Facility Location Planning

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Problems

Problems

Facility set up without proper location planning

Problems

Problems

Relocate facility to a new location

Continue operations at the existing location

Sell off the facility to other companies (Divestment)

Close down the operations completely and liquidate the assets

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Operations Strategies with Multiple Facilities 1. Separate facilities for different products/ services 2. Separate facilities geographical areas to serve different

3. Separate facilities for different processes in the manufacture of a product or in providing a service
Oxford University Press 2007. All rights reserved.
3

Factors in Facility Location Planning

Good transportation facilities

Availability of power supply

Basic amenitie s

Close Proximity to the raw material

Government policies

Close Proximit y to Markets

Facility Locatio n Plannin g

Environment and community

Residential complexes, schools, hospitals, clubs, etc. Availability of cheap & skillful labor Easy availability of cheap land

Proximity to subcontractors

Less construction costs

Oxford University Press 2007. All rights reserved.

Factors in International Location Planning

Offensive in competitors home country

Trade barriers

International customers

Power & prestige

International competition

Synergy

International Facility Location Planning

Regulations

Economies of scale

Additional resources

Exploitation of firm specific advantages

Low costs Incentives

Oxford University Press 2007. All rights reserved.

Different breakeven volumes for four location options for different FC and VC values

TC

Cost/ Revenue (Rs)

VC (High)

Cost/ Revenue (Rs)

FC (Low) VBE Volume of Production (units) VBE Volume of Production (units)

Location 1
TR

Location 2

TC Cost/ Revenue (Rs) VC (Low) Cost/ Revenue (Rs)

FC (High)

VBE Volume of Production (units)

VBE Volume of Production (units)

Location 3 Location 4 Oxford University Press 2007. All rights reserved.

TC[(X) DS, EXP+ (Y)DS]

TR

TC[(X) DS, EXP + (Y)]

FC (Y)

TCDS, EXP (X)

Cost/ Revenue (Rs)

FC (X)EXP
TCDS (X)

Break-even analysis for a facility experiencing very high demand increasing at a high rate

TC (X)

FC (X) 0 VBE (X) VMAX (X) VMAX (X)DS VMAX (X)DS, EXP VMAX [(X)DS, EXP+(Y)] VBE [(X)DS, EXP+(Y)] VMAX [(X)DS, EXP+(Y)DS]

Volume of Production (units)

Oxford University Press 2007. All rights reserved.