Page 137 - DMGT501_OPERATIONS_MANAGEMENT

Unit 5: Facility Location

(b) The system should be designed to minimize total system costs. Notes
(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 5.2 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 5.2: 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.
Tax regulations, environmental regulations or various other kinds of government policies and
regulations can be important factors in the location decision. There may be a more favourable
investment climate in a particular geographical or political region that may attract industry to
invest in that region.

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