Operations Management

Year: MMS - 1st Semester: 1st

Weightage: 100 marks Duration: 40 hrs

Asst Professor Shrinivas Gokhale

NE Society’s Institute of Management Studies

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 Chapter 3: Facility Location
The locations where a firm sets up their operations is simply called as ‘facility
location’.

According to Prof R C Davis – The function determining where the plant

should be located for maximum operating economy and effectiveness.

According to Bethel Smith & Alwater – Facility location stands for that spot
where in consideration of business as a whole, the total cost of production and
delivering goods to all the consumers is the lowest.

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 Need of Selection of Location

Starting New Existing

Global Location
Organization Organization
Plants manufacturing
Identification of region Virtual proximity
distinct products

Manufacturing plants supplying to

Choice of site within a region Virtual factory
a specific market area

Pants divided on the basis of the

Dimensional analysis process or stages in
manufacturing

Plants emphasizing flexibility

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 Importance of facility location

Fix production technology & cost structure

Determine nearness of location from the market

Serve customers in a better manner

Withstand competition

Select the best location

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 Types of facility location
Single facility location Multi facility location

1. Define the location objectives & associated

1. Separate facilities for different products / services
constraints

2. Separate facilities to serve different geographical

2. Identify the relevant decision criteria
areas

3. Relate the objectives to the criteria using

3. Separate facilities for different processes
appropriate method

4. Evaluate the alternative locations

5. Select the location that best satisfies the criteria

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 Factors responsible for location in
Manufacturing & Service operations
Factors responsible for Manufacturing Operations Factors responsible in Service Operations

Availability of raw materials Proximity to customers

Favorable labor climate Integration with other parts of organization

Integration with other parts of organizations Transportation costs & proximity to markets

Proximity to markets Location of competitors

Quality of life

Proximity to suppliers & resources

Safety requirements

Availability of services

Utilities, Taxes & Real estate costs 6

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 Techniques of facility location
Factor-rating system
Weighted Average Factor-rating system
Locational break even analysis
Transportation Method of Linear programming
Simple median method
Load-distance method
Centroid Method (Centre of gravity)
Mini-max Method

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  Thank You! 

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8 11/21/2018
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