1. Page 1
FACILITYLOCATION
BY:
Neha Sharma

2. Page 2
What is facility location?
Facility location is the process of identifying
the best geographic location for a service or
production facility.
Facility location is actually a term used in
operation management, facility location or
location analysis is done so that the better
uses of the location can be understood.
Any investor who wants to invest in any
business he must first of all select the
location (country, region and then sites)

3. Page 3
Factors affecting location analysis
• Location of market.
• Location of raw material sources.
• Infrastructure .
• Transportation cost.
• Availabilities of labour.
• Government policies.
• Climate factors.
• Community attitude.
• Safety measures.

4. Page 4
Things to remember
When selecting a site for a business it is important to-
a. Purchase the property when possible.
b. Lease the property to avoid the problem of mortgage
payments.
c. Rent or buy the property, whichever must be done in
order to obtain the specific site.
d. Make comparisons between the rentals of
neighbouring stores and property for sale.

5. Page 5
Location Method
• Factor rating method.
• Break even analysis.
• Transportation method.

6. Page 6
Steps in factor rating method
• Develop a list of relevant factors.
• Assign a weight to each factor reflecting its relative
importance to the firm. And total weighted score should
be equal to 1.
• Develop a rating scale for the factors.
• Multiply the scores by the weights for each factors and
total the weighted score for each location.
• Make a recommendation based on the maximum point
score considering other quantitative factors.

7. Page 7
Break even analysis
 Break –even analysis is use of cost volume
analysis to make and economic comparison of
location alternative. By identifying fixed and
variable cost and graphing them for each
location. We can determine which one
provides the lowest cost. Break-even analysis
can be done mathematically and graphically.

8. Page 8
Steps of break-even analysis
 Determine all relevant for each location.
 Classify the cost for each location into a annual fixed cost and
variable per unit cost.
 Allot the total cost associated with each location on a single
point.
 Identify ranges of output for which each location has the lowest
cost.
 Solve algebraically for break-even point over the identify
ranges.
 Select the location with lowest total cost at the expected
production volume.

9. Page 9
Transportation model
 There are many factor which help of the
Project Manger to chose a best location.
Some factor are most important and some are
less important. These factors which are more
important the operation manger assign max.
weight while the less important give min.
weight.

10. Page 10
Steps of Transportation Model
1. Origin Point ( supply, Production )
2. The destination point & the demand per
period at each destination.
3. The cost of shipping per unit from each
source to each destination.

11. Page 11
Benefits of location analysis
• You get a thorough knowledge of all the factors
involved in the production, and ways through which
the materials that are needed in the production can
easily be accessed.
• You can save a lot on transportation cost for
materials, labour, import and export.
• The materials will be available at a comparatively
low cost.
• Helps in a smooth running of an organization, by
seeing to that all that is possibly needed is readily
and easily available.
• Allows you to outperform your competitor’s
facilities.

12. Page 12