminate this problems and
constraints of above problem simulation
model is developed.
 In this models same work environment
will be developed and workers assign the
work.
 The best work environment will be


OTHERS MODELS
Cost Benefit Analysis
Location Break Even
Analysis
Analytical Delphi
Method.
Rate of Return.


BEHAVIORAL IMPACTS OF FACILITY
LOCATION


BEHAVIORAL IMPACTS
 Quantitative and Qualitative analysis
only consider the cost and benefits
of the alternative locations.
 Behavioral Factors are the
unquantifiable factors which affects
to take decision regarding
facility/factory locations.
 Behavioral aspects of a location play
influencing role for success of
business.


BEHAVIORAL IMPACTS
 The behavioral aspects of each
alternative locations should be taken
consideration for selection of
location.
 They are:

 Cultural Difference

 Job Satisfaction

 Consumers’ Consideration


CULTURAL DIFFERENCE
 Culture is the norms and customs of the
society.
 It is differs form one community to
another community, one region to another
region and one country to another
country.
 Culture influence the attitude of the
people.
 Economic, social and cultural variations
of locations directly affects the location
decisions of the organization.


JOB SATISFACTION
 Job satisfaction directly reflects on
employees motivation.
 It is an individual’s emotional reaction to
the job itself.
 The degree of unionization, prosperity of
the location determines the value of
attitude of labours.
 Job satisfaction ensures the following:
 Less Absenteeism More
Motivation
 Less Tardiness Labour efficiency
 Less labour turnover Less labour
grievance


CONSUMERS’ CONSIDERATION
 Consumers are the main source of
revenues of any organization.
 Specially, service organizations have
more consideration about
consumers.
 Such as banks, supermarkets and
restaurants heavily emphasize
customer convenience.
 Location decision should be taken
consideration the behavior of the
customers and their satisfaction.


FACILITY LAYOUT PLANNING/DESIGN


WHAT IS LAYOUT?
 Plants layout means the disposition
of the various facilities.
 Plants layout begins with design of
the factory building and goes up to
the location and movement and
individual worktable.
 It is the major consideration of the
production operation management.


WHAT IS LAYOUT?
 Layout planning includes:

 New layout design.

 Minor change in present layout.

 Existing layout rearrange.

 Re-allocation of existing facilities.

 Building of a new plant.


OBJECTIVES OF LAYOUT
 Objectives of Layout planning
includes:
 Efficient utilization of floor space.

 Ensure smooth flow of operations.

 Efficient material handling system.

 Increase Production and
productivity.


PRINCIPLES OF PLANT LAYOUT
 Principles regarding the pant layout
are:
 Integration.

 Minimum movement & material
handling.
 Smooth & Continuous flow

 Cubic space utilization.

 Safe & improved environment.

 Flexibility


TYPES OF LAYOUT (2060 TU)
 The major types of layouts are:

 Process ( Functional ) Layout:

 Product (Assembly Line) Layout.

 Combination Layout.

 Fixed position Layout.


PROCESS ( FUNCTIONAL ) LAYOUT
 Process layout is simple layout
design.
 It is widely used layout.

 In this layout machine are arranged
according to their function.
 All the machines or similar operation
at one location (place)


PRODUCT (ASSEMBLY LINE) LAYOUT.
 Product layout is also known as
assembly line layout.
 It is widely used for continuous
production system.
 In this layout, machine are arranged
as the need of raw materials.
 Production of textile, sugar, instant
noodles, paper mills.


COMBINATION LAYOUT.
 In this production world pure product
and process layout are rare.
 It is the combination of both product
and process layout.
 In this method machine are arranged
in a process layout but process
grouping is sequence to manufacture
various types and size of production.
 It is also known as Group
Technology and Cellular Layout.


FIXED POSITION LAYOUT.
 In fixed position layout men and
equipment are moved to the material.
 Material is remain one place and
product is completed at that place
where the material is fixed.
 It is used for Project Technology.

 Ship Building, aircraft building,
infrastructure etc.


BEHAVIOURAL ASPECTS IN LAYOUT DESIGNING
 Operation manager must consider
individual and group behaviour when
planning a process oriented layout.
 Layout can affect both employee
relationship and customer satisfaction.
 They are:

 Behavioural aspects of process layout

 Behavioural aspects of product layout


BEHAVIOURAL ASPECTS OF PROCESS LAYOUT
 While planning about Process layout
the operation manager should
consider individual and group
behaviour as well.
 They are:

 Individual and Interpersonal
Behavioural of Employees
 Customer Behavioural of customer


BEHAVIOURAL ASPECTS OF PRODUCT LAYOUT
 While planning about Product layout
the operation manager should
consider individual and group
behaviour as well.
 In product layout the production
manager should be consider the
employees’ satisfaction, motivation,
interest and productivity.

Facility Location Factors Affecting Planning

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