Facility location planning

General procedures for facility location planning:

1.Priliminary screening:

Preliminary screening is to identify feasible sites in planning process. For some kind of facilities, particular environmental or labour consider action are crucial.

Resources Labour skill and productivity.Land availability and cost.Raw materials.Subcontractors.Transportation facilities.Utility availability and rates.Local conditionsCommunity receptivity to business.Construction cost.Quality of life.Taxes.Organized industrial complexes.

Sources of information

After identifying several key locations requirements, management undertakes a search to find alternative locations that are consist with these requirements. Local chamber of commerce provide literature promoting expansion possibilities in various state and local communities.

Other sourcesThe national industrial conference board.The U.S. department of conference.The U.S. small business administration.The U.S. census of manufactures.the data include geographical breakdowns of labor availability,

population, transportation facilities, type of commerce and similar information.

Detailed analysis

Once the preliminary screening narrows alternative sites to just a few, more detailed analysis begins. At each potential site a labor survey may be conducted to assess the local skill. Where community or consumer response in question, pilot, studies or systematic survey may be under taken. Among all many consideration, each company identify which ones are most pertinent for their location strategies.

Factor rating

It is a decision procedure in which each alternative is rated according to each factor relevant to the decision and each is weighted according to the importance.

Factor rating are frequently used to evaluate location alternatives because

1.Their simplicity facilitates communication about why one site is better than another

2.They enable to bring divers locational consideration in to the evaluation process

3.They foster consistency of about judgment about location alternatives.

Typically the first step in using factor rating is to list the most relevant factors in the location decisions.

Need for facility location planning

Revenue and costs are both affected to by facility location. A technique called break even analysis helps related cost and revenue to facility location.

Break even analysis It is a graphical algebraic representation of the relationship

among volume of out put, cost and revenues. As the volume of out put increases cost and revenue will also increases.

Costs1.Fixed cost2.Variable cost

Break even with discounting revenue and cost

Revenues or costs may be nonlinear rather than linear functions of output volume or the function may increase in jumps rather than smoothly. Indeed purpose of break even analysis is to reveal how the organization costs and revenues changes with volume of output.

Information from the break even chart can now be used for managerial decisions. Once the desired level of profitability for the year has been started, we can show the volume of output required to achieve it.

We can also identify how many facilities and shifts will be needed and we can estimate operating costs and working capital requirement.