CONSIDERATIONS FOR THE OPTIMAL FACILITY LOCATION
There are many factors to be considered when deciding on a new facility location. There are various researches conducted on this complex topic. One of the oldest sources of information on the topic is Alfred Weber’s(1929) Theory of location of industries. Alfred Weber formulated and singled out two cases. In the first case, the weight of the product is less than the weight of the raw materials required. The second case is when the final product is heavier than the raw materials. Finding the lowest cost by calculating to the facility’s distance from the source and destination is solid model that has been used for many years. However, having the lowest cost location is not a viable solution to today’s complex supply chain issues. According to Lancinskas et al.(2016), other factors related to the issue can be analyzed under to categories; the objectives and the restrictions. Restrictions can be related to customer behavior, competitors, minimum distance from living areas. Objectives can be maximizing the market share; and minimization of the cost for establishment, maintenance and communication. There are also other considerations involved that may fit into both categories, such as the availability and lack of certain talent. With the globalization, we can see that many startups are leveraging the availability of talent in certain cities to locate their facilities. One other consideration would be the support organization gets from the federal or local governments. All these criteria must be analyzed separately and jointly to solve a multi objective facility location problem in today’s competitive environment. With the advances in new technologies and alternative transportation methods, these solutions are continuing to grow. With the advancement in e-commerce, many organizations do not need to distribute their products to physical stores and utilize their online presence as a point of sale. One newer area of research is related to space travel and space resources. In order to utilize space resources effectively, many organizations are planning to create production facilities in earth orbit or other planetary bodies.
Efficiency in the Supply Chain
There are a number of factors to consider when trying to determine an optimal location for the facilities of your company. Perhaps, the best way to determine the optimal location is to research (Hecht, 2016) the area that you plan on operating in. This can be done by engaging in discussion with other businesses in the area, a lot of information can be learned as far as the amount of foot traffic in the area, what businesses are successful in the area, as well as gauge the local political climate goes.
Another consideration that can be used in determining the optimal location for the facilities of a company is to look at the business needs (Beesley, 2016) of the company. If the company is small enough to operate out of a home or small storefront, there is no need to operate out of a large facility. Conversely, if the company is mid-sized or is experiencing upward growth, it may be best to operate out of a larger facility, as it would eliminate the need and the expense of having to undertake moving into a larger facility.
When determining the optimal location for the facilities of a company are financial considerations. As mentioned above, it may be best to operate out of a larger facility than needed as a means to eliminate the need to undertake multiple moves. The business owner should know (Real Estate Law – Free Advice, 2018) that commercial leases are different than residential leases in that they offer little protection for the holder of the lease. Commercial leases are designed to the need of each tenant, and are harder to break, and attempting to do so, the business owner will likely add on the expense of having to hire a lawyer.
Another financial consideration to consider in attempting to find the optimal location for a business is knowing (Beesley, 2016) the local work force. Are there enough people to fill the jobs needed to properly staff the facility? Is the local minimum wage in-line with what the company is willing to pay their staff? Paying adequate wages and the cost of renting a building can be a massive expense.
Other considerations to consider would be the location of the facility in relation to where the suppliers of the company are located (Beesley, 2016), is the location of the facility in a safe area, it may be harder for to attract potential employees to an area with a high crime rate. These are just a few of the considerations that need to be made when considering the optimal area for the facilities of a company.
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