What is Facility or plant location | Meaning or Importance |

Meaning of Facility Location

Facility or Plant location means determining where the plant should be located for getting maximum economic benefits and effectiveness. In simple words, the area or location where the firm set up its plant is called a plant location. It is an important decision in the case of new entrepreneurs. Economic benefits like cheep & quality raw material, transport availability, near to market, good man power, etc.

IMPORTANCE OF PLANT LOCATION

1.) Nature and size of business

2.) Production technology and cost structure

3.) Customer Service

4.) Competition

5.) Physical factors

 

1.) Nature and size of business

Plant location depends on the size or nature of the plant. A small-scale firm normally selects the location near to the market because if they don't like the location later on then they can relocate. But for a big company, the amount of investment is large. So, they have to be very careful will locating the location.

 

2.) Production technology and cost structure

The location of the plant will decide the type of production technology management adopt and the structure of cost. For example - If management installs its plant in an underdeveloped country, they will choose a labor-intensive process to take benefit of the availability of low-cost labor.

 

3.) Customer Service

The location of the plant affects the company's ability to serve its customer quickly and speedily. For example - In case of dairy milk products that are delivered on daily basis to their customers. In this case, the location of the plant must be near to delivered the milk products on time.

 

4.) Competition

The importance of plant location decisions also helps the company to take a competitive advantage. An optimum location that reduces the transportation cost, available to the near market, having low labor cost, etc. always gives the company an advantage as compared to its competitor.

 

5.) Physical factors

One another importance of plant location decisions is that it helps the company to look over the other aspects also.

For example - heating, ventilation requirements, disposal of company waste properly, etc.