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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Program : MBA

Semester : II

Subject Code : MB0044

Subject Name : Production and Operations Management

Unit number : 5

Unit Title : Location Strategies

Lecture Number : 5

Lecture Title : Location Strategies

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Production and Operations Management

Objectives:

After studying this unit, you should be able to:

Describe facility management

Discuss the facility planning process

Explain the methods for selecting a plant location

Analyse the features and importance of different layouts

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MB0044-Production and Operations Management

Unit-5 Location Strategies

Lecture Outline

Introduction

Facility Location Process

Location Decision Sequence

Rating Methods

Summary

Check Your Learning

Activity

3

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Introduction

Location identification is an important strategic decision made by the top management. Location strategies are based on the following:

The companys expansion plan and policy

Diversification plan for the products

Changing market conditions

The changing sources of raw materials

In this session, you will learn about various methodologies used to select

the location of plant, the flexibility in location choice, the trends and

practices across the globe and the techniques used to determine the

location for a particular type of industry.

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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The general factors that influence the plant location are:

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Facility Location Process

Availability of land

Availability of inputs

Closeness to market places

Communication facilities

Infrastructure

Transport

Government support

Housing and recreation

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MB0044-Production and Operations Management

Unit-5 Location Strategies

Facility Location Process (cont.)

The special factors that influence the plant location are:

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Economic stability outside investments

Cultural factors

Wages

Joint ventures support of big time players

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MB0044-Production and Operations Management

Unit-5 Location Strategies

Location Decision Sequence

1

National level

2

Regional level

3

Community level

4 Site level

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MB0044-Production and Operations Management

Unit-5 Location Strategies

Rating Methods

The rating methods which determine the most likely location are:

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Rating plan method

Factor rating method

Point rating method

Break-even analysis

Centre of gravity method

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Rating Methods (cont.)

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Rating plan method

Ratings depend on the perception of the management

The location with the maximum rating is chosen

Factor rating method

Each of the factors for the location is rated

The rating of the competitive locations are considered

The products of the rating are added

The location which gets the maximum product of rating is selected

Point rating method

A fraction of a suitably selected total rating is apportioned

The points that can be allocated to the locations are assessed

The totalled ratings are compared

The location is selected

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Break-even analysis The total costs for different locations on estimated amounts per annum are compared and the location that costs the least is selected.

Rating Methods (cont.)

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Centre of gravity method Centre of gravity method is used mainly when:

Transportation costs, either for distribution of products or collection of

materials from different suppliers, is the main criterion

Production rates are high

The volume and weights of materials that have to be moved are huge

Time taken, either to receive material from suppliers or delivery to

customers, is critical

Rating Methods (cont.)

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Summary

Location identification is an important strategic decision made by the top management.

The general factors that influence the plant location include availability of land and inputs, closeness to market places, communication facilities, transport, infrastructure and government policies.

The special factors that influence the plant location include economic stability, cultural factors, wages and joint ventures.

While making location decisions, first the country of choice is selected. Then the regional and community level choices are done. Finally the site level decisions are made.

The methods which determine the most likely location are:

o Rating plan method

o Factor rating method

o Point rating method

o Break-even analysis

o Centre of gravity method

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MB0044-Production and Operations Management

Unit-5 Location Strategies

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Check Your Learning

1. Name the special factors that influence the plant location.

Ans: The special factors that influence the plant location are economic

stability, cultural factors, wages and joint ventures.

2. When is the centre of gravity method mainly used?

Ans: Centre of gravity method is used mainly when:

Transportation costs, either for distribution of products or collection of materials from different suppliers, is the main criterion

Production rates are high The volume and weights of materials that have to be moved are

huge Time taken, either to receive material from suppliers or delivery

to customers, is critical

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MB0044-Production and Operations Management

Unit-5 Location Strategies

14

Mr. Shyam Manohar is planning to start a seafood processing industry in India. He has four options to locate the plant - Chennai, Kolkata, Goa and Cochin. Analyse the factors that will influence his decision.

Activity

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