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This chapter aims to further that discussion by Facility location models at the facility location decision in detail. Yang and Lee expand on this by stating that facility location decisions involve firms that are seeking to locate, relocate or expand their businesses.
From these definitions it is possible to infer that location decisions are faced by both new firms determining their locations as well as existing firms determining how to react to changes in their operating environments.
It is argued that existing firms often have a bigger stake in location decisions than new organisations Stevenson The motivation for new firms is often different from that of existing firms reacting to changes in the market outlook Blair and Premus New firms tend to be mostly influenced by access to present customers and access to growing markets while cost-minimisation is more important to Facility location models firms choosing to expand.
Location decisions represent a key part of the strategic planning process of virtually every organisation Stevenson They also normally involve long-term commitment of resources which are not easily reversible. They are thus not made lightly, and they usually involve long and costly studies of alternative locations before the eventual site is selected Gaither and Frazier The convenience of a particular location for customers, as well as the cost to transport materials to the facility and move finished product from the facility.
Access to banking, educational and other activities that are important to the success of their organisation. Thus changes to any of these factors may cause a firm to consider re-location in order to be able to meet its objectives more profitably.
As Slack et al However, it should also be noted that the demand could also reduce to such a level that it is no longer viable to have a firm in a particular location. Changes in demand may be caused by demographic shifts of people as well as changes in their purchasing power.
Changes in the supply of inputs is an all-encompassing phrase to take into consideration the cost and availability of raw materials as well as operating costs such as labour, utilities, transportation and taxes.
A special variation to the need for location decisions is when firms are considering an international facility location. Drawing from Canel and Khumawala and Ferdowsthe key motives may be categorised as follows; Access to low manufacturing-related costs such as labour, materials, transportation and financing in order to minimise costs of production thereby gaining a cost advantage.
This can be triggered by the changes in the costs of supply inputs which may necessitate the relocation of an entire facility abroad.
Access to markets results in easier access to customers as well as the ability to offer better customer service thereby helping to build customer loyalty. Access to natural resources, technologies, skilled personnel and materials available in a certain part of the world may enable a firm to benefit from knowledge and exposure to world-class technology.
Access to investment incentives, as well as the avoidance of tariff barriers, enables a firm to increase its access to markets while at the same time reducing its cost of production.
In summary, the motivation for international facility locations is essentially to gain competitive advantage in the market place.
However, while acknowledging that expansion costs are often less than those of other alternatives, Stevenson Vonderembse and White This is because as more production space is added, material handling and storage become more difficult because inventory space is often converted to production.
Some examples of these are a shift in markets, an exhaustion of raw materials or a substantial increase in the cost of operations.
However, as Stevenson Thus the firm should consider whether it will be able to serve more customers profitably with the extra location. The costs of operating both plants need to be evaluated against the improved customer service that may be attained by the facility addition.
Heizer and Render Location decisions will normally involve long-term commitment of large capital investment that may not be easily reversible or even easily moved from one location to another Stevenson Once a firm is committed to a specific location, many costs specific to operating at the site are then firmly in place and difficult to reduce.
Given that the location decision implies a long-term commitment of capital resources, Stonebraker and Leong Thus, hard work to determine an optimal facility location is often a good investment Heizer and Render Strategic role of facilities Often when setting up facilities, firms need to consider their strategic roles taking into consideration the main motive for establishing the facility and the extent of the technical activities at the facility.
Ferdows has identified six strategic roles of factories; Off-shore factory whose role is limited to producing specific items at low cost. The local management have little choice as to how production is organised with most if not all product technology dictated from the head office.Enclosed Cargo Trailers From Our Elkhart, IN Facility The Facility Location On This Page Not What You're Looking For?
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Facility location and supply chain management a review, facility location decisions play a critical role in the strategic design of supply chain networks in this paper, a literature review of facility location models in the context of supply chain.
Center-of-Gravity Technique Locate facility at center of geographic area Based on weight and distance traveled Establish grid-map of area Identify coordinates and weights shipped for each location To Accompany Russell and Taylor.
MULTI-SERVICE FACILITY LOCATION MODELS Toronto, showing that variables expressing family status are distributed in a gradient or concentric ring pattern – families in different life stages are located in different parts of.
The Facility Location Models chapter highlights the strategies for evaluating potential facilities as well as the advantages and disadvantages of selecting international facilities locations.