Module-2
Sessions 16-35
Facility Location
 Facility location:
 Plant location is the function of determining location for a plant for
maximum operating economy and effectiveness.
 Steps in Location Selection:
 in choosing a plant location, the entrepreneur would do well to
proceed step by step, the steps being;
1.Within the country or outside;
2.Selection of the region;
3.Selection of the locality or community;
4. Selection of the exact site.
Cond.
1. Deciding on Domestic or International
Location
2.
Selection of Region

Existence of Complementary
and Competing Industries

Finance
Facilities

Availability of Water and
Fire-fighting Facilities
and
Research
i.
Availability of Raw Materials
ii.
Nearness to the Market
iii.
Availability of Power
iv.
Transport Facilities

Local Taxes and Restrictions
v.
Suitability of Climate

Momentum of an Early Start
vi.
Government Policy

Personal Factors
vii.
Competition Between Status
3. Selection of Community

Availability of Labour

Civic Amenities for Workers
4. Selection of the Site

Soil, Size and Topography

Disposal of Waste
Issues in Facility Location
 Proximity to customers
 Business climate
 Total cost
 Infrastructure
 Quality of labor
 Suppliers
 Political risk
 Governmental Barrier
 Environmental regulation
 Competitive Advantage
Location Models
 Factor rating
 Centre of gravity
 Break-even analysis
 Qualitative factor analysis
Factor Rating Method Example
Two refineries sites (A and B) are assigned the following range of point values
and respective points, where the more points the better for the site location.
Sites
Major factors for site location
Fuels in region
Power availability and reliability
Labor climate
Living conditions
Transportation
Water supply
Climate
Supplies
Tax policies and laws
Pt. Range
0 to 330
0 to 200
0 to 100
0 to 100
0 to 50
0 to 10
0 to 50
0 to 60
0 to 20
A
123
150
54
24
45
4
8
5
5
Total pts. 418
B
156
100
63
96
50
5
4
50
20
544
Best Site
is B
Centre of Gravity Method
Cx =
d V
V
ix
i
i
Cy =
d V
V
iy
Where:
Cx = X coordinate of centroid
Cy = Y coordinate of centroid
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith
location
i
i
Example
– Several automobile showrooms are located according to the following
grid which represents coordinate locations for each showroom
Y
S ho wro o m
Q
(790,900)
D
No o f Z-Mo b ile s
s o ld p e r mo nth
A
1250
D
1900
Q
2300
(250,580)
A
(100,200)
(0,0)
X
Question: What is the best location for a new Z-Mobile warehouse/temporary
storage facility considering only distances and quantities sold per month?
Plant Location Methodology: Example of Centroid
Method (Continued): Determining Existing Facility
Coordinates
To begin, you must identify the
existing facilities on a twodimensional plane or grid and
determine their coordinates.
Y
Q
(790,900)
D
(250,580)
A
(100,200)
(0,0)
You must also have the
volume information on the
business activity at the
existing facilities.
S ho wro o m
X
No o f Z-Mo b ile s
s o ld p e r mo nth
A
1250
D
1900
Q
2300
You then compute the new coordinates using the formulas:
100(1250) + 250(1900) + 790(2300)
2,417,000
Cx =
=
= 443.49
1250 + 1900 + 2300
5,450
200(1250) + 580(1900) + 900(2300)
3,422,000
Cy =
=
= 627.89
1250 + 1900 + 2300
5,450
You then take the coordinates and place them on the map:
Y
S ho wro o m
Q
(790,900)
D
(250,580)
Z
A
(100,200)
(0,0)
X
New
location
of facility
Z about
(443,627)
No o f Z-Mo b ile s
s o ld p e r mo nth
A
1250
D
1900
Q
2300
Project Assignment
 Visit
the website of 5 major organizations in
your region. Find out where their facilities are
located . Form discussion groups to analyze the
rationale behind the location of these facilities
Reference for problems
 Aswathappa and K.Sridhar Bhat
 Kindly go through the solved examples