Facilities Location

The wrong (improper) location for a manufacturing firm will normally result in increased production and distribution costs. As for service organizations, the location is critical because proximity to customer and a convenient location may be an important factor in determining the survival of the enterprise. Location decisions become even more significant because once the choice is made and implemented, it cannot be reversed without considerable costs.

The facilities location decision involves three phases:

    1.    The regional or general area,
    2.    The particular community with the region selected, and
    3.    The specific site within the community.

Some of the major regional factors requiring careful consideration includes:

1.    Proximity to markets—long distances require more time and costs and thereby affect the service provided.

2.    Relationship to other facilities. A firm with multiple locations may select a region for an additional facility based primarily on the best coverage of the market territory it serves.

3.    Access to materials and vendors. This determines transport times and costs for materials, supplies, tools, equipment and components supplied by vendors.

4.    Transportation and communication facilities—Prompt, regular, dependable, low cost shipment and communication, services are essential. Depending on the nature of its operations, a firm may prefer, rail, truck, air or some combination of these.

5.    Concentration of skilled labour and the overall labour supply. The objective is to develop and maintain an effective work force with minimum recruiting and training costs.

6.    Competition. The nature of the industry will determine whether it is better to locate it near or far from competitors.

Factors that affect the location decision at the community level include the following:

1.    Labour supply—This should be sufficient to provide the number of people and skills to be employed.
2.    Laws and taxes—These may restrict or support a firm's operations
3.    Attitudes—The community, labour groups, and other business firms may have co-operative attitudes or be resistant to any change.

The following specific site location factors within a community are important.

1.    Size must be adequate for present needs and sufficient for future expansion.

2.    Land costs, plus total development costs, should be realistic.

3.    Utilities such as electricity, water, fuel, and sewers should be available on a deendable basis at a reasonable cost.

4.    Infrastructure should be well developed to facilitate the efficient and low-cost distribution of materials and fraud by personnel.

5.    Provision for waste disposal and environmental considerations should minimize restrictive legislation, control costs and prevent loss of public support.