Importance of Facility Location in Meeting Strategic Goals at the Lowest Possible Costs

In today’s competitive environment, organizations are directing their focus to the importance and impact a facility location can have on meeting strategic goals, at the lowest possible cost. A facility location decision is a complex task that involves both qualitative and qualitative factors to achieve and sustain an efficient supply chain. Facility location decisions closely involve other supply chain management decisions such as transportation and inventory management; however these factors can be adjusted with relative ease in order to respond to changes in demand and throughout the supply chain. Conversely, decisions regarding facility locations are “often strategic in nature and entail long term decisions, exposing firms to many uncertainties during the lifetime of a facility” (Baron, Milner, & Naseraldin, 2011, p. 774).

The facility location decision involves several fundamental questions such as “where to locate the organization's production facilities, how large each should be, what goods or services should be produced at each location, and what markets each facility should serve” (Soltani, 2009, p. 657). In addition to these questions, management is tasked with identifying future uncertainties such as work force, social and cultural factors, tariffs and tax incentives, geographic proximity to customers and suppliers, local economies, as well as weather. An important aspect for an organization to understand is the impact that future growth may have on their business model and long term goals. Once a facility location decision is implemented, the decision is hard to reverse. However, the successful implementation of a facility location enables the organization to gain a competitive advantage while providing high le...

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...portant factor, companies are shying away from countries with historically lower labor costs and are focusing on labor qualification, flexibility and mobility. This focus contributes to the overall success of a facility location by being able to retain a skilled workforce and quality of life.

The complex task of evaluating a facility location is one that will have a long term affect on a company’s success in the industry and long term goals. The evaluation process is a long a tedious task that involves all members of the supply chain, where each of these factors play an important role in the facility location decision. In order for a successful relocation or expansion decision to be made, these factors should be ranked and weighted in accordance to the companies long term goal in order to gain a competitive advantage and maintain high customer service levels.