Facility Location Planning

The preliminary Screening: A preliminary screening to identify feasible sites begins the planning process. For some kinds of facilities, particular environmental or labor considerations are crucial. Breweries, for example, require an adequate supply of clean water.  Aircraft manufacturers must be located near a variety of subcontractors; primary aluminum producers need electrical power.

Resources                                                                         Local Conditions

ü Labor skills and productivity.   ü Land availability and cost ü Raw materials ü Subcontractors ü Transportation facilities (highways,  rail, air, water ü Utility availability and rates

ü Community receptivity to business   ü Construction costs ü Organized industrial complexes ü Quality of life: climate, housing, recreation, schools ü Tasks

Sources of information: After identifying several key location requirements, management undertakes a search to find alternative locations that are consistent with these requirements. Where does this information come from? Local chambers of commerce provide literature promoting expansion possibilities in various state and local communities. The wall street Journal and numerous trade publications contain advertisements placed by cities and communities hoping to attract new commerce. The national Industrial Conference Board, the U.S. Department of Commerce, the U.S. Small Business Administration, and the U.S. Census of Manufactures are among the many sources that provide both general and detailed location information. Data include geographic breakdowns of labor availability, population, transportation facilities, types of commerce, and similar information.

Detailed Analysis: Once the preliminary screening narrows alternative sites to just a few, more detailed analysis begins. At each potential site a labor survey may be conducted to assess the local skills. Where community or consumer response is in question, pilot studies or systematic surveys may be undertaken. Community response is important, for example, in deciding where to locate a nuclear reactor, recreation area, commercial bank, state prison, or restaurant. For assessing community attitudes and for developing strategies to gain acceptance, survey research techniques can be very helpful. Among all the many considerations, each company must identify which ones most pertinent for their location strategies?

Factor Ratings: Factor ratings are frequently used to evaluate location alternatives because:

• Their simplicity facilitates communication about why one site is better than another;
• They enable managers to bring diverse location considerations into the evaluation process;
• They foster consistency of judgment about location alternatives.

Typically, the first step in using factor ratings is to list the most relevant factors in the location decision (column 1 in Table 5.1). Next, each factor is rated, say from 1 (very low) to 5 (very high), according to its relative importance, (column 2 in table 5.1). Then, each location rated, say from 1 (very low) to 10 (very high), according to its merits on each characteristic (column 3 in Table 5.1). Finally, the factor rating is multiplied by the location rating for each factor, (column 4 in Table 5.1), and the sum of the products yields the total rating score for that location. The total scores indicate which alternative locations are most promising, considering of all the various location factors.

Table 5.2 Factor ratings for location alternative

Factor	Factor Rating	Factor Rating	Product of   ratings
Tax advantages	4	8	32
Suitability of labor skills	3	2	6
Proximity to customers	3	6	18
Proximity to suppliers	5	2	10
Adequacy of water	1	3	3
Receptivity of community	5	4	20
Quality of educational system	4	1	4
Access to rail and air transportation	3	10	30
Suitability of climate	2	7	14
Availability of power	2	6	12
		Total Score	149