Plant Location Methods, Factor Rating Method

Techniques used for Selecting Best Location:

Following are the few important techniques used to decide best location from the available alternative locations:

1. Subjective Techniques:

(a) Industry precedence,

(b) Preferential factor and

(c) Dominant factor.

2. Qualitative Techniques (Factor ranking system)
3. Semi-quantitative Techniques (Factor weight-rating system)
4. Quantitative Techniques (Operation Research Models):

(a) Break-even analysis.

(b) Economic/cost analysis, and

(c) Transportation model.

Procedure for Selecting a Site:

For selecting a site following procedure should be followed:

1. Constitution of a site selection committee.
2. Determining the company needs.
3. Deciding criteria for selection.
4. Accumulate the data.
5. Analyse the data.
6. Evaluate the alternatives.
7. Reduce number of alternatives.
8. Investigation in detail.
9. Collect and analyze further data.

Factor Rating Method for Location Planning

The process of selecting a new facility location involves a series of following steps:

1. Identify the important location factors.
2. Rate each factor according to its relative importance, e., higher the ratings is indicative of prominent factor.
3. Assign each location according to the merits of the location for each factor.
4. Calculate the rating for each location by multiplying factor assigned to each location with basic factors considered.
5. Find the sum of product calculated for each factor and select best location having highest total score.

ILLUSTRATION:

Let us assume that a new medical facility, Health-care, is to be located in Delhi. The location factors, factor rating and scores for two potential sites are shown in the following table. Which is the best location based on factor rating method?

Solution:

The total score for location 2 is higher than that of location 1. Hence location 2, is the best choice.