Six Sigma as a Strategic Tool
As mentioned in the earlier articles, Six Sigma helps the organization develop at various levels viz. operational, tactical and strategic. While the operational and tactical goals of cost reduction and increased customer satisfaction are well understood and appreciated, the strategic intent behind Six Sigma is not well recognized. It is the pivotal factor, however in […]
Information System for Knowledge Management
Introduction Knowledge is very important for survival of organization. Historically, employees have gathered knowledge through trial-and-error method or by working as an apprentice under a tenured knowledgeable employee. Management guru Peter Drucker forwarded a concept that knowledge is as valuable as a company’s various asset like plant, machinery, etc. Importance of Knowledge Management Knowledge provides […]
Supply Chain Network Design & Contributing Factors
Designing Supply Chain Network for each industry or business involves arriving at a satisfactory design framework taking into all elements like product, market, process, technology, costs, external environment and factors and their impact besides evaluating alternate scenarios suiting your specific business requirements. No two supply chain designs can be the same. The network design will […]
The Economic Effect of the American Deep Freeze
In the beginning of 2019, America has been hit by a weather phenomenon known as the Polar Vortex. This phenomenon has brought chilly winds and freezing temperatures to the United States. In many parts of the country like Chicago, the temperatures have hit historic lows and were close to -50 degrees! The daily life of […]
Reverse Logistics & SCM – Scope and Advantages
Supply Chain Management is concerned not only with the flow of raw materials and finished goods, but scope extends beyond this to include reverse flow of unsold finished goods, parts and packaging materials from the point of consumption at customer’s end back to the organization or to rework/refurbishing vendors. Today reverse logistics has been adopted […]
Facility Location is the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors:
Overall objective of an organization is to satisfy and delight customers with its product and services. Therefore, for an organization it becomes important to have strategy formulated around its manufacturing unit. A manufacturing unit is the place where all inputs such as raw material, equipment, skilled labors, etc. come together and manufacture products for customers. One of the most critical factors determining the success of the manufacturing unit is the location.
Facility location determination is a business critical strategic decision. There are several factors, which determine the location of facility among them competition, cost and corresponding associated effects. Facility location is a scientific process utilizing various techniques.
For a company which operates in a global environment; cost, available infrastructure, labor skill, government policies and environment are very important factors.
A right location provides adequate access to customers, skilled labors, transportation, etc. A right location ensures success of the organization in current global competitive environment.
A geographic area becomes a focal point for various facility locations based on many factors, parameters and issues. These factors are can be divided into primary factors and secondary factors.
A primary factor which leads to industrialization of a particular area for particular manufacturing of products is material, labor and presence of similar manufacturing facilities. Secondary factors are available of credit finance, communication infrastructure and insurance.
Facility location is critical for business continuity and success of the organization. So it is important to avoid mistakes while making selection for a location. Errors in selection can be divided into two broad categories behavioral and non-behavioral.
The goal of an organization is customer delight for that it needs access to the customers at minimum possible cost. This is achieved by developing location strategy. Location strategy helps the company in determining product offering, market, demand forecast in different markets, best location to access customers and best manufacturing and service location.
If the organization can configure the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors:
Customer Proximity: Facility locations are selected closer to the customer as to reduce transportation cost and decrease time in reaching the customer.
Business Area: Presence of other similar manufacturing units around makes business area conducive for facility establishment.
Availability of Skill Labor: Education, experience and skill of available labor are another important, which determines facility location.
Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing facility by providing incentives in custom duties and levies. On another hand free trade agreement is among countries providing an incentive to establish business, in particular, country.
Suppliers: Continuous and quality supply of the raw materials is another critical factor in determining the location of manufacturing facility.
Environmental Policy: In current globalized world pollution, control is very important, therefore understanding of environmental policy for the facility location is another critical factor.
Your email address will not be published. Required fields are marked *
Capacity Planning – Meaning, Classification and its Goals
February 12, 2025
What is Aggregate Planning? – Importance and its Strategies
February 12, 2025
