Page 140 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes Said Pranav Securities' CEO, Mr Rajesh Jain, "Most shampoo marketers operate through
third party contract manufacturing since it keeps costs low and also provides logistical
advantages. But these advantages of third-party manufacturing are now decreasing, since
places such as Himachal Pradesh offer backward area benefits as well as income tax rebates".
Another FMCG analyst felt that its own manufacturing facility will give the company
further cost advantages in the segment vis-à-vis competition, particularly Hindustan Lever
Ltd. (HLL)

"Besides with value added tax and MRP-based excise duties coming in next year, production
outsourcing has become less attractive. P&G's move shows it has set its sights on a long
innings in India," he added.
Yet another analyst said the willingness of FMCG companies to invest in building capacities
showed that they were banking on the current downturn in the market to end soon.
"Besides, why would companies invest unless they were sure that growth will continue
even if it comes at lower price points," he wondered.

Procter & Gamble Hygiene and Health Care Ltd. (PGHH) – the listed arm of P&G - posted
30 per cent sales growth at 577.24 crore for the 12 months ended June 2004, with 35 per
cent higher net profit at 92.17 crore.
While PGHH deals with Vicks and Whisper product portfolios, its subsidiary P&G Home
Products caters to shampoo and detergent brands in India.

Source: thehindubusinessline.com

5.4.2 State/District

The site selection process further narrows the pool of potential locations for the facility down to
several communities or localities. Many of the same location factors that are considered in
selecting the country or region in which to locate are also considered at this level of the process.

Notes State/District specific factors are:
1. State/District government 10. Concentration of customers
2. Local business regulations 11. Taxes
3. Environmental regulations 12. Construction/Leasing costs
4. Government services (Chamber of Commerce, etc.)
5. Availability of sites 13. Land cost
6. Financial services 14. Business climate
7. Labour pool 15. State amenities
8. State inducements 16. Transportation system
9. Proximity of suppliers 17. Proximity of customers

5.4.3 Plant Location

The site selection process eventually narrows down to the determination of the best location
within a community. In many cases a community may have only one or a few acceptable sites,
so that once the community is selected the site selection is an easy decision. Alternatively, if

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