1. LOCATION THEORY Obaid Ali Fatima Aftab Andleeb Pervaiz Danish Mehr
Abrar Khan
Manzoor Hussain
Sundas Liaqat

2. FACILITY LOCATION
Once a firm has decided to open a new facility OR relocate an existing facility, It must decide where that facility should be located.

3. FACILITY LOCATION
Facility location problem involves the evaluation of various sites for a new facility.
There are several factors that influence the Facility Location Decision:

4. INTRUSTRIAL LOCATION DECISIONS
Primary Location Factors
Labor
Energy Resources
Transportation
Proximity to market for output
Government regulation
Raw material availability
Secondary Location Factors
Physical Environment
State and local Government attitude and policies

5. Factors Related to Resources
Labor availability, Labor cost, Labor Skills;
Materials Availability, Material cost, material quality;
Equipment availability, Equipment Cost;
Land availability, Land suitability, Land cost;
Energy availability, energy cost;
Water availability, water quality, water cost.

6. Profitability analysis at each potential site
ATTRACTIVENESS OF AREA
Input costs and availability
Labor, capital, energy and raw material
Proximity to national and regional markets
Transportation availability
Government influences
Taxes and tax rates
Labor union influence
CHARACTERISTICS OF THE PLANT
Market orientation
Regional, National, International
Production Process
Skill level needed
Transportation requirements
Mission of plant
Profit or cost center
Growth rate and volume
Location Decisions

7. LOCATION Most of the Facility Location factors vary with time:
The accelerated changes in the economic environment are impacting the frequency of Facility Location decisions.
Changes in the economic environment:
International level competition among companies.
Appearance of new markets and unification of others.
Increase of competition pressure.
Logistics factors are more important and complex.
Companies are reviewing their facility locations in order not to loose competitiveness.

8. Changes in the economic environment:
Industry processes automation.
Labor qualification, flexibility and mobility has become more important factors.
However, labor costs are still a main factor in some industries and in certain manufacturing processes of others: Relocation to Mexico, Taiwan, Singapore, India, China, etc.

9. Factors Related to the Market
Proximity to the firm’s market, size of the market, potential needs of the market.

10. Factors Related to the Infrastructure
Availability of Financial Institutions, Strength of Financial Institutions
Government Stability, Government taxes, Import and Export restrictions.
Quality of life, Cultural issues,
Environmental regulations, Transportation availability, Transportation cost
And finally, Competitors’ size, strength and attitude in that region.

11. Locating Firm In Global Economy
Raw material supplies
Extending market power
Comparative advantage

12. FACILITY LOCATION
There are many analytical techniques that can be used in facility location decision.
Some of these are:
1) Factor Rating
2) Cost-Profit-Volume analysis
3) Center of Gravity Method, etc

15. Example
The firm is considering 2 alternative sites for its new facility, France and Denmark
After evaluating the firm’s Needs, the Managers have Narrowed the list of Important Selection Criteria down into 5 major Factors.
Labor availability and attitude
People to car ratio
Per capita income
Tax structure
Education and Health

16. Factor Rating Example
Since factor weights, selected factors, and assigned scores are all determined subjectively, the managers should be very careful in selecting these items and numbers.

17. Cost-Profit-Volume Analysis

18. Cost-Profit-Volume Analysis

19. Cost-Profit-Volume Analysis
Since Bowling Green has the lowest Total Cost at the volume being produced, it will be chosen as the site of new facility

27. THANK YOU!!