Location Planning free essay sample

Basically, location is where the business situated at. According to the book, Operations Management: An Asian Perspective, by William Stevenson and Sum Chee Choung (2010), Location decisions for many types of organizations are not are frequently, but location decisions tend to have a significant impact on the organization. Thus, location plays a vital part in the organization. So why do organizations need to make location decisions? First is that they may be a change in their marketing strategy. Location decision is closely tied to the strategies of an organization. Like for example, the company is a low-cost producer, of course they want a location where labor and cost of materials are low. Other reasons for location decisions are cost of doing business, growth or expansion and depletion of resources in the current location. As a general rule, profit-oriented organizations base their decisions on profit potential. No single location may be better than the others so organizations should identify several locations from which to choose from. An organization has 4 location options to choose from; expand existing facilities, add new facilities, move to another facility or do nothing. In making location decisions, regional factors, community considerations, multiple plant strategies and site-related factors should be regarded. Primary regional factors involve location of raw materials, location of markets and labor factors. Firms locate near or at the source of raw materials for three primary reasons; necessity, perishability and transportation costs. Location of market is part of the organization’s competitive advantage and strategy. The closer they are to the market, the easier they can reach the market. In terms of labor factors, the organization should consider the potential employees available in that certain region as well as their attitude and skills. They should also consider the cost of labor. Another important things are the climate and taxes in that region. Companies are usually attracted to moderate climate and lower taxes (Stevenson Chuong, 2010). In community considerations, the organization should first check the quality of life in that community. Is the community safe? Is it appropriate for the nature of the business? These questions should be answered by the company. Also, services needed for the operations of the business should be available in that community. Taxes should be considered. There are different tax rates in every place. Environment regulations should also be checked. The organization should comply to these regulations. Certain utilities for operations should also be available in that community. Lastly, the developer of that community should have a support to the organization so that it would be easier to operate and future problems would be easier to resolve (Stevenson Chuong, 2010). Basically, there are three types of multiple plant strategies: Product plant strategy, Market Area plant Strategy and Process plant strategy. Having multiple facilities, organizations can organize their operations in several ways. Each strategy carries certain amount of cost and managerial implications. There would be competitive advantage as well. In a product plant strategy, the entire products or product lines are produced in different plants and each plant supplies the whole domestic market. This would have a decentralized approach wherein a single plant focus on a narrow set of requirements that corresponds specialization of labor, materials, and equipment along product lines. This specialization would result to economies of scale and lower operating cost as to compared with multi purpose plant. Market area plant strategy means that plants are designated to serve a specific segment of a market. Individual plants produce most of the products and supply a certain area. This arrangement is desirable when an organization is suffering from high shipping costs. With this strategy, there may be a high operating costs but there would be a significant decrease in shipping costs. Moreover, there would be a rapid delivery and response to local needs. In a process plant strategy, different plants focus on different aspects of the product. This strategy is best suited to products that have numerous components just like automobile manufacturers. Separating the production of components would result to less confusion than if all production is made in the same location (Stevenson Chuong, 2010). Site-related factors are land, transportation, environmental and legality. In acquiring a land, the cost of that land should be within the budget of the organization. Current utility, sewer capacities and degree of development required should also be checked. If possible, there should be a room for future expansion. All of these depend on the needs of the organization. In terms of transportation, there should be ample space for parking of company vehicles and also enough space for roads. Environmental and legal aspects like zoning restrictions should also be checked to avoid problems in acquiring and developing that certain site (Stevenson Chuong, 2010). With all of things I have discussed, clearly, location is very important in the life of a business. That is why location should be carefully planned. Location can either lead to success or failure of the business. It is essential that the location is suitable to the nature of the business. All of the factors discussed would depend on the needs and goals of the organization. As stated by Stevenson and Chuong (2010), No single location may be better than others. Therefore, the organization should be wise in choosing the factors that they will consider.