Location

Group Members
Fahad Sattar
Bilal Ahmad
Masab Farooq
Zaid Ali
Abdul Rehman

(06)
(05)
(10)
(29)
(02)

IF LIFE IS A GAME.
THEN I AM IN IT.
TO WIN IT.

Facility location
The process of determining
geographic sites
for a firms operation.

Importance of Location
Location has much importance on these
factors
1.Impact on supply chain
2.Supplier relationship Process
3.Transportation
Cost
(inbound
outbound)
4.Coordination difficulties.

or

Impacts of location
Location has significant Impact on
1.Operating cost
2.Price it charges for its services and
goods
3.Ability to compete in market place
4.Penetrate new customer segments

Location Decision across

the organization
Locating new facilities or relocating existing facilities is
usually costly, therefore these decisions must be carefully
evaluated by the organizations accounting and finance
departments.
When locating new retail facilities must carefully assess how
the location will appeal the customers and possibly open up
new markets.
Relocating all or part of an organization can significantly
affect the attitudes of firms
workforce and the
organizations ability
to operate effectively across
departmental lines.

Location decisions across

The organization
BMW
TML
1.
2.
3.
4.
5.
6.
7.

Spartanburg, South Carolina

Economic Environment
Monetary Incentives
Improved highway system
Airport
Seaport
Tax incentives

1. Shifted from singur ,west

bengal to sanand Gujrat.
2. Land
3. Soft
loans(95000
million@0.1% interest in 20
years
4. Water supply
5. Infrastructure
6. Road infrastructure

Factors Affecting
Location Decisions
Managers generally can disregard factors that fail
to meet at least one of the following two decision
The factor must be sensitive to the location.
The factor must have a high impact on the
companys ability to meet its goals.

Factor must be sensitive to location:

Managers should not consider a factor not affected by the location
decision. E.g if community attitudes are uniformly good at all
locations.

Factor must have a high impact on

Companies Ability to meet its goals.
The factor must should directly effect the company to achieve its
goals. E.g distance from the suppliers of raw material.

Types of factors

1. Dominant factors:
Dominant factors are derived from competitive priorities (Cost,
Quality, time, Flexibility) and have a particular strong impact on
sales or cost.

2. Secondary factors:
Secondary factors are also important , but management can
downplay or even ignore some of these factors if other factors
are more important.

Dominant Factors in
manufacturing
1.Favorable Labor Climate
2.Proximity to Markets
3.Quality of life
4.Proximity to suppliers and Resources
5.Proximity to the parent Companys
Facilities
6.Utilities, Taxes and Real Estate Costs
7.Other factors

1.Favourable labor climate

Favorable labor climate my be the most important
factor for labor intensive firms in industries such as textile,
furniture and consumer electronics.

Labor Climate:
Labor climate is a function of wage rates, training
requirements, attitudes toward work, worker productivity
and union strength.

2. Proximity to markets
Locating near markets is particularly
important when final goods are bulky or
heavy and outbound transportation rates are
high.
For example manufacturers of products
such as heavy metals require proximity to
their markets.

3. Quality of life
A factor that considers that availability of
good schools, recreational facilities , cultural
events and an attractive lifestyle.
In U.S, Japan and Europe more than 50%
of new industrial jobs went to nonurban regions
during the past 2 decades. Reason for movement
includes high costs of living, high crime rates and
general decline in the quality of life in many large
cities.

4. Proximity to suppliers
Firms depends on inputs of bulky,
perishable or heavy raw materials which
emphasize
proximity to their suppliers and
resources. In such case inbound transportation
costs become a dominant factor.
Another advantage of locating near
suppliers is the ability
to maintain lower
inventories.
Locating paper mills near forests and foodprocessing facilities near farms is practical.

5. Proximity to parent company

In many companies plants supply parts to
other facilities or rely on other facilities for
management and staff support. These require
coordination and communication, which become
more difficult as distance increases.

6. Utility, Taxes and Real estate Cost

Other location decision factors include
utility costs (telephone, energy and water) local
and state taxes, financing incentives offered by
local or state governments, relocation costs and
land costs.
For example BMW received tax relaxation
and other incentives by the government of
Spartanburg, south Carolina while installing their
plant for BMW X series vehicles.

7. Other Factors
1.
2.
3.
4.
5.
6.
7.
8.

Some other secondary factors are

room for expansion
construction costs
accessibility to multiple modes of
transportation
the cost of shuffling people and material
between plants
insurance costs
competition from other firms for workforce
local ordinances,
community attitudes.

Dominant Factors
in Services
1.Proximity to Customers
2.Transportation Costs and Proximity to
Markets
3.Location of Competitors
4.Site Specific Factors

1. Proximity To Customers
Location is a key factor in determining
how conveniently customer s can carry on
business with the firm. Influence of location on
customers tends to be the dominant factor.
Being close to customer who match a
firms target market and service offering is thus
important for profitability.

2. Transportation costs and

proximity to markets
For warehousing and distribution
operations, transportation costs and proximity
to markets are extremely important. With a
warehouse nearby , many firms can hold
inventory closer to the customer, thus reducing
delivery time and promoting sales.

3. Location of competitors
Management must not only consider the current
location of competitor but also try to anticipate their
reaction to the firms new location. Avoiding areas where
competitors are already well-established often pays off.
However competitors is actually advantageous.

Critical Mass:
A situation whereby several competing firms
clustered in one location attract more customers than
the total number who would shop at the same stores at
scattered locations.

4. Site Specific Factors

Retailers also must consider the
1.
2.
3.
4.

Level of retail activity

Residential density
Traffic flow
And site visibility.

GIS
A system of computer software, hardware and data
that the firms personnel can use to manipulate,
analyze and present information relevant to the
location decision.
A GIS can be a really useful decision making tool
because many of the decision made by business
today have geographical aspect. It provides
different important demographic variables which
are helpful in decision making and to reach the
target markets.

Functions Of GIS
1.Stores databases
2.Display maps
3.Create models that can take information
from existing data sets, apply analytical
functions and write results in newly
derived data sets.
GIS can also be useful for identifying
customer location that relate well to a
service firms target market.

Examples of GIS
Some examples of Important GIS are
Arcinfo, Mapinfo, SAS, SiteAmerica
and
MapPoint 2004.
MapPoint 2004 is developed by
Microsoft. One of the nice features of MapPoint
is that the maps and much of the census data
come with the software itself , while in many
other systems maps and data are purchased
separately. MapPoint is easy-to-use GIS that
mainly focus on everyday business.