Criteria for placement of production facilities

General issues of placing production

Criteria for placement of production facilities

Methods of placement of industrial enterprises

General issues of placing production

Where should be placed production facilities or company that provides services? This issue has become central to the strategy of manufacturing and service firms, especially in this age of global markets and global production. The drastic changes in trade agreements have transformed the world in this global village and given companies greater flexibility in choosing their location.

However, in practice the question of placing the company is closely connected to two competing demands.

1. The necessity of placing production close to consumer that is stipulated by time-based competition = конкуренцией за выигрыш времени, trade agreements and transportation costs.

2. The necessity of placing production close to cheap and skilled labor force.

Criteria for placement of production facilities

Location of production facilities is a common problem for both new and existing industries, and in the success decisive role is played by planning. Company Toys "R" Us opened an office in Japan, as part of its global strategy. Disney Company has selected for his "European Disneyland French capital Paris.

When placing production facilities and service companies are guided by different criteria, determined by the requirements of competition. These criteria influencing the choice of the location of manufacturing plants and warehouses, are discussed below.

Proximity to consumers.Proximity to market is of particular importance because of the increased liability to the consumer. It is this closeness to deliver goods quickly. In addition, the proximity of production and consumption ensures that the interests of consumers will be taken into account when creating new products. The basis for making decisions on this criterion is data about the nature of population.

Business climate.Favorable business climate may include a comparable scale of entrepreneurial activity, the presence of companies operating in the same industry, and in the case of a foreign placing - the presence of other foreign companies. In addition, success is measured by the presence of appropriate legislation in the sphere of business, support of entrepreneurial activity by local government grants, tax incentives, etc.

Company Archer Daniels Midland (AMD) – is the major producer of agricultural products. Company AMD Eurooport in Rotterdam, the Netherlands, is the world's largest grain elevator (process, storage and shipment of grain), where grain can be transported by road, rail, river and sea transport.

Total costs.The purpose of placement is to choose places with the lowest overall cost. They include regional costs and internal and external costs of distribution. Regional costs consist o f cost of land, buildings, payment of labor, taxes and energy costs. Besides, there are hidden costs are difficult to calculate. These include:

• Excessive movement of material resources between the various intermediaries to the final consumer and

• Weakening consumer response due to the remote location of the consumption market.

Infrastructure. It is vital to the existence of forked transport system (road, rail, sea and air transport), as well as providing electricity and telecommunications. The willingness of local authority to invest in modern infrastructure can also stimulate the choice of the location of production.

The quality of training of the workforce. Educational and professional level of local workers must meet the requirements of companies, and even more importantly the willingness and ability to learn.

Suppliers. The presence of a highly professional and competitive supply chain -is one of the conditions of placing. The proximity of the main suppliers of the enterprises also can lead to usage of methods of production organizing with partial capacity utilization = загрузка производственных мощностей.

Location of other objects of the company. Location of other companies or distribution centers of the same company may influence the choice of the location of the new office of the company. In this context the range and volume of products are closely associated with the decision of placing.

Free Trade Zone. Foreign Trade Zones within the country, called free trade zones - are usually closed regions (under the supervision of the customs service), in which foreign-made goods are sold without the usual customs formalities. Currently in the U.S. there are about 170 free trade zones. Such special zones exist in other countries. In the free trade zones entrepreneurs can use imported components into finished products and receive a deferral of payment of customs duties until the delivery of manufactured products in the consumer country.

Political risk.The rapidly changing geopolitical circumstances in many countries provide new opportunities. But the protracted=затянувшийся reforms taking place in many countries, is extremely difficult decision in favor of accommodation in these regions.

Public barriers.Currently, many countries have legally removed barriers to entry into the industry and placing of production. But at the same time, planning should take into account many non-legal and cultural barriers (Toys "R" Us in Japan ").

Environmental requirements. When deciding on placement the impact of some industries on the environment should take into account. In addition to tangible financial implications, it affects the relationship with the local population.

Country-consumer. The interest of the consumer countries in placing of foreign enterprises in its territory is an integral part of the process. This is essential as the educational level of the local population and the quality of life.