DO NOT COPY Chapter 6 SERVICES LOCATION AND DISTRIBUTION

DO NOT COPY Chapter 6 SERVICES LOCATION AND DISTRIBUTION

DO NOT COPY Learning Objective Define the objective of locations of services unit. Identify the factors important for services business Use models for identifying a service location Appreciate importance of the location of a service facility.

DO NOT COPY Introduction Location is as important in service business as in manufacturing. There are many reasons why organizations open up new facilities. There are many factors while deciding the location of a service unit based on the type of services organization wish to deliver to its customer.

DO NOT COPY Factors that originate Location decision An expanding market Introduction of new products or services The exhaustion of raw materials in a certain area: The pressure of the competence Mergers and acquisitions

DO NOT COPY Location Alternative Expansion of an existent facility. Only possible if enough space exists. Attractive alternative when the current facility location is good enough for the company. Lower costs than other options Start a new facility in a new area. Sometimes is a more advantageous option than the previous one (if there are problems related to lose of focus on the company’s objectives). Shut down of a facility and (or not) starting of a new one somewhere else. Moving production from one plant to other.

DO NOT COPY Some of the important issue with regards to the service Location: Proximity to Customers Business Climate Total Costs Infrastructure Quality of Labour Suppliers Other Facilities Political Risks Government Barriers Trading Blocks Environmental Regulation Host Community Competitive Advantage

DO NOT COPY Location Selection Factors Flexibility Competitive positioning Demand management Focus

DO NOT COPY Errors in Location Selection Can be divided into two broad category: 1. Behavioral 2. Non behavioral

DO NOT COPY Location Planning Analysis  It includes  Proximity to raw material  Proximity to market  Climate  Culture  Infra

DO NOT COPY Step by step process to reach an alternative Identifying a country Identifying a region Location to raw material Location to markets Labor factors Labors factors Other Identifying a community Identifying a site

DO NOT COPY Analytical Model for identifying location Location cost Volume profit analysis Factor Rating model Center of gravity model

DO NOT COPY Factors Influencing service Facility Location Customer Proximity Services business area Availability of skilled labor Free Trade Zone/Agreement Suppliers Environment policy

DO NOT COPY Choosing a good location for service business Is location important for the success of your service business? What type of location is best for your service business? How much rent can you afford? Is your proposed location appropriate for what you plan to do there?

DO NOT COPY Is location important for the success of service business? Location is important but may not be that important for some of the services business Services which do all their business at customers locations and business which have little contact with customers may not opt for a great location. Example : Plumber, internet based business.

DO NOT COPY What type of location is best for service business? Will customers come on foot? Will customers drive and, if so, where will they park? Will more customers come if you locate near other similar businesses? Will the reputation of the neighborhood or even of a particular building help draw customers?

DO NOT COPY How Much Rent Can You Afford? One has to see in a business rent cost which is a fixed cost in a business. A lot of research should be done while taking premises on rent. Need to check appropriateness of the location under consideration.

DO NOT COPY Location Strategy Formulating a strategy will involve following factors: Facilities Feasibility Logistics Labor Community and site Trade zones Political risk Governmental regulation Environment regulations Incentives

DO NOT COPY Organizations Requirement Size Traffic Population Total cost Infrastructure Labor Suppliers

DO NOT COPY Multiple plant manufacturing strategies Product Plant strategy Market area plant strategy Process plant strategy General purpose plant strategy Services business strategy

DO NOT COPY Trends and Future strategies  International level competition  Changes in economic environment  Industry processes automation  Transportation and IT development  JIT systems