Steps In The Facility Location Study

Location studies are usually made in two phases namely, (i) the general territory selection phase, and (ii) the exact site/community selection phase amongst those available in the general locale. The considerations vary at the two levels, though there ‘ is substantial overlap as shown in Table 1.

Table 1 Overlap of considerations of factors in the two stages of facility location

	Location Factors	Phase I General Terri- tort’ Selection	Phase II Particular Selection of Site and Community
1	Market	•
2	Raw Materials	•
3	Power	•	•
4	Transportation	•	•
5	Climate and Fuel	•
6	Labour and Wages	•	•
7	Laws and Taxation	•	•
8	Community Services and Attitude		•
9	Water and Waste		•
10	Ecology and Pollution		•
11	Capital Availability	•	•
12	Vulnerability to enemy attack	•	•

A Typical team studying location possibilities for a large project might involve economists, accountants, geographers, town planners, lawyers, marketing experts, politicians, executives, industrial engineers, defense analysts, ecologists etc. It is indeed an inter-disciplinary team that should be set up for undertaking location studies.

Territory Selection

Now in step (i) for the general territory/region/area selection, the following are some of the important factors that influence the selection decision.

Markets

There has o be some customer/market for your product/service. The market growth potential and the location of competitors are important factors that could influence the location. Locating a plant or facility nearer to the market is preferred if promptness of service required, if the product_ is fragile, or is susceptible to spoilage;, Moreover, if the product is relatively inexpensive and transportation costs add substantially to the cost, a location close to the markets is desirable. Assembly type industries also tend to locate near markets.

Raw Materials and Supplies

Sometimes accessibility to vendors/suppliers of raw materials, parts supplies, tools, equipment etc. may be very important. The issue here is promptness and regularity of delivery and inward freight cost minimization. If the raw material is bulky or low in cost, or if it is greatly reduced in bulk viz. transformed into various products and by-products of if it is perishable and processing makes it less so, then location near raw materials sources is important. If raw materials come from a variety of locations, the plant/facility may be situated so as to minimize total transportation costs. The costs vary depending upon specific routes, mode of transportation and specific product classifications.

Transportation Facilities

Adequate Transportation facilities are essential for the economic operation of a production system. For companies that produce or buy heavy bulky and low value per ton commodities, water transportation could be an; important factor in locating plants. It can be seen that civilizations grew along rivers/waterways etc. Many facilities/plants are located along river banks.

Manpower Supply

The availability of skilled manpower, the prevailing wage pattern, living costs and the industrial relations situation influence the location.

Infrastructure

This factor refers to the availability and reliability of power, water, fuel and communication facilities in addition to transportation facilities.

Legislation and Taxation: Factors such as financial and other incentives for new industries in backward areas or no-industry-district centers, exemption from certain state and local taxes, octopi etc. are important.

Climate

Climatic factors could dictate the location of certain type of industries like textile industry which requires high humidity zones.

Site/Community Selection

Having selected the general territory/region, next we would have to go in for site/community selection. Let us discuss some factors relevant for this stage.

Community Facilities: These involve factors such as quality of life which in turn depends on availability of facilities like schools, places of worship, medical services, police and fire stations, cultural, social and recreation opportunities, housing, good streets and good communication and transportation facilities.

Community Attitudes: These can be difficult to evaluate. Most communities usually welcome setting up of a new industry especially since it would provide opportunities to the local people directly or indirectly. However, in case of polluting, or `dirty’ industries, they would try their utmost to locate them as far away as possible. Sometimes because of prevailing law and order situation, companies have been forced to relocate their units. The attitude of people as well as the state government has an impact on industrial location.

Waste Disposal: The facilities required for the disposal of process waste including solid, liquid and gaseous effluents need to be considered. The plant should be positioned so that prevailing winds carry any fumes away from populated areas, and so that waste may be disposed off properly and at reasonable expense.

Ecology and Pollution: These days there is a great deal of awareness towards maintenance of natural ecological balance. There are quite a few agencies / propagating the concepts to make the society at large more conscious of/the dangers of certain avoidable actions.

Site Size: The plot of land must be large enough to hold the propose plant and parking and access facilities and provide room for future expansion}: These days a lot of industrial areas/parks are being earmarked in which certain/standard sheds are being provided to entrepreneurs. (especially small scale ones).

Topography: The topography, soil structure and drainage must be suitable. If considerable land improvement is required, low priced land might turn out to be expensive.

Transportation Facilities: The site should be accessible by road and rail preferably. The dependability and character of the available transport carriers, frequency of service and freight and terminal facilities is also worth considering.

Supporting Industries and Services: The availability of supporting services, such as tool rooms, plant services etc. need to be considered

Land Costs: These are generally of lesser importance as they are non-recurring and Facilities Location possibly make up a relatively small proportion of the total cost of locating a new plant Generally speaking, the site will be in a city, suburb or country location. In general, the location for large-scale industries should be in rural areas, which helps in regional development also. It is seen that once a large industry is set up (or even if a decision to this effect has been taken), a lot of infrastructure develops around it as a .result of the location decision. As for the location of medium scale industries, these could be preferably in the suburban/semi-urban areas where the advantages of urban and rural areas are available. For the Small-scale Industries, the location could be urban areas where the infrastructural facilities are already available. However, in real life, the situation is somewhat paradoxical as people, with money and means are usually in the cities and would like to locate the units in the city itself.

Some of the industrial needs and characteristics that tend to favour each of these locales are now discussed. Requirements, governing choice of a city location are:

• Availability of adequate supply of labour force,
• High proportion of skilled employees
• Rapid public transportation and contact with suppliers and customers.
• Small plant site or multi floor operation
• Processes heavily dependent on city facilities and utilities
• Good communication facilities like telephone, telex, post offices.
• Good banking and health care delivery systems.

Requirements governing the choice of a suburban location are:

• Large plant site close to transportation or population centre
• Free from some common city building zoning (industrial areas) and other restrictions.
• Freedom from higher parking and other city taxes etc
• Labour force required resides close to plant.
• Community close to, but not in, large population centre
• Plant expansion easier than in the city

Requirements governing the choice of a country/rural location are:

• Large plant site required for either present demands or expansion.
• Dangerous production processes.
• Lesser effort required for anti-pollution measures.
• Large volume of relatively clean water
• Lower property taxes, away from Urban Land Ceiling Act restrictions
• Protection against possible sabotage or for a secret process
• Balanced growth and development of a developing or underdeveloped area
• Unskilled labour force required.
• Low wages required to meet competition.