Foundation Place

We will study: Definition and feature of foundation place Importance of foundation place Factors Criterias

What does foundation place mean?

The foundation place is a location where business is set up on and the business continued to work throughout the production activity It is the best location in terms of economy It is the most suitable place for business

An ideal location for production will include some or all of the following ingredients: 1. Closeness to point of sale. The higher the sales revenue - the higher the productivity will be. 2. Closeness to raw materials. 3. Away from centers of population - for noisy, environmentally unfriendly plant. 4. Near to skilled labour source. 5. Have good communication links

When do we need a location?

When we establish a new facility When we move to a new area or a new building When having a new product design or changing design When giving up the production of some product

The best location depends on the type of business and the types of goods and services. Manufacturing industries often need to be close to sources of raw material transport links and market. Service to people and businesses typically need to be located near to the centers of population.

Importance of foundation place

For a business the main purpose is to be successful in economic sense, namely profit, so the cost of inputs is very important at the stage of production. The location affects every input, also it affects productivty, so a well-chosen location is very important for our success.

The establisment a new business and a new investment are versatile problems. One of problems is choosing a foundation place.

‘’in the right place,at the right time,the right quality investment’’

Investors must behave according to these principles and they must choose the best place for their purpose.

The wrong selection place gives rise to problems in the process of production and results of production are bad. It is far to the market and to the raw material suppliers, Labour is scarse, Costs of transportation is high.

Shortly reaching the economic goals is very difficult in these conditions.

Factors affecting the selection of location Generally the factors of choice of location is approached under three main categories: Economic factors Natural factors Social factors

a)Economic factors There are raw material, energy, work manship, transportation facilities, land and construction cost, proximity to market etc. in this division.

b)Natural factors The climate and land availabilty can affect the choice of location. The height of the land, terrain, temperature differences, the degree of humidity,even the wind are effective.

c)Social factors Air pollution, noise or resistance of community to waste is effective in this part.

Also factors affecting the selection of location are investigated in ten main groups: Market Labor Raw material and services Transportation Energy and fuel Water and waste Finance Community features Government Climate

Location selection criterias

Raw material It is one of the most important input of production, so investors must work very carefully about the sources of raw materials.

Water and adequacy of energy and fuel Proxsimity to sources of cheap energy and fuel is very important for some businesses. Also the chemical compotision of water, the amount of water, water tempreture, water hardness are very important for some facilities.

Market Generally the business areas must be close to market for service business for retail and wholesale businesses.

Labor The availability of workers, their skill level and wage rate they need to be paid is crucial in deciding the where to locate. Some businesses may need skilled labour whereas others require a large supply of lower-cost, unskilled labour.

Infrastructure Infrastructure covers the modes of transport for people, materials and information. Businesses need to ensure there is adequate infrastructure provision or costs can rise, such as extra transport costs.

Road/rail/sea and air links. The most appropriate mode will depend on the type of business and product, but road is used by over 80% of business. Communications network. For example: Is there mobile phone coverage and suitable telephone lines?

Transportation Transportation is used at the start of production to bring raw materials, end of the production to distrubute products. So transportation costs musn’t be very high.

Methods of choosing location Comperative Methods Scoring Methods Load-Distance Model The Center of Gravity Method Break-Even Analysis

Profit is the main purpose of all the operators and there are many competitive firms so behaviors of investors must be rational and investors must be careful when they choose location.

THANKS FOR LISTENING

Mehmet ASIL Dokuz Eylül University Industrial Engineering