C o n f i d e n t i a l
MB0044-Production and Operations Management
Unit-5 Location Strategies
1
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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C o n f i d e n t i a l
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
4
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
5
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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C o n f i d e n t i a l
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
9
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.)
C o n f i d e n t i a l
MB0044-Production and Operations Management
Unit-5 Location Strategies
12
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
13
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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