Analysis Of Facility Relocation Strategies

ANALYSIS OF FACILITY RELOCATION STRATEGIES

THE CRITERIA FOR ANALYSING RELOCATION STRATEGIES IN THE NEW ECONOMY

Author: Tafadzwa Magejo, MSc MSOM (UZ), BTech (Hons) Prod Eng, GradZweIE

Softex Tissue Products 202 Seke rd graniteside Harare

Mobile: +263 11 455 916 Tel: +263 4 770097 ext Email: tmagejo@artcorp.co.zw, tmagejo@yahoo.co.uk

Abstract

This paper presents an analysis of facility relocation strategies. The stimulants of facility relocation (what gives birth to facility relocation strategies) are presented. The various considerations that Production or operations managers (P/OMs) should make when taking a strategy to relocate their facilities. The various tools used by the P/OMs are stated but not discussed. This is a foundational guide to analyzing relocation strategies. Facility relocation strategies are considered as those decisions made by P/OM to move an existing facility to a new area due to the various reasons that may stimulate that movement. The conclusion of this paper is that the analysis of facility relocation strategies is important for business success and as such P/OMs must take time to analyze these strategies.

1.0 Introduction

Fixed capacity planning (FCP) is the first long term question with which production management is faced . This planning needs to be done thoroughly from the start. Fixed capacity planning involves the following issues:

Identifying a suitable location

Determining the size of the productive facility

Layout of the productive unit

Occupational safety etc

The issue of location strategies becomes a continuous problem to be addressed at every strategy session, even after setting up the facility. This is because the stimulants or the basis for facility location analysis are dynamic and business perspective changes along the way as well. As shall be seen later business strategy and facility location are heavily intertwined that is a change in strategy may mean a change in location. [Radical strategy formulations and radical innovations are examples of such strategies]. This continual evaluation of facility location strategies gives birth to facility relocation strategies. As indicated by Botes . It is of cardinal importance for any business that its production units or productive units be correctly located.

A wrong location can result in the business suffering for the rest of its existence or until a strategy to relocate is made. In the past many businesses have failed because a wrong location was chosen. As such a question of whether a productive unit is functioning in the correct location or not should be given constant attention. If it is not correctly located, new locations must be considered.

The biggest myth of the new economy is that location no longer matters. Most believe that as our business world becomes smaller due to technological innovation, boarders of regional and international industry will continue to disappear, business cycles will continue to speed up and the world will become a huge homogenous market place market place .

Economic changes in various regions and countries have been forcing many firms to reconsider their locations. Companies have shifted their headquarters from Zimbabwe to other regional countries some of these moves have been successful whilst others have been major flops. The P/OM in Zimbabwe or anywhere else is faced by the challenge of analyzing and coming up with a successful relocation strategy.

The investigation of new locations is the formulation of relocation strategies and measures to be taken during relocation. The subject of facility relocation should not be taken for granted in business. Thorough analysis criteria for facility relocation should be developed. These are some of the issues that have been drivers to the compilation of this research paper.

Key Words

Fixed Capacity Planning (FCP), Facility Re/location Planning (FRP), Re/Location analysis, New Economy

Research objectives

1. Present criteria for evaluating facility relocation strategies in the new economy.

2. Analyze the new thinking in relocation strategies.

Research Methodology

A wide range of published works reflecting on the latest thinking in facility relocation strategies are analyzed and critiqued.

2.0 Fixed Capacity Planning (FCP)

FCP is concerned with the premises. One of the issues covered in FCP is the location of the productive unit(s) . The process of continually evaluating facility location requirements gives rise to facility relocation strategies. The issue of facility relocation is of primal importance to FCP.

As such FCP, FRP and strategy formulation are the first steps to business process reengineering (BPR) and Business Process Planning (BPP). The subject of BPR in essence involves a lot of FCP in general and FRP in particular .

Facility location has a long term impact on the supply chain and must be a part of a firm's strategy . Facility location decisions are a critical element in strategic planning for a wide range of private and public firms. The ramifications of siting facilities are broadly based and long lasting, impacting numerous operational and logistical decisions. High costs associated with property acquisition and facility construction make facility location or relocation projects long-term investments .

FCP must then include the planning by firms for the new facilities to remain in place and in operation for an extended time period. Thus P/OMs must select sites that will not simply perform well according to the current system state, but that will continue to be profitable for the facility's lifetime, even as environmental factors change, populations shift and market trends evolve. Finding robust facility locations is thus a difficult task, demanding that decision makers account for uncertain future events. The complexity of this problem has limited much of the facility location literature to simplified static and deterministic models . This implies that the issue analyzing facility relocation studies must be approached in a qualitative way as well to address pertinent issues in