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Need for location decisions

As part of marketing strategy


Because of growth in demand
Depletion of basic inputs
Shifts in markets or cost of doing
business in a location
Nature of location
decisions
Strategic importance of location
decisions
To become a low cost producer
Increasing profit by increasing market share
Convenience of customers
Long term commitment, mistakes difficult to
overtime
Poor location decision may cause excessive
transportation cost, shortage of qualified labour,
loss of competitive advantage, inadequate
supplies of raw materials.
Contd..
Objectives of location decisions
Acceptable locations rather than best single
location
Location is based on where the business is in
the supply chain
Web based retail business can locate anywhere
Location options
Expand an existing facility
Add new location
Shut down one and move to another
Procedure for making location
decision
1. Decide on criteria for evaluating location
alternatives
2. Identify important factors
3. Develop location alternatives
1. Identify general region of location
2. Identify smaller number of community
alternatives
3. Identify alternatives among community
alternatives
4. Evaluate the alternatives and make decision
Factors affecting location
decisions
Regional factors
Location of raw materials
Necessity, perishability and transportation costs
Location of markets
Profit oriented firms frequently locate near the
market
Perishability of the products (bakeries)
Distribution cost (sand and gravel dealers)
Location near competitors or away from competitors
Location near to crowd or in a convenient space
Located for ready action (hospitals, police station,
PO)
GIS (Geographical information system):
It is a tool that can be used for location
planning. It collects, stores, retrieves and
display demographic data. Analysis with GIS
have the ability to answer number of
questions in location decision making
Location of suppliers
Labor factors:
Labor costs (for labor intensive firms)
Skills of potential employees
Climate and taxes
Community consideration
Local groups may seek to exclude
certain companies
Some communities attract new business
because they offer more jobs and
revenue.
Community resistance to pollution,
airport expansion, nuclear facilities etc.
Desirability for workers to live
Micro factories to reduce response time
Site related factors
Soil condition, load factors, drainage
rates
Land costs, room for future expansion
Industrial parks is a good alternative for
firms involved in light manufacturing.
Proximity of airport and train stations
Multiple plant manufacturing
strategies
Product plant strategy:
Entire products are produced in separate plants and
each plant usually supplies the entire domestic
market.
Decentralized approach
Specialization results in economies of scale and
lower operating costs
Market area plant strategy:
Individual plants produce most if not all of a
companys products and supply a limited
geographical area.
Significant savings in shipping cost can be made
Centralized approach
Contd..
Process Plant Strategy:
Different plant concentrate on different
aspects of a process
This approach is mostly suitable for
products that have numerous
components
Centralized approach
Increase in learning opportunities
Similar problems will arise which along
with their solutions can be shared with
other plants
Service and retail
locations
Nearness to raw materials is not usually
a factor
Consumer access is sometimes a prime
consideration
Traffic volume and convenience is considered
Most of the cases retailers prefer locations
near other retailers
Good transportation and parking facilities
Customer safety and security
Global locations
Advantages
Markets
Cost saving
Legal and regulatory advantages
Financial advantage
Disadvantages
Transportation cost, security cost, unskilled labour,
import restrictions
Risks
Political risks, terrorism, Economic legal and
cultural risks
CAPACITY Planning
Capacity refers to an upper limit on the
load that an operating unit can handle.
The load may be in terms of number of
physical units produced (Bicycles assembled
per hour) or
Number of services performed (computers
upgraded per hour).
The goal of strategic capacity planning is
to achieve a match between the long
term supply capabilities and the predicted
level of long term demand
Basic questions in capacity
planning
1. What kind of capacity is needed?
Depends on the products and services that
management intends to produce or provide.
2. How much is needed?
3. When it is needed
Forecasts are key inputs used to answer these
two questions.
. Factors affecting the frequency of capacity
decisions are stability of demand, rate of
technological change and product design
Capacity Decisions are
strategic
Capacity limits the rate of output
possible
Capacity decisions affect operating
costs
It is major determinant of initial
cost
Once implemented, it is difficult to
modify
Capacity decisions affect
competitiveness
Design capacity: The maximum output rate
or service capacity a process is designed for
Effective capacity: Design capacity minus
allowances such as personal time,
maintenance and scrap
Actual output: It cannot exceed effective
capacity and is often less because of machine
breakdowns, absenteeism, shortages of
materials, quality problems etc.
PROBLEMS
Determinants of effective
capacity
Facilities
Design of facilities (size and provision of expansion)
Locational factors
Transportation cost, distance to market, labor supply, energy
source
Layout of work area
Environmental factors such as heating, lighting,
ventilation etc.
Product and service factors.
Ability of produce similar products are greater
Process factors
Quantity capability of the process
Output quality
Contd..
Human factors
Activities involved in the job, training and experience
required to perform the job.
Employee motivation
Policy Factors
(allowing and not allowing overtime options)
Operational factors
Scheduling problems
Inventory shortages
Supply chain factors
What impact will changes in capacity have on suppliers,
warehousing, transportation and distributers?
External factors
Production standards, minimum quality and performance
standards, pollution standards, government regulations etc.
can restrict increasing and using capacity
Maintenance
Management
It is a combination of any action
carried out to retain an item in or
restore into an acceptable condition
Down time reduces productivity
It keeps the entire production system
more reliable, productive and
efficient
Objectives of maintenance
management
To maximize the availability and
reliability of all assets
To extend the useful life of assets by
minimizing wear and tear and
deterioration
To ensure operational readiness of all
equipments required for emergency use at
all times
To increase the equipment readiness by
reducing downtime
Levels of maintenance
First Level: formulation of
maintenance strategy so that it is
consistent with other business
strategies within the company
Second level: Planning and
Scheduling maintenance in order to
ensure efficient maintenance
operations
Third level: Execution and collection
of data from the maintenance action
Maintenance strategy
It depends on following factors
Internal resource level
Contract resource policy
Plant condition and age
Maintenance objectives
Statutory inspections
Safety requirements
Long and short term production
requirement
Maintenance management
process
Bath tub curve
Types of maintenance
system
Emergency/Breakdown maintenance
Preventive maintenance
Running maintenance
Shutdown maintenance
Predictive maintenance
Routine maintenance
Time-based Preventive maintenance
Third stage of Bath-tub curve
Corrective maintenance
Restore to original conditions
Minor repair and replacement of component
Design out maintenance
Break down maintenance
It occurs when there is a work stoppage because of
machine breakdown.
Here, maintenance is a repair work
Objectives
Get equipment back to action in order to minimize
interruption to production
Control the cost of repair crews
Control the cost of operation of repair shops
Control the investment in replacement spare machines
and spare parts
Perform appropriate amount of repairs at each malfunction
Usually preferred for machines which are less costly
Standby equipments are required
Process of Breakdown maintenance

Fault deduction
Fault isolation
Fault elimination
Adjust/align/caliberate
Repair
Remove and replace
Verification that the fault has been
eliminated
Preventive maintenance
It is undertaken before the need arises.
It consists of
Proper design and installment of equipment
Periodic inspection of plant and equipment
Repetitive servicing of equipment
Usually preferred for machines which are costly
Benefits are:
Greater safety to workers,
Decreased production downtime
Fewer large scale and repetitive repairs
Less standby equipment required
Planned and preventive
maintenance
Maintenance request
Maintenance schedule
Work/job specification
Planned maintenance programmes
Annual/weekly plan
inspection report
History records
Planned lubrication
Work priority
Safety
Predictive maintenance
Sensitive instruments (like vibration
analysers, pressure temperature
gauges ) are used to predict the
trouble.
Conditions can be measured
periodically or on continuous basis
Routine maintenance
Includes activities such as periodic
inspection, cleaning, lubrication and repair
of production equipments after their service
life.
It can be classified into two
Running maintenance: In which maintenance
work is carried out while the equipment is in the
operating condition.
Shut down maintenance: In which
maintenance work is carried out when the
machine or equipment is out of service.
Design out maintenance
Aims to eliminate the cause of
maintenance
Choice between
Cost of redesign + reduced maintenance
cost v/s Recurring cost of best
maintenance procedure
Steps in design-out
maintenance
Identify the defects causing High maintenance
cost
Look into the possible causes of the defect
Identify the possible solution to eliminate the
cause
Suggest the necessary modification
eliminating or reducing the effect of the defect
Compare financial benefits against
investment required
Assess the degree of risk with new modification
Total Productive
maintenance
Developed in Japan in 1971
The word TOTAL has three important
features in TPM
Total effectiveness: Economic efficiency
or profitability
Total preventive maintenance to improve
maintainability
Total participation: Autonomous
maintenance by operations and small group
activities in every departments at all level.
It tries to eliminate six big
losses
1. Break downs due to equipment
failure
2. Set-up and adjustment
3. Idling and minor stoppage due to
abnormal operation of machine
components
4. Reduced speed of operation
5. Defects in process and rework
6. Reduced yield between machine
start-up and stable production
Condition monitoring
technologies
Vibration monitoring
Thermography
Oil debris monitoring
Performance monitoring
Flow, pressure, energy consumption

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