Chapter 13, Problem 1DQ

Summary Introduction

Interpretation: The key factors and data collection regarding location options, that each organization should consider locating a new facility and how the data would be collected needs to be explained.

Concept Introduction: Deciding the location of a new organization is a strategic decision. This is a decision which once taken, cannot be changed easily and certainly not after installation of the facility. Many business factors are important. For example, market; key suppliers; availability of power/water/services, etc; development index of the society, availability, and level of technical staff/managers/operatives, etc.    

Explanation of Solution

Given information:

1. A list of some factors which ought to be taken into account to decide the location of a manufacturing and service organization.
2. Some pointers towards sources of data.

1.      Locating a new facility is a critical and long term decision for any company in any sector.

2.      The prime factors for each case shall be different. However, some factors may outweigh other factors, for example, availability of space, power and infrastructure is essential except for tiny units which can run in rented space with little power. This may be the case e.g for small NGO’s.

3.      The manufacturing facility would need to consider proximity to customers, raw materials, availability of related infrastructure (for example, transport/shipping).

4.      The service organization may, on the other hand, give weightage to factors like availability of customers; easy access to and fro customers; communication infrastructure, etc.

5.      It is not possible to give a consolidated list of factors because of the unique conditions and requirements of every organization. For example, an IT service organization aiming to provide services to the government may also consider proximity to political authority in the country/state.