Mgmt n Location Analysis

7/29/2019 Mgmt n Location Analysis

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Definition of Planning

Defining the organizations objectives orgoals

Establishing an overall strategy for

achieving these goalsDeveloping a comprehensive hierarchy of

plans to integrate and coordinate activities

It is concerned with both ends and means


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Purposes of Planning

It gives direction

Reduces the impact of change

Minimizes waste and redundancySets the standards used in controlling


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Types of Plans

Breadth

Strategic

Operational

Time Frame Long term

Short term

SpecificityDirectional

Specific


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Strategic Planning

It covers a longer period of time which mayextend from 5 to 20 or more years

It takes into consideration the totality of activitiesof the company

Objective-Future Profits

Rewards- Development of future potential


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Operational Planning

Shorter period of time

Plans are prepared in more specific terms.Plans

deal with various functional areas like finance,marketing, R &D etc

Objective- Present profits

Rewards- Efficiency, Stability


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Short -Term Versus Long-TermPlans

Short term- less than one year

Long term- any time more than 5 years

Intermediate term- any period in between


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Specific Versus DirectionalPlans

Specific Plans

Advantages

Clearly defined objectives

No ambiguityDisadvantages

They require clarity and a sense of predictabilitythat often doesnt exist

Ex- Increase cos sales by 20% over 1 year mightestablish specific procedures, budget allocationsand schedule of activities to reach that objective


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Single-use Plan

A one-time plan thats specificallydesigned to meet the needs of a uniquesituation and is created in response to nonprogrammed decisions that managers

make


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Standing Plans

Ongoing plans that provide guidance foractivities repeatedly performed inorganisation and that are created inresponse to programmed decisions that

managers make


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Contingency Factors inPlanning

Managers level in the organization

Degree of environmental uncertainty

Length of future commitment


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Contingency Factors inPlanning..cont

Managers level in the organization

Operational planning dominates planning

activities of lowerlevel managers.

As managers move up the organization, theirplanning role becomes more strategy oriented

Small business : owner manager does both


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Degree of Environmental Uncertainty

The greater the environmental uncertainty, the

more plans need to to be directional andemphasis placed on the short term

The greater the change, the less likely it is that

plans are accurate

Well managed organizations are developingmultiple scenarios of future


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Length of Future Commitments

Plans should extend far enough to meet those

commitments made today

Planning for too long long or for too short aperiod is inefficient

Decisions made today become a commitment tosome future action or expenditure.


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Operational Planning

While designing the corporate planning control

system it is indeed needed to chart out both thelong range and short term plans, programmes,

procedure and policies. Using all the insight,foresight, experience at disposal, it should takecare of feelings, objective, assumption and risks,it should be planned keeping in mind the kind of

business (seasonal or otherwise), its shouldutilize inputs information of the market andeconomy, in short utilize all information andinputs at your disposal.


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Organising

External grouping of activities and

resources for facilitating attainment ofspecific organisational activities

Objectives are achieved in shortestpossible time, in an orderly manner with

maximum utilization of given resources


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Organization Structure

Formal established patterns ofrelationships amongst the various parts ofa firm

Deliberately specified and adopted and donot evolve on their own

Established- Relationships are clearlyspelled out and accepted by everyone


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Structure

Complexity

Formalization

Centralisation


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Elements of OrganisationStructure

(i) Network of formal relationships andduties i.e. organisation chart plus jobdescriptions

(ii) The manner in which various tasks andactivities are assigned to different peopleand departments (differentiation)

(iii) The manner in which separate tasks andactivities are coordinated (integration)


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Elements of OrganisationStructure..cont

(iv) The power, status and hierarchicalrelationships within the organisation (authoritysystem)

(v)The planned and formalised policies,procedures and controls that guide theactivities and relationships (admin system)

(vi)The flow of information and communicationnetwork


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Departmentalization

Functional

Product

Customer Geographic

Process


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Line Authority & Staff Authority

Line Authority- Authority to direct the workof subordinate

Staff Authority- Gives advice and service toline but they have no authority to put theirrecommendations into actions


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Various departments in PDA ofan organisation

- Transportation

- Warehousing

- Inventory control- Material handling

- Order processing

- Packaging- Information system

- Locational analysis


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LOCATION STRATEGY / DECISIONS

Location includes decision of site, plant,

equipment etc.


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LOCATION AND SITE

Location and site are two separate entitiesquite often

mistaken as one!

Location refers to a city / town or an industrial zone and

is used in broader sense while site refers to a specific plotof land, where the project would be set up.

Choice of location has to be taken after careful

consideration of a number of factors such as proximity to

markets and sources of raw materials, availability ofinfrastructure, Government policies, incentives offered,

labor situation, etc.


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Factors Affecting Site

Site size and cost

Air, rail, highway, and waterway systems

Zoning restrictions Nearness of services/supplies needed

Environmental impact issues


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Objective of Location Strategy

Maximize the benefits of location

to the firm


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Industrial Location Decisions

CostfocusRevenue varies little

between locations

Location is a majorcost factorAffects shipping &

production costs (e.g., labor)

Costs vary greatly betweenlocations

1995 Corel Corp.


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Industrial Location Decisions

It is helpful to begin this discussion by

asking students how and under whatconditions location impacts costs and

revenues. Once they have begun toconsider these issues, then the decisionfor industrial or service organizations can

be explored.


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Service Location Decisions

Revenue focus Costs vary little between market areas

Location is a majorrevenue factor

Affects amount of

customer contact

Affects volume of

business


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In General - Location Decisions

Long-term decisions

Difficult to reverse

Affect fixed & variable costs Transportation cost

As much as 25% of product price

Other costs: Taxes, wages, rent etc.

Objective: Maximize benefits of location

to the firm


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Ranking factors are available for different countries from

various sources

Factors Affecting Country

LocationsGovernment rules, attitudes, stability,

incentives

Culture & economy

Market locationLabor availability, attitudes, productivity, and

cost

Availability of supplies, communications,

energy

Exchange rate & its stability


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Region Location Decisions

Corporate desires

Attractiveness of region (culture, taxes, climate, etc.)

Labor, availability, costs, attitudes towards unions

Costs and availability of utilities Environmental regulations of state and town

Government incentives

Proximity to customers & suppliers

Cost of Land, Development and construction


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1. PROXIMITY TO MARKETS

Proximity to the markets is an important criteria fordeciding on the location. This is particularly true of bulkyproducts for which the transportation costs are likely to beconsiderable e.g. plastic products (big containers, fuel

tanks, which may occupy more space resulting in highercosts).

For certain products like refined sugar the reason forlocating a stand alone sugar refining plant near the market

would be different. Unit manufacturing perishable products should also be

located near the center of consumption.


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Organizations That Need To BeClose to Markets

Government agencies Police & fire departments

Post Offices

Development Agencies / Corporations

Retail Sales and Service Fast food restaurants, supermarkets, gas stations

Drug stores, shopping malls

Bakeries

Services Doctors, lawyers, accountants

Banks, auto repair, motels


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2. PROXIMITY TO RAW MATERIALS

Projects which are resource based should be

located near the sources of raw materials for

economies of transportation.

- Cement Plants,

- Steel Plants,

- Alumina refineries,

- Thermal Power Plants, Fly Ash Aggregates,

etc.


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FOOT LOOSE INDUSTRIES!!

They do not require nearness to either raw materials or

markets.

They do not require face-to-face contact with customers

Availability of infrastructure, Govt. Incentives and trainedmanpower are the only criteria for such units.

Electronics Industry

Software Development

BPOs, Call Centers, Telemarketing, etc.


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3. AVAILABILITY OF INFRASTRUCTURE

Availability of: Power:

- Availability, investment required, power tariff andstability of power supply

Water:- Quality and Quantity, reliability of supply, possibility of

ground sources (tube wells)

Communications:

- Telephones, Internet (bandwidth?), possibility of leasing

lines, etc. Transport:

- Rail, Road, Air and sea or inland water


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6. OTHER MISCELLANEOUS

FACTORS:

General living conditions (cost of living, cost

of housing, education facilities, entertainment /

recreation facilities, healthcare facilities,

security, political environment, etc.)

Climatic conditions,

Nearness to ancillary units,

Cost of mitigating environmental pollution


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4. Transportation Model

Used primarily for industrial locationsLogistics is the name of

the game!

Finds amount to be shipped from severalsources to several

destinations Used primarily for industrial locations Type of linear

programming model

Objective: Minimize total production

& shipping costs

Constraints

Production capacity at source (factory)

Demand requirement at destination


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Summary of Methodsof Solving Location Problems

Weighted index method which:

Assigns weights and points to various factors

Determines tangible costs

Investigates intangible costs

Center of Gravity Method

Finds best distribution center location

Location breakeven methods

Special case of breakeven analysis

Transportation method A specialized linear programming method


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Geographic Information Systems

Latest tool to help in location analysis

Enables combination of manyparameters

ONE OF THE


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ONE OF THE

POSSIBILITIES?

The ideal location for manycompanies in the future will

be perhaps a floatingfactory ship that will gofrom port to port, fromcountry to

country wherever the

cost per unit is

the lowest.

1995 Corel Corp.

Mgmt n Location Analysis

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