Page 138 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes 5.3.2 Factors affecting Service Products

In service, the capacity to deliver the service to the customer must first be determined; only then
can the service be produced. What geographic area can you realistically service?

Example: A hotel room must be available where the customer is when that customer
needs it – a room available in another city is not much use to the customer.
The primary parameters on which the geographical location decisions are based for service
products have been enumerated below:

1. Purchasing power of customer drawing area.
2. Service and image compatibility with demographics of the customer drawing area.
3. Competition in the area.
4. Quality of the competition.

5. Uniqueness of the firm's and competitor's locations.
6. Physical qualities of facilities and neighboring businesses.
7. Operating policies of the firm.
8. Quality of management.

Example: Karim, a speciality restaurant in Delhi, had opened outlets in the major
upcoming markets in Delhi, Noida and Gurgaon. In the malls that are coming up in and around
Delhi, you see well known names like Marks and Spencer, McDonald's, Tissot, Canon Nike, etc.
These are all decisions related to capacity.

5.4 Selection of Site for the Plant

When we see on the television news or read in the newspaper that a company has selected a site
for a new plant, the decision can appear to be almost trivial. Usually it is reported that a
particular site was selected from among two or three alternatives and a few reasons are provided
such as good community or available land. However, such media reports conceal the long,
detailed process for selecting a site for a major manufacturing facility.

Example: When General Motors selected Spring Hill, Tennessee, as the location for their
new Saturn Plant in 1985, it culminated a selection process that required several years and the
evaluation of hundreds of potential sites.
When the site selection process is initiated, the pool of potential locations for a manufacturing
facility is, literally, global. Since proximity to customers is not normally an important location
factor for a manufacturing plant, countries around the world become potential sites. As such, the
site selection process is one of gradually and methodically narrowing down the pool of
alternatives until the final location is determined. In the following discussion we identify some
of the more important factors that companies consider when determining the district, region,
state and site at which to locate a facility.

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