DO NOT COPY Chapter 6

 

SERVICES LOCATION AND DISTRIBUTION

DO NOT COPY Chapter 6

 

SERVICES LOCATION AND DISTRIBUTION

DO NOT COPY

Learning Objective

•Define the objective of locations of services unit.•Identify the factors important for services business•Use models for identifying a service location•Appreciate importance of the location of a service facility.

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Introduction

Location is as important in service business as in manufacturing.There are many reasons why organizations open up new facilities .There are many factors while deciding the location of a service unit based on the type of services organization wish to deliver to its customer.

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Factors that originate Location decision

An expanding marketIntroduction of new products or servicesThe exhaustion of raw materials in a certain area:The pressure of the competenceMergers and acquisitions

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Location AlternativeExpansion of an existent facility.Only possible if enough space exists.Attractive alternative when the current facility location is good enough for the company.Lower costs than other optionsStart a new facility in a new area.Sometimes is a more advantageous option than the previous one (if there are problems related to lose of focus on the company’s objectives).Shut down of a facility and (or not) starting of a new one somewhere else.Moving production from one plant to other.

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Some of the important issue with regards to the service Location:

Proximity to CustomersBusiness ClimateTotal CostsInfrastructure Quality of Labour SuppliersOther FacilitiesPolitical RisksGovernment BarriersTrading BlocksEnvironmental RegulationHost CommunityCompetitive Advantage

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Location Selection Factors

FlexibilityCompetitive positioningDemand managementFocus

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Errors in Location Selection

Can be divided into two broad category:1. Behavioral2. Non behavioral

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Location Planning Analysis

It includes Proximity to raw materialProximity to marketClimateCultureInfra

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Step by step process to reach an alternative

Identifying a countryIdentifying a regionLocation to raw materialLocation to marketsLabor factorsLabors factorsOtherIdentifying a communityIdentifying a site

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Analytical Model for identifying location

Location cost Volume profit analysisFactor Rating modelCenter of gravity model

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Factors Influencing service Facility LocationCustomer ProximityServices business areaAvailability of skilled laborFree Trade Zone/AgreementSuppliersEnvironment policy

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Choosing a good location for service businessIs location important for the success of your service business?What type of location is best for your service business?How much rent can you afford?Is your proposed location appropriate for what you plan to do there?

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Is location important for the success of service business?

•Location is important but may not be that important for some of the services business•Services which do all their business at customers locations and business which have little contact with customers may not opt for a great location. Example : Plumber, internet based business.

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What type of location is best for service business?Will customers come on foot?Will customers drive and, if so, where will they park?Will more customers come if you locate near other similar businesses?Will the reputation of the neighborhood or even of a particular building help draw customers?

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How Much Rent Can You Afford?

One has to see in a business rent cost which is a fixed cost in a business.A lot of research should be done while taking premises on rent.Need to check appropriateness of the location under consideration.

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Location Strategy

Formulating a strategy will involve following factors:FacilitiesFeasibilityLogisticsLaborCommunity and siteTrade zonesPolitical riskGovernmental regulationEnvironment regulationsIncentives

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Organizations Requirement

SizeTrafficPopulationTotal costInfrastructureLaborSuppliers

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Multiple plant manufacturing strategies

Product Plant strategyMarket area plant strategyProcess plant strategyGeneral purpose plant strategyServices business strategy

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Trends and Future strategies

International level competitionChanges in economic environmentIndustry processes automationTransportation and IT developmentJIT systems