Operation Management Facility Location Layout Marketing Essay

Operation Management Facility Location Layout Marketing Essay Q2. Visit the websites of three major organizations in your region. Find out where their facilities are located. Explain some factors which should be considered while evaluating location options for a facility because globalization has made consumers expect the best products at the lowest prices irrespective of where they are produced. Companies are under competitive pressure to engage in global production and service operations due to the rapid growth of global markets We all know that every organisation goes by the The Four Ps: Price, Product, Promotion and Place. Place refers generally to distribution, i.e., where your customer evaluates and ultimately receives your product or service. While this may not matter much for people who work virtually, or who run a business that drop-ships from a third party, its critical for restaurants, retailers, and even many service businesses. Ironically, while place is often the most permanent of the four Ps, its also often the most overlooked. So, Operations Management takes into consideration Facility location layout to decide on the problem of choosing the right place. Location is about more than just choosing a building. Perhaps for you, opening your business in your own town, or even your part of town, is a given. But consider the big picture: State Income taxes and sales taxes vary greatly from state to state, as do regulatory requirements. Is the state you live in friendly to entrepreneurship? To the specific type of business you want to run? Now might be the time to consider a move if it isnt, or possibly to open your business in a nearby state if you live near a state line. City Rent and other costs, availability of labour, taxes, regulations and government economic incentives can also vary greatly from city to city, even within the same state. Or maybe a small town is the perfect spot for your business. Part of town What kind of commute is involved? Is the part of town consistent with the image for your business? Rent varies greatly according to location. Location relative to streets, parking, and other businesses Do you need to be visible and/or easily accessible to pedestrian and automobile traffic? Will being close to businesses that draw a similar clientele help your business? For example, a sporting goods store or health food store might do very well next to a gym. Type of location Do you need office space, retail or warehouse? Retail is generally the most expensive of the three. There are many factors to consider in choosing the location for your business. While cost is obviously a major consideration, you must also think about your various constituencies. Is your location important to:- You? The space has to work for you, or it wont work. Remember, youre the one has to work there every day. Your customers? It also has to work for your customers, or it wont work. No customers = no business. Your employees? This issue may not be as critical at first, especially if you dont have any employees yet. But the ability to attract and keep good employees will be affected by your location. Strategic partners? While this may not seem like a big issue, the reality is that strategic partnerships happen more easily when the partners are local to each other. Why do you think that certain areas become hubs for certain types of business, such as Silicon Valley for the tech industry? Potential investors or buyers? You may not even be thinking about that yet, but potential investors looking at the long-term value of the business will see location as an important factor. Each of these groups has different concerns about the location: Cost Most obviously, can you afford it? Also, though, consider whether your customers and employees can afford it. For example, is there free parking, or is it expensive? Will higher rent cause you to charge higher prices to your customers? Thats not necessarily a bad thing, but a factor to consider. What about taxes? Income taxes and sales taxes vary greatly from state to state, and if you buy your own property, Convenience Is it easy to find? Is parking close by? Consider your clients. If youre dealing with pregnant mothers and the elderly, they may have a different concept of convenient. Safety This is an increasingly important issue for both customers and employees. Is the parking close by? Well lit? Is there security on the premises? Prestige Would a downtown address add credibility? Will wealthy clients favour a business in their own neighbourhood? Some places even provide virtual offices with prestigious addresses, such as Beverly Hills, Silicon Valley, or Manhattan. Traffic Retailers and restaurants love it, office workers dont. Facility requirements Do you have any special needs, such as high power consumption or specialized wiring? Do you need meeting space, but only occasionally? You might consider a shared office suite (often called executive suites) in that case. Zoning Many cities have very strict zoning requirements. Make sure your business is even allowed there before you sign the lease! A fully informed decision involves a fairly complex matrix of issues. Determine your priorities, keep an open mind about your options, do your research, and get ready to make one of the most important decisions about your business. WHAT IS FACILITY LOCATION LAYOUT? Facility Location is the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors. Overall objective of an organization is to satisfy and delight customers with its product and services. Therefore, for an organization it becomes important to have strategy formulated around its manufacturing unit. A manufacturing unit is the place where all inputs such as raw material, equipment, skilled labours, etc. come together and manufacture products for customers. One of the most critical factors determining the success of the manufacturing unit is the location. Factors Influencing Facility Location: If the organization can configure the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors: Customer Proximity: Facility locations are selected closer to the customer as to reduce transportation cost and decrease time in reaching the customer. Business Area: Presence of other similar manufacturing units around makes business area conducive for facility establishment. Availability of Skill Labour: Education, experience and skill of available labor are another important, which determines facility location. Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing facility by providing incentives in custom duties and levies. On another hand free trade agreement is among countries providing an incentive to establish business, in particular, country. Suppliers: Continuous and quality supply of the raw materials is another critical factor in determining the location of manufacturing facility. Environmental Policy: In current globalized world pollution, control is very important, therefore understanding of environmental policy for the facility location is another critical factor. Center of Gravity, Location Strategy: Location Strategy in Operations Management is an important factor to be considered. It is important because it helps in determining the place of manufacture. The place of manufacture needs to have certain qualities of features where manufacturing process takes place hassle-free. It is one such method or strategy which can determine the effectiveness of a location. Firms throughout the world are using the concepts and techniques in Operations Management to address the location decision because location greatly affects both fixed and variable costs. Location has a major impact on the overall risk and profit of the company. For instance, depending on the product and type of production or service taking place, transportation costs alone can total as much as 25% of the products selling price. That is, one-fourth of a firms total revenue may be needed just to cover freight expenses of the raw materials coming in and finished products going out. Other costs that may be influenced by location include taxes, wages, raw material costs and rents. Companies make location decisions relatively infrequently, usually because demand has out-grown the current plants capacity or because of changes in labour productivity, exchange rates, costs or local attitudes. Companies may also relocate their manufacturing or service facilities because of shifts in demographics and customer demand. Location options include Expanding an existing facility instead of moving Maintaining current sites while adding another facility elsewhere and Closing the existing facility and moving to another location. The location decision often depends on the type of business. For industrial location decisions, the strategy is usually minimizing costs, although innovation and creativity may also be critical. For retail and professional service organizations, the strategy focuses on maximizing revenue. Warehouse location strategy, however, may be driven by a combination of cost and speed of delivery. The objective of location strategy is to maximize the benefit of location to the firm. Location and costs: because location is such a significant cost and revenue driver, location often has the power to make or break a companys business strategy. Key multinationals in every major industry, from automobiles to mobile phones, now have or are planning a presence in each of their major markets. Location decisions to support a low cost strategy require particularly careful considerations. Once management is committed to a specific location, many costs are firmly in place and difficult to reduce. For instance, if a new factory location is in a region with high energy costs, even a good management with an outstanding energy strategy is starting at a disadvantage. Management is in similar bind with its human resource strategy if labor in the selected location is expensive, ill-trained or has a poor work ethic. Consequently, hard work to determine an optimal facility location is a good investment. Location and Innovation: When creativity, innovation and research and development investments are critical to the operations strategy, the location criteria may change from a focus on costs. When innovation is the focus, four attributes seem to affect overall competitiveness as well as innovation. The presence of high-quality and specialized inputs such as scientific and technical talent As environment that encourages investment and intense local rivalry. Pressure and insight gained from a sophisticated local market. Local presence of related and supporting industries. A workplace that has carefully arranged its layout will allow for a more effective and efficient workflow and produce its good or services to a high standard. There are three types of workflow layouts that managers can choose from: Process layout: arranged in departments (e.g., hospitals). Product layout: production line (e.g., a car assembly plant). Fixed-position layout: building a large item (e.g., jumbo jet). CONSUMER BEHAVIOUR AND DESIRE: Consumer behaviour refers to the mental and psychological process that goes in the mind of buyer so as to choose one product or service and not the other. In the first stage of buying, the consumer identifies and need and selects a product or service that will satisfy the need. On selecting the product, they estimate amount they are willing to spend on it. Just before buying the product or service, the consumer analyzes the different price on offer. Here are the factors that influence consumer choices: 1. Culture Culture is the way of life of a community or group. In order to fit in a cultural group, a consumer must follow the written and unwritten cultural norms. For instance, for your to fit in an Islamic community, you are cannot consume pork. To fit among the youth in any community, you are expected to dress like them. In other words, cultural norms define what a consumer can or cannot buy. 2. Lifestyle Your lifestyle is generally determined by the amount of money you make. If you make more cash, you are expected to keep to a certain lifestyle. Lifestyle influence consumer behaviour directly by the fact that if you earn less, you cannot afford to buy items which are above your class. On the other hand, if you are from a higher class, you will feel like your class is lowered by consuming cheap products or services. 3. Motivation Motivation is what drives a person to consider one need to be more important that the other. The more important need demands to be satisfied sooner than the others. Motivation is powered by different physiological, biological and social needs. If you are motivated by the need to feel important, you will generally buy products or services that feed this need. 4. Personality Personality is a set of characters that are deeply embedded in a persons mind. Personality differs from person to person and also place and time. Personality determines what you eat, wear, drive or watch. In simple terms, personality determines all your decisions including your attitude towards different products. 5. Age Age influences consumer behaviour in a rather direct way. For instance, the needs of a 6-year old are not similar to those of a teenager. Consumer needs are basic in childhood but become complex in teenage and middle ages. In old age, consumer needs go back to basic. Furthermore, the psychological needs of people at different age groups are different thus the difference in consumer behaviour. 6. Perception Perception is the prevailing popular opinion about a product or service at a particular time. Perceptions change with time. Consumer can have the same need but buy totally different brands due to perception. In the past, mobile phones were only for communication- calling and texts. This perception has since changed; mobile phones have a variety of functions. Perception is also influence by media reports and advertising. Just after the Oil Spill at the Gulf of Mexico, perceptions about BP the oil company were really bad. **************