The location where firms set up their operations is simply called 'Facility location.' All the manufacturing and service organizations carefully plan where they should locate their plants and service facilities because location will have a serious affect on the success of an organization. Firms conduct facility location analysis where they evaluate different locations and finally choose an optimum location to start their operations.
The need for selection of facility location may arise under the following circumstances:
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When the business is newly started
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When the expansion to the existing plant is not possible
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When a firm wants to establish new branches
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When the landlord does not renew the lease
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For social or economic reasons like inadequate power supply, government regulations, etc.
Earlier, much importance was not given to the subject of selecting a location and decisions in this regard were mainly governed by individual preferences. Various problems arose thereafter and it resulted in failure of many firms. The government with an objective of establishing a socialistic pattern of society also provided various benefits and incentives to the firms that were located in the under-developed areas. All this made the firms to follow a more scientific and logical approach towards the selection of location.
Once a facility location is determined, firms design a structure internal to the firm that satisfies its production and service requirements. This internal structure is called the 'layout' of the firm. Both facility location and layout play a key role in enhancing operational efficiency of the firm. This chapter discusses how firms should make the facility location and layout decision to improve material flow inside the firm and its overall efficiency.
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