Managing Employee Reactions to Organizational Change

INTRODUCTION

Change is inevitable--it is a fact of life for individuals, families, organizations and communities. It is normal for individuals to react--physically and emotionally--to change. Thus it can be expected that employees will react to organizational changes.

Some organizational changes (e.g., restructuring, reorganization, streamlining and downsizing) can mean transfers, layoffs, reassignments, or other impacts for employees. In planning and implementing organizational change, attention needs to be given to recognizing and managing possible reactions to change. For example, "loss" is a central theme of the changes noted above and organizations need to provide opportunities for employees to grieve and to express other emotions associated with loss such as guilt and anger. A powerful determinant of employee well being and organization productivity will be how well the organization is able to manage responses to change in order to support recovery.

The following provides information about possible employee reactions to organizational change and outlines steps and strategies to consider in planning and implementing organizational change. These steps and strategies support the recovery process to change and assist employees and the organization in transitioning to the "rebuilding" phase in which new goals and directions can be identified. Most of the strategies promote employee wellness and productivity (e.g., team approach, communications, praise) and need to be in place, as a "way of doing business," before change or crisis occurs. The example of layoff and to some extent, job transfer, will be used given that these will generally have the greatest impact and require a full range of responses.

Recognize Reactions to Change

Everyone reacts differently to change. Reactions to change will depend on the employee’s perception of the change and resources (e.g., coping skills, problem solving skills, support) for response to change as well as the degree to which the organization understands and is prepared (see "Steps and Strategies") for the magnitude of possible reactions to change.

In terms of employee perception, it is important to understand the relationship between employees and the employing organization. Numerous studies have shown that a job means more than a paycheck to most individuals. There is a strong sense of attachment to a job and a psychological bond exists between the employee and the organization. A major factor in how people define themselves are by what they do for a living. The organization is security to the employee (e.g., financial, sense of belonging, sense of worth/self). In return the employee gives loyalty. When this bond is changed or broken, it can affect all employees (e.g., loss of control, loss of security, distrust, fear, hostility) and also impact on organization productivity.

In the case of layoff, for example, an organization can expect reactions from both employees laid off and from those remaining on the job as they are impacted by the change. Included in the latter group may be those who participated in the "bumping" process. Will their reactions include some of those listed below? What

will be the reaction of employees in their new department or work area?

Employees Laid Off--may experience a flood of emotions:

1. Initial shock/disbelief that they are unemployed. Many employees believe if one is loyal and committed to the organization, the organization can be trusted to take care of them.

2. Grief reaction (e.g., denial, anger, depression, and later acceptance/resolution) may develop out of: loss of job status, loss of supportive employee relationships, loss of financial security, loss of self-esteem, and loss of social status. Some employees may withdraw to insulate themselves from both the experience of loss and the breaking up of relationships as well as to avoid having to deal with the threat to themselves.

Employees Remaining on Job--may also experience the following:

1. Insecurity--questioning "Are the layoffs really over?" "When will the next phase of layoffs begin?" "Am I next?" Will I be treated like the other employees were? How will this effect job advancements/promotions?

2. Resentment--especially toward management if employees perceive management as sending "double messages," using the possibility of lay off as a threat, treating those being laid off in an uncaring way or not experiencing "their share" of cut backs. There may also be resentment that another employee has displaced one of the department’s employees through the bumping process.

3. Grief--sadness from having other employees being laid off. In cases of close relationships, the experience of loss may be similar to that experienced in divorce or death.

4. Guilt--over still having a job when others don’t.5. Anger and hostility--due to above noted areas and/or over possible

changes (e.g., workload and environment).

The threat of layoff, real or perceived, can result in any of the above reactions. Individuals may present a whole new range of behaviors motivated by survival needs and directed toward self-preservation. If employees do not have or do not make use of personal and other resources for coping, their reaction can be prolonged and result in more serious psychological and/or physical effects.

Organizational changes, even those resulting in job transfers or layoffs, often have other impacts on individuals, although initial reactions usually include those previously described. Sometimes employees discover personal resources they never thought they had. Job transfers or reassignment can sometimes mean new opportunities, higher status, or greater job satisfaction. In some cases, the organizational change may lead to a career option that the individual had been reluctant to risk on her/his own. Many, in the case of layoffs, will begin activities such as job search as they move toward acceptance of the change(s). In managing reaction to change, strategies need to support the recovery process.

Quality and Productivity--may be negatively impacted if careful attention is not given up-front to how proposed changes affect employees, work processes, performance expectations or workload, employee skills and training, availability of resources and the overall work environment. From the prior description of the reactions to change, for example, one can see how a real or perceived threat, such as that of layoffs, could distract from work performance.

Steps and Strategies

While the first step is recognition of employee reactions to change, the next is determining that the planning and implementation of appropriate strategies is a responsibility and priority of the organization. As previously noted, most of these strategies (e.g., team approach, communication, praise) promote productivity and employee wellness and should be in place in an organization before significant changes occur. Strategies which can support recovery to change include the following:

Team approach--a management and labor team to conduct joint problem-solving. When employees are included in the decision-making process, they are more vested in its success. The team may be able to generate alternatives/options to organizational change that eliminate or reduce the number of job transfers or layoffs, for example. At a minimum, the team approach will increase the ability to communicate the plan (including what options were considered) to the rest of the organization. It is critical that employees have correct information up-front about rules and conditions, as in the case of layoff and bumping.

Data-based Decisions--probably no where else are data-based decisions more critical than when considering job transfers and/or layoffs or restructuring, given the potential impacts on individual well being and quality and productivity. Data should be gathered to determine both short and long term impact of various options. Will the proposed changes create unreasonable expectations or unreasonable workloads?

Communication--is the most important strategy. Words and actions need to be clear, open, honest, direct, timely, and consistent in order to support recovery. Management and labor representatives must be able to clearly communicate the goals, direction, and actions to reduce "rumors" and employee insecurity. Examples of communication methods are: letter from top manager to all employees (this should not replace in-person or "managers walking around" communications or employee meetings), establish a "transitional communication team (could be prior noted management and labor team) comprised from each level of the organization to help alleviate rumors and identify needs, weekly or frequent newsletter or posting, a telephone "hotline" and/or videos.

Empathy and Listening--managers and labor representatives who express empathy (e.g., "I know this restructuring is hard on all of us, we are losing good people") will be helping employees manage the changes. Also, encouraging employees to talk about their feelings and situation and listening to them will provide management and labor representatives with an idea of what their concerns are and what needs to be done (e.g., a referral to Employee Assistance may be needed for an employee who indicates s/he is not managing well and/or whose work performance begins to deteriorate). A "code of silence" must be avoided because it can create additional stress, undermine productivity and destroy cooperation. On the other hand, "empty promises" such as "I’ll take care of you" by managers, who may not have the authority or ability to do so, can be very damaging.

Acknowledgments--opportunities to acknowledge change and loss need to be provided. For employees laid off, schedule a "good-bye" function where existing employees can say good-bye to their friends and peers. This will begin the mourning period, which is a normal and natural reaction to the loss. Once this period passes, rebuilding and growth can begin.

Power of Praise--more than ever, existing employees, who may experience increased workloads and pressures, need recognition. Simple recognition is appropriate (e.g., "You did a great job on your monthly report.") and shows that the organization values their service. Treating exiting and remaining employees with kindness, respect and value builds trust and loyalty.

Education--each department needs to be aware of how it may be impacted by organizational change and needs to be prepared to plan and respond. This may include contacting the Training Office for education/training in areas such as managing change, quality management, team building, communications skills, time management, conflict resolution, and stress management.

Pre-transfer or Employment Search Assistance--through the Human Resources Department or outside agencies, employees may benefit from pre-transfer or career counseling and assistance with job search (e.g., resume development, cover letters, letters of reference, and resources on potential employment).

Employee Assistance Program (EAP)--needs to be included in the team approach and receive early notification from management regarding proposed changes in order to plan and assist employees and families/partners on a one-to-one and/or group basis:

1. One-to-one--employees or family members/partners can contact EAP at any time for assistance with a broad range of issues including the loss issues, stress management, anger management, relationship problems, financial, legal, career, and housing. Supervisors and union representatives offer EAP to persons who indicate they are having problems in these areas and/or who experience deteriorating work performance which may indicate problems in these areas.

2. Group basis--employees being laid off or those remaining can benefit from group "debriefing" session(s) which are "educational" in nature in that they provide "facts" about the situation (e.g., job transfers and/or lay off), teach about normal reactions (including the grieving process), and identify coping strategies. These sessions can provide employees the opportunity to mourn. Prior to conducting these sessions, EAP will need: to gather information about the transfers or lay offs; understand how and what management conveyed to employees about the job transfer or lay off process; find out what reactions have been; get management’s point of view of departmental functioning; inform management of debriefing session goals; describe what happens during debriefing; and what information, if any, EAP can bring back to management (note: debriefings are generally confidential, but a group may decide it would be in their interest to share some concerns or ideas with management). Group, as the one-to-one sessions, would be on scheduled work time.

3. Follow-up--a method of follow up with employees and/or family members need to be agreed upon, keeping confidentiality in mind. Follow-up with managers, given confidentiality, would be what information, if any, was sanctioned by the individual or group.

Accountability--given the impact of some changes, such as layoffs, on employee wellness and organization productivity, it is important that managers be informed about, trained in, and expected to use strategies such as those previously outlined.

Rebuilding--after a normal mourning period, employees and managers will need to "work together" to restructure and regroup to create new goals and direction

and become invested in the future.

Process Validation Sample Protocol

Process validation protocol for the products manufactured in the

pharmaceutical product manufacturing facility.

1.0 Protocol Approval:

Signing of this approval page of Process Validation Protocol No. __________

indicates agreement with the Process Validation approach described in this

document. Any modifications to the Process Validation will be prepared and

approved as an addendum.

2.0 Objective:

To conduct the process validation of the manufacturing process for the

_____________ manufactured at the liquid facility. The Validation study shall be

conducted for the generation of sufficient data to establish documentary

evidence and to provide assurance that the product can be manufactured on

a commercial scale, meeting all its quality attributes in a consistent manner.

Three consecutive commercial batches of ___________ shall be taken for

process validation.

3.0 Scope:

This protocol shall be applicable for first three consecutive commercial scale

batches manufactured with specific batch size & equipments and operating

parameters for the _____________ at ABC Limited.

4.0 Validation Approach:

The validation approach shall be prospective and following things shall be

reviewed:

4.1 Review the qualification documents of equipments and related utility

systems which shall be employed for the manufacturing of batch.

4.2 Review the calibration record of instruments used in validation. 

4.3 Review the master formula records.

4.4 Review the specification and analytical procedures of raw materials and

packing materials.

4.5 Review the specification and analytical procedures for in-process &

finished products.

5.0 Reason for Validation: New product in the manufacturing facility.

6.0 Revalidation: Revalidation shall be done in case of following cases:

6.1 Any major change in the manufacturing process which may affect the

quality of the product.

6.2 Any change in the batch size

6.3 Any change in the batch formula

6.4 Change in manufacturing site

6.5 Any modification in any critical equipment

6.6 Any major modification in the related utility system

6.7 Any change in the specification and/or change in the source of active

pharmaceutical ingredient (API)

6.8 Any change in primary packaging material.

7.0 Responsibilities:

7.1 Quality Assurance shall be responsible for:

7.1.1 Preparation, approval and training of validation protocol, review of the

data compiled, review of deviations (if any), monitoring the process as per the

process parameters and for withdrawal of validation samples.

7.1.2 Review of facility, equipment qualification and utility validation reports.

7.1.3 cGMP compliance during manufacturing process, review and evaluation

of the data/results generated during validation.

7.1.4 Preparation of process validation summary report, review and its

approval.

7.2 Production shall be responsible for:

7.2.1 To execute the batches as per the batch production record and process

validation protocol.

7.2.2 Compilation of data related to manufacturing area and furnishing the

same for review.

7.2.3 Review of protocol and summary report.

7.3 Quality Control shall be responsible for:

7.3.1 Raw material and packing material analysis

7.3.2 In process and finished product samples analysis as per the sampling

plan.

7.3.3 Collection and review of in process and finished product analysis data.

7.3.4 Submission of data /results to QA for review and evaluation.

8.0 Reference Documents:

8.1 BMR No:

8.2 BPR No:

8.3 Specification No.:

9.0 Procedure:

9.1 Product Details:PRODUCT NAME :GENERIC NAME :

SHELF LIFE :STORAGE :

CONDETIONLABEL CLAIM :

OVERAGES (IF ANY) :BATCH SIZE :

MARKET :PACKING

INSTRUCTION:

9.2 Raw Material Details:Item code

Ingredient GradeQuantity Batch (

Kg)

9.3 Packing Material Details:Item code

Ingredient Unit Std. Quantity /Batch

9.4 Equipment Details:

Sr. No.

Ingredient Equipment Code

9.5 Quality Control Instruments:

Sr. No.

Instrument Name Instrument Code

9.6 Manufacturing Process Flow Chart: Diagrammatic flow chart for the

manufacturing process of the product.

9.7 In-process Checks & Critical Control Points:

Sr. No.

Process Parameters

9.8 Sampling Plan & Acceptance Criteria:

Stage

Sampling Location & Quantity

Test Acceptance Criteria

9.9 Finished Product Specification:

Sr. No.

Test Limit

10.0 Sampling Plan Diagram: Prepare a diagram representing the

sampling location.

11.0 Stability: If acceptance criteria at all the stages of 3 batches are

satisfied, the process to be accepted as validated for manufacturing the

product at the site, ABC Limited. The Validation batches shall be introduced

for complete stability studies as per stability protocol.

12.0 Deviations: Any deviation from the protocol related to manufacturing

process, raw materials, equipments used, sampling, in-process controls and

analytical methods should be authorized and documented in the batch

manufacturing record as well as the validation report.

13.0 Conclusion: Based on the results of all the 3 batches, suitable

conclusions will be drawn with respect to the suitability of proposed method of

manufacture for the ____________. Conclusion about the suitability of the

validation batches for stability testing would be drawn.

14.0 Documentation and Reporting: Validation protocol, batch

manufacturing records, batch packing records, analytical reports,  stability

protocol, stability data and stability report of all the three validation batches

have to be compiled, reviewed and to be documented.  A process validation

report shall be prepared.

15.0 Report Approval: Process validation data shall be compiled and report

shall be prepared by Officer or Executive – QA. The report shall be checked by

Asst. Manager – QA, Manager – QC, Manager-Production and shall be

approved by DGM – Quality.

Organogram and Job Responsibilities in Pharmaceuticals

CATEGORIES: GMP , QUALITY ASSURANCE

OCT 29, 2013

Learn about the organogram and job responsibilities of employees in a

pharmaceutical company.

An organogram is a diagrammatic representation of any organization or

company. It contains all the positions of all departments in the company. In

other words an organogram shows the relationship between all the employees

of the organization.

As per World Health Organization (WHO), a site master file should contain the

organogaram and job responsibilities of all employees with their educational

qualifications and experience. Hence, organogaram and job responsibilities of

the personnel have their own importance.

An organogaram should start from the top level management ending to the

lower one. If company has more than one manufacturing units, the

organogram should be site specific including the personnel working for the

manufacturing site as shown in the above organogram. Name of the persons

holding the positions may also be included in the organogram.

It is important to define the job responsibilities of all the personnel as it an

important part of GMP. Job responsibilities should contain all the works the

person is looking for. Some of the responsibilities may be shared between two

or more persons. It should also be defined that who will execute the

responsibilities in the absence of job holder. Responsibilities should be given

according to the qualification and their experience. Job holder should have

adequate authority to carry out the responsibilities.  Every person should have

proper training for their area of job and that should be recorded.

Organizational chart should not be like the below one. Separate organograms

for different departments may be prepared.

Role and Calculation of Air Changes per Hour in Clean Room Area

CATEGORIES: GMP , HVAC , STERILE

SEP 25, 2013

Learn how to determine the air velocity in CFM and air changes per hour in

pharmaceutical clean rooms and also know its requirements in different

cleanroom classes.

Air changes in pharmaceutical clean room play an important role in

maintenance of clean room quality. Air changes per hour are the number of

total replacements of any room’s air in one hour.

If the supply of the air by HVAC system in

one hour is equal to the volume of the room then it will be one air change per

hour. Rooms having 60 air changes per hour will have 60 times air supply

then the volume of the room. FDA recommends maintaining the minimum 20

air changes per hour in clean rooms.

How to Calculate the Air Changes Per Hour (ACH)First of all determine the velocity of the air below the HEPA filter in feet per

minute. It is determined at the four corners and the center of the filter and the

mean of the five readings are determined.

V = (V1+V2+V3+V4+V5)

                     5

V = Velocity observed at each point

Now calculate the area of the filter by multiplying the length and width of

filter in feet.

A = l x w

l = length of HEPA filter

w = width of HEPA filter

Calculate the total air volume per minute supplied in the clean room by the

following formula:

T = A x V

A = Area of HEPA filter in square feet

V = Average air velocity in feet per minute

Calculate the total air in the room multiplying the length, width and height of

the room in feet.

Volume = L x W x H

Now we can calculate the Air Changes per hour using the following formula:

Air Changes per Hour =      T X 60  

                                         Volume

Related: Cleanroom Validation

Requirement of number of air changes per hour for any room depends on the

class of the room, number of personnel working in the area and frequency of

access the room. Cleanliness of any clean room is maintained by the air

changes per hour. More air changes per hour are required for the better clean

room class then the lower one.

Related: Prevention of Cross- contamination by HVAC System

More air changes per hour are required to maintain the area where dust is

generated as in granulation and tablet compression areas. In these areas dust

is to be removed in a short period, hence more air changes per hour are

required. Following is the list of the air changes per hour in different classes of

classified area.

Cleanroom Class

ISO Class Required Air Change per Hour

100 ISO 5 240-4801,000 ISO 6 150-240

10,000 ISO 7 60-90100,000 ISO 8 5-48

Therefore the air changes per hour shows the quality of the air in the

cleanroom that helps the maintenance of the clean area quality.

Dear Sir,

Thanks for registering yourself as a Business Visitor at the PHARMAceutical EXPO 2013

concurrent with the 65th Indian Pharmaceutical Congress scheduled to be held at Amity

University, Noida, Delhi NCR from December 20-22, 2013.

Badges: You are requested to kindly exchange your Business Card at the FICCI Registration

Counter at Amity University, Noida, Delhi NCR. The Visitor Badge will be valid for all

Exhibition Days i.e December 20-22, 2013.

Exhibition Date            Exhibition Days                 Exhibition Timing

December 20, 2013         Friday                                  10.00 AM – 6.00PM

December 21, 2013         Saturday                              10.00 AM – 6.00 PM

December 22, 2013         Sunday                                10.00 AM – 6.00 PM       

For latest Update kindly logon to www.pharmaexpo.in

Looking forward to see you at PHARMAceutical EXPO 2013.

With Warm Regards, 

Organiser

Date : 07/12/2013 PNB /001/12/13 To,

Punjab National BankBranch Sector-22DChandigarh

Sub : Furnishing details about our Drug Manufacturing Licence

Ref. : Your Letter No 22-D Dated 27/11/2013

Dear Sir, Sir, we are in receipt of your above mentioned letter wherein you had asked us to provide details about our manufacturing licence.Sir, we have applied for renewal of our Drug Manufacturing Licence on 24/12/2013. Our renewal period is from 01/01/2013 to 31/12/2017. A Photostat copy of the same renewal letter is attached for your consideration.We hope it answers your query in this regard.Thanking you.

Yours sincerely

Date : 11/12/2013

To, M/S JAGS BIOPHARMA #4,BIX 1523,CENTRAL TOWN LADOWALI ROAD, JALANDHAR CITY

Dear Sir, Please find enclosed herewith original copy of agreement. Please sign it as token of acceptance and send it back to our office. Please sign and return to our office.Looking forward to long business relationship with you.Thanking you.

AUTHORISED SIGNATORY

Locating a Plant: Locating a Plant Presented By: Anupam Kumar Reader SMS Varanasi E mail: anupamkr@gmail.com

Need for Locating a Plant: Need for Locating a Plant It arises when: The business in newly started The expansion to the existing plant is not possible A firm wants to establish new branches The landlord does not renew the existing lease Economic or social reasons like: Inadequate power supply Government regulations, etc.

Importance of the Right Location: Importance of the Right Location Location Decision is a long term decision Location Decision is difficult to revise or reverse The location of plant fixes the production technology. Options between labour intensive or capital / machine intensive production technologies.

Importance of the Right Location: Importance of the Right Location The location of plant fixes the cost structure. It affects the fixed and variable costs. At times transportation costs are almost 25% of the price of product. Location of a facility affects the company’s ability to serve its customers quickly and conveniently. Location determines the nature and size of the business

Factors Affecting Location Decisions: Factors Affecting Location Decisions Market Proximity Integration with other parts of the organization Availability of Labour and Skills Site Cost Availability of Amenities Availability of Transport Facilities Availability of Inputs Availability of Services Suitability of Land and Climate Regional Regulations Room for Expansion Safety Requirements Political Cultural and Economic Situations Regional Taxes, Special Grants and Import / Export Barriers.

Factors Affecting Plant Location: Factors Affecting Plant Location Controllable Factors Market Supply of Raw Material Transport Infrastructure Availability Labour and Wages Uncontrollable Factors Government Policy Climatic Conditions Supporting Industries Community Social Network

Need for Locating a Plant: Need for Locating a Plant The need for locating a plant can broadly be divided into 2 types. Location Choice for Existing Organization Plants Manufacturing Distinct Products Plants Supplying to a Specific Market Area Plants Based on the Process or Stage of Manufacturing Plant Emphasizing Flexibility (Increase in Operations) Location Choice for New Organizations Identification of Region Choice of Site with a region Selecting a Site

Location Evaluation Methods: Location Evaluation Methods There are various methods for evaluating the ideal Location for a Plant. Some of them are: Factor Rating Method Point Rating Method Locational Break-Even Analysis Center of Gravity Method Transportation Model

Factor Rating Method: Factor Rating Method Most widely used location technique Useful for service & industrial locations Rates locations using factors Intangible (qualitative) factors Example: Education quality, labor skills Tangible (quantitative) factors Example: Short-run & long-run costs

Factor Rating – Selection Criteria: Factor Rating – Selection Criteria Labor costs; including wages, unionization, productivity Labor availability; including attitudes, age, distribution and skills Proximity to raw materials and suppliers Proximity to markets State and local government fiscal policies; including incentives, taxes, unemployment compensation Utilities; including fuel, electricity, Water costs Site costs; including land, expansion, parking, drainage

Factor Rating – Selection Criteria: Factor Rating – Selection Criteria Quality-of-life issues; including all levels of education, cost of living, health care, sports, cultural activities, transportation, housing, entertainment, religious facilities Foreign exchange; including rates and stability Transportation availability; including rail, air, water and interstate roads Quality of government; including stability, honesty, attitudes toward new business - whether overseas or local

Factor Rating Method: Factor Rating Method List relevant factors Assign importance weight to each factor (0 - 5) Develop scale for each factor (1 - 10) Score each location using factor scale Multiply scores by weights for each factor & total Select location with maximum total score

Factor Rating Method - Illustration: Factor Rating Method - Illustration Factor Factor Rating Location A Location B Tax Advantage 4 8 6 Suitability of labour Skill 3 2 3 Proximity to customers 3 6 5 Adequacy of Water 1 3 3 Receptivity of community 5 4 3 Quality of Education System 4 1 6 Access to rail and Air transport 3 10 8 Suitability of climate 2 7 9 Availability of Power 2 6 4 139 140

Point Rating Method: Point Rating Method While selecting a location, companies have several objectives, But not all are of equal importance To overcome this issue, in Factor Rating Method, each objective is given a Factor Rating depending upon the mutual importance of the various objectives. The Point Rating Method takes into consideration a hypothetical ideal location and tries to fix the maximum points for each of the objectives. Now all the available locations are given points after considering the maximum possible points as per the ideal site.

Point Rating Method - Illustration: 1100 1130 Factor Rated Maximum Possible Points Location X Location Y Future Availability of Fuel 300 200 290 Transportation, Flexibility & Growth 250 200 95 Adequacy of Water Supply 150 100 140 Labour Availability 250 210 200 Pollution Regulations 300 250 280 Site Topography 50 40 30 Living Conditions 150 100 135 Point Rating Method - Illustration

Point Rating Method: Point Rating Method The drawback of this method is that high score in any factor can overcome a low score in other factor. To overcome such extreme deviations, any site which does not have at least a specified number of points for those essential factors are excluded from further consideration.

Point Rating Method - Illustration: Point Rating Method - Illustration Factor Rated Maximum Possible Points Location X Location Y Future Availability of Fuel 300 200 290 Transportation, Flexibility & Growth 250 200 95 Adequacy of Water Supply 150 100 140 Labour Availability 250 210 200 Pollution Regulations 300 250 280 Site Topography 50 40 30 Living Conditions 150 100 135 1100 1130

Point Rating Method: Point Rating Method Point Rating Method helps in comparing the tangible factors with the intangible factors. Points are assigned only to the intangible factors. Evaluation is made to determine whether the difference between the intangible scores is worth the difference between the tangible costs (if any) of the competing locations.

Point Rating Method: Point Rating Method If two alternative locations are found to be equally attractive by comparing costs based on tangible factors then These two alternative potential locations may further be evaluated, based on the intangible factors using the Point Rating Method.

Locational Break-Even Analysis: Locational Break-Even Analysis Method of cost-volume analysis used for industrial locations Steps Determine fixed & variable costs for each location Plot total cost for each location Select location with lowest total cost for expected production volume Must be above break-even

Locational Break-Even Analysis - Illustration: Locational Break-Even Analysis - Illustration You’re an analyst for ACC Cement. You’re considering a new manufacturing plant in Aurangabad, Bhubaneswar, or Coimbatore. Fixed costs per year are Rs. 11Cr., Rs. 6Cr., & Rs.3Cr. respectively. Variable costs per case are Rs. 250 , Rs.450 , & Rs.750 respectively. The price per bag is Rs. 1200 . What is the best location for an expected volume of 200,000 bags per year? Would your decision change if the expected volume is more than 5 Lakh bags or less than 1 Lakh bags ?

Locational Break-Even Analysis: Locational Break-Even Analysis Sr. No. Place Fixed Cost (in INR) ‘000s Variable Cost (in INR) Tota l Cost (at 0 Unit production) ‘000s Variable Cost ( at 2 Lac unit production) ‘000 s 1. Aurangabad 110000 250 110000 50000 2. Bhubaneswar 60000 450 60000 90000 3. Coimbatore 30000 750 30000 150000 Back to Question Sr. No. Place Fixed Cost (in INR) ‘000s Variable Cost (in INR) Variable Cost (at 1 Lac Unit production) ‘000s Variable Cost ( at 5 Lac unit production) ‘000 s 4. Aurangabad 110000 250 25000 125000 5. Bhubaneswar 60000 450 45000 225000 6. Coimbatore 30000 750 75000 375000

Locational Break-Even Analysis – Illustration Chart: Locational Break-Even Analysis – Illustration Chart 0 500 1000 1500 2000 0 5 10 15 20 25 30 Volume (in ‘00) Annual Cost (in ‘00) C A B C lowest cost B lowest cost A lowest cost

Locational Break-Even Analysis: Locational Break-Even Analysis Godavari Electricals Ltd. Wanted to set up its new plant for manufacturing of heaters. The management of Godavari identified three potential areas whose fixed and variable costs are as below. The product is expected to be sold at Rs. 1050 per unit and the existing demand in the market is likely to be 600 units per year. Calculate the most profitable location for Godavari under the current conditions. What is the minimum quantity that Godavari should target to break even its costs in Hyderabad? Location Fixed Cost / Year Variable Cost / Unit Kakinada Rs. 2,00,000.00 325 Vijayawada Rs. 2,50,000.00 285 Hyderabad Rs. 3,00,000.00 265

Center of Gravity Method: Center of Gravity Method Finds location of single distribution center serving several destinations Used primarily for services Considers Location of existing destinations Example: Markets, retailers etc . Volume to be shipped Shipping distance (or cost) Shipping cost/unit/mile is constant

Center of Gravity Method Steps: Center of Gravity Method Steps Place existing locations on a coordinate grid Grid has arbitrary origin & scale Maintains relative distances Calculate X & Y coordinates for ‘center of gravity’ Gives location of distribution center Minimizes transportation cost

Center of Gravity Method: Center of Gravity Method

Transportation Model: Transportation Model Finds amount to be shipped from several sources to several destinations Used primarily for industrial locations Type of linear programming model Objective: Minimize total production & shipping costs Constraints Production capacity at source (factory) Demand requirement at destination

For further details …: For further details … Contact Anupam Kumar Reader School of Management Sciences, Varanasi. Email: anupamkr@gmail.com

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