Reference no: EM132221193

A single large, centrally located facility is able to produce and distribute its products easier or can even have a central factory with many distribution points in its supply chain and with that can very much reduce the production costs by using the same machines and tools to produce different products over and over again. This allows an organization to grow and increase the production units and at the same time is able to decrease its overall costs. Also, the flow of information is faster and more effective then within smaller, dispersed facilities. A single large facility enables better forecasting, offers more local jobs, has a steady production, and of course has a more effective use of limited resources. For facilities that are near the source of raw materials, the material cost is lower as if the materials have to be shipped to the single dispersed facilities. However, single large facilities are somewhat inflexible because of the cost of customization if a product has to be changed. Also, the cost of labor can also be a disadvantage, if the facility has its main plant in an area where wages are increasing. Nevertheless, the many smaller dispersed facilities have of course advantages too. These include being more flexible to change and closer to the customers, information flow is timelier and better, the managers and employees are more motivated because the smaller facility provide a feeling of ‘belonging’. The smaller facilities are able to take advantage of low labor costs in the different areas they are in or at least they are able to make better adjustments to rising wages. By being closer to its customers, smaller facilities can be more flexible in meeting various customer demands. And with that, the facility will gain more customers. Decisions can be made faster in a smaller facility and employees can be given authorization to make an effort to improve problem areas without approval from headquarters. Employees and also managers are more empowered and motivated when they receive more responsibilities, which gives them a sense of ownership, and this improves efficiency and willingness to work hard and fast will increase. However, the smaller dispersed facilities can also encounter disadvantages. Overall it is more expensive for an organization to set up many smaller facilities. Furthermore, the production costs per unit are higher than the mass-produced products in a large facility: and it is more challenging to maintain production consistency in products and processes within the smaller facilities. There are greater chances of loss of information and data in case of small and dispersed facilities because of the many instances they have to go through. Moreover, raw materials can be damaged during transport when shipped from one dispersed facility to another.