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Unit 12: Facility Location




          5.   Location of other plants and warehouses: Organizations need to look at their plant locations  Notes
               for the complete system point of view.

               (a)  Distribution  and supply requirements require  the support  of sister-plants  and
                    warehouses that complement the system.

               (b)  The system should be designed to minimize total system costs.
               (c)  The locations of competitor’s plant and warehouses must also be considered (what
                    do they know, that you don’t) the object being to obtain an advantage in both freight
                    costs and the level of customer service.
          6.   Climate: The recent typhoons in the Gulf of Mexico have indicated the need to look at
               climatic conditions as a parameter for making location decisions.


                 Example: Petrochemical plants near Houston were seriously threatened by Hurricane
          Katrina.

               Japan has seismic  regions that could be extremely risky for large fixed investments  in
               products that are hazardous or dangerous or uses raw materials or produces by products
               that may have similar impacts.
          7.   Governmental controls and regulations: Table below shows the composite ranking of the
               business environment in 20 countries, based upon factors including government controls,
               regulations and incentives and  labour conditions.   Labour  conditions  include  skills,
               availability, unionization and history of labour relations.

                  Table 12.2:  Ranking of  the Business  Environment in  20 Countries,  1997-2001

                              1   Netherlands    11 Finland

                              2   Britain        12 Belgium
                              3   Canada         13 New Zealand
                              4   Singapore      14 Hong Kong
                              5   U.S.           15 Austria
                              6   Denmark        16 Australia

                              7   Germany        17 Norway
                              8   France         18 Ireland
                              9   Switzerland    19 Italy

                              10 Sweden          20 Chile

          In another ranking, this time by the World Bank in their ‘Doing Business in 2006’ ratings, India
          was ranked 116 out of the 155 countries in the listing. New Zealand was number one, closely
          followed by Singapore. According to this report, starting a business in India requires 11 procedures
          and around 72 days, the highest in the Asian region. Business in India requires 20 procedures. In
          ‘rigidity of employment’ that relates to hiring and firing people, India ranks 62 on an index of
          100. Around 40 procedures and 425 days are required for a contract. Also, taxes must be paid
          59 times during the year.





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