Presented by:

Sanket Kulkarni

(115098)

Sagar Shah

(11509

Soham Gokhale

(115103)

It is branch of Manufacturing Planning & Control

Focuses on optimal placement of facilities to reduce costs associated with transportation, distribution and production

Facility location refers to the location of service organizations

It’s also known as factory location in production organization.

The success of organization is dependent on decision of facility location

It is strategic decision of an organization

Facility location is important for both new and existing organizations

Existing company may need facility location for:

o Change in available resources

o Shift of demand

o To expand new target market

o Development of new technology

o Socio-political-Legal changes

Facility location planning is more important to new organizations

It involves 3 strategic decisions

1. To select proper geographical region

2. To select specific site within this region

3. To find the actual site

Selection of Region

Selection of Locality

Selection of Actual Site

Adequate Supply of Raw materials. Proximity to the market – Minimum supply

time. Transport Facilities – Good capacity and

speedy transportation. Supply of Labor – Cheap Labor Supply. Power – Regular Power Supply for operation

machinery at full capacity. Supply of Capital – Required for Initial

promotion and Expansion

Natural Factors – Land, Water, Climate(Agriculture based Industries).

Political Factors – Favorable Development Policies.

Government Subsidies – Exemptions, Rebates and Subsidies.

Historical and religious factors.

Selection of Location

Semi-UrbanRuralUrban

Advantages of Urban Areas

-Good transportation, communication services.

-Banking, Credit and Insurance facilities.

-Storage facilities.

-Availability of skilled, unskilled labor.

-Educational, Medical facilities.

Disadvantages of Urban Area

-High Land Cost.

-High Labor Cost.

-High Attrition Rate.

-Municipal Restrictions, High Taxes.

-Strong Trade Unions.

Advantages of Rural Areas

-Cheap Land and Labor.

-Low Labor attrition rate.

-Lesser Taxes, Municipal Restrictions.

-Sufficient Land available.

-Amicable relations between management and Labor.

Disadvantages of Rural Area

-Lack of Transportation.

-Warehouse facilities unavailable.

-High Distribution Costs.

-Shortage of Skilled Labor.

-Lack of Banking, Municipal facilities

Advantages of Semi Urban Areas

-Cheap Land compared to Urban areas.

-Availability of Adequate Land.

-Lesser cost of Distribution as compared to Rural areas.

Disadvantages of Semi Urban Areas

- Conversion into Urban area with all its merits, demerits.

Facility location is strategic decision regarding selecting a best plant location

It is long term commitment of an organization

A best selection of facility is hub for success of organization besides that wrong decision may negatively affects the every step of an organization

For long term decisions there are some procedures

There are various quantitative and qualitative analysis to find out the best alternatives

The general procedures in facility location includes

o Preliminary Screening

o Detailed Screening

Detailed analysis includes both macro analysis and micro analysis

This is the way of analysisng best location by using different qualitative and quantativemethods:

Qualitative models are the techniques of measuring non monitory factors of proposed facility/plant location

The quantitative models are used for analyzing those factors which can be measured in terms of money

It is basically mathematical models which can be multiple use

This is the basic stage before selecting the facility location

It includes:

Proximate to customers, market,rawmaterial(Depends on the company)

Business climate

Pest Environemnt

Availability of labour materials etc.

Company : Jubilant Life Sciences Limited.

It is largest Custom Research and Manufacturing Services (CRAMS) player and a leading Drug Discovery and Development Solution (DDDS) provider out of India.

Jubilant Organosys Ltd., headquartered at sector-16, Noida, near New Delhi in India.

Jubilant Organosys Ltd. has five existing facilities. The details of the facilities are given in the table. The company wants to locate a new facility so that the total transportation cost is the minimum. The management of the company wants to know about the best possible location using the median and centre of gravity method.

Existing Plant Annual Load

(Tons)

Coordinates Cost of 1ton per 1Km

distance (Rs.)

Kochi 350 9.58°N 76.14°E 4

Vadodara 480

22.18°N 73.12 °E

4

Renukoot 275 24.2°N 83.03°E 4

Ghaziabad 370

28.40°N 77.26°E

4

Ludhiana 200

30.55°N 75.54°E

4

- Median Method.

It is done on an assumption that the movement of load is done on rectangular/rectilinear pattern. It is useful for single new facilities.

- Centre of Gravity Method.

It is an attempt to establish a ‘ Centre of Gravity’ with respect to existing ancillary facilities.

Transportation cost = distance*annual load*cost of 1 unit by 1 distance.

Distance = | XJFC - Xmarket |+ |YJFC – Ymarket |

Total annual load for all markets = 1675

Median = 1675/2 = 837.5

Moving along X-axis:

XJFL coordinate = 76.14 (i.e. the x coordinate of Kochi).

Moving along Y- axis: YJFC coordinate = 24.2 (i.e. the y coordinate of Renukoot).

Now, transportation cost if operating from coordinate (76.14, 24.2) is calculated.

Formulae:

X= Xi Li / Li

Y = Yi Li / Li

X= (76.14*350 + 73.12*480 + 83.03*275 + 77.26*370 +

75.54*200) / 1675X = 76.58

Y= (9.58*350 + 22.18*480 + 24.2*275 + 28.40*370 +

30.55*200) / 1675Y = 22.25

For distance from my location to Kochi:|76.14 -76.14| + | 24.2 -9.58| = 14.62Transportation cost = 14.62*350*4 = 20468For distance from my location to Vadodara:|76.14 -73.12| + |24.2 -22.18|= 5.04Transportation cost = 5.04*480*4 = 9676.80For distance from my location to Renukoot:|76.14 -83.03|+ |24.2 -24.2| = 6.89Transportation cost = 6.89*275*4 = 7579

For distance from my location to Ghaziabad:|76.14 -77.26| + |24.2 – 28.40| = 5.32Transportation cost = 5.32*370*4 = 7873.6For distance from my location to Ludhiana:|76.14 -75.54| + |24.2 – 30.55| = 6.95Transportation cost = 6.95*200*4 = 5560

Total transportation cost = 20468+9676.8+7579+7873.6+5560

= 51157.4

For distance from my location to Kochi:|76.58 -76.14| + | 22.25 -9.58| = 13.11Transportation cost = 13.11*350*4 = 18354For distance from my location to Vadodara:|76.58 -73.12| + |22.25 -22.18|= 3.53Transportation cost = 3.53*480*4 = 6777.6

For distance from my location to Renukoot:|76.58 -83.03|+ |22.25 -24.2| = 8.4Transportation cost = 8.4*275*4 = 9240For distance from my location to Ghaziabad:|76.58 -77.26| + |22.25 – 28.40| = 6.83Transportation cost = 6.83*370*4 = 10108.4For distance from my location to Ludhiana:|76.58 -75.54| + |22.25 – 30.55| = 9.34Transportation cost = 9.34*200*4 = 7472Total transportation cost =18354+6777.6+9240+10108.4+7472= 51952

MEDIAN METHOD:

Coordinates (24.2, 76.14) and Transportation Cost for this coordinate is 51157.4

CENTRE OF GRAVITY METHOD:

Coordinates (22.25, 76.58) and Transportation Cost for this coordinate is 51952

Thus it is seen that transportation Cost by Median method is less than the Transportation Cost by Centre of Gravity method

Thus the coordinates (24.2, 76.14) are used for establishing the facility.