Cost economies are always important while selecting a location for the first time, but should keep in mind the cost of long-term business/organizational objectives. The following are the factors to be considered while selecting the location for the new organizations:
1. Identification of region: The organizational objectives along with the various long-term considerations about marketing, technology, internal organizational strengths and weaknesses, region specific resources and business environment, legal-governmental environment, social environment and geographical environment suggest a suitable region for locating the operations facility.
2. Choice of a site within a region: Once the suitable region is identified, the next step is choosing the best site from an available set. Choice of a site is less dependent on the organization’s long-term strategies. Evaluation of alternative sites for their tangible and intangible costs will resolve facilities-location problem. The problem of location of a site within the region can be approached with the following cost-oriented non-interactive model, i.e., dimensional analysis.
3. Dimensional analysis: If all the costs were tangible and quantifiable, the comparison and selection of a site is easy. The location with the least cost is selected. In most of the cases intangible costs which are expressed in relative terms than in absolute terms. Their relative merits and demerits of sites can also be compared easily. Since both tangible and intangible costs need to be considered for a selection of a site, dimensional analysis is used.
When starting a new factory, plant location decisions are very important because they have direct bearing on factors like, financial, employment and distribution patterns. In the long run, relocation of plant may even benefit the organization. But, the relocation of the plant involves stoppage of production, and also cost for shifting the facilities to a new location. In addition to these things, it will introduce some inconvenience in the normal functioning of the business. Hence, at the time of starting any industry, one should generate several alternate sites for locating the plant. After a critical analysis, the best site is to be selected for commissioning the plant. Location of warehouses and other facilities are also having direct bearing on the operational The existing firms will seek new locations in order to expand the capacity or to place the existing facilities. When the demand for product increases, it will give rise to following decisions:
- Whether to expand the existing capacity and facilities
- Whether to look for new locations for additional facilities
- Whether to close down existing facilities to take advantage of some new locations