Evaluating the importance of business location factors the influence of facility type

Despite the increasing pace of technology and digital enterprise, there will almost always be a requirement for a bricks and mortar presence, whether that’s to house your staff, store stock in a secure warehouse, or provide a physical brand presence for your customers.

There are many things for business owners to consider when choosing a business location, whether setting up an office or a shop for the first time, or looking to expand into new areas. Entrepreneur Jake Fox reveals the key factors a business needs to consider when selecting a new location.

Does your business rely on frequent deliveries? If so, it’s important to consider local transport links, particularly main roads and motorways. Property rental and purchase prices are often steeper in higher density, more commercialised areas, so there are certainly cost benefits to seeking a more out of town location, providing your daily business operations won’t be hampered by poor transport links. Equally, if you rely on high customer footfall, then ensuring your location is accessible by car, bus and even train will all be important considerations. Don’t forget your employees too, as a good location is often a critical factor in recruiting the right people into your business, particularly if they have been offered several jobs and need to evaluate the pros and cons of each.

Believe it or not, your location can increase your odds of being affected by crime, which in turn can influence your insurance premiums, as well as the additional security measures you made need to take to keep your premises safe. It’s fair to say that in business, we all make decisions based on information, intuition and probability mixed in with a little luck. But knowing the chances of crime in the areas you are considering is an important part of the decision making process. Looking at UK government crime statistics can help businesses make an informed decision about where to set up a new shop, office or warehouse. Knowing the risks of potential criminal activity can help you better prepare and take adequate precautions.

Your proximity to other competing businesses could be crucial to your success. Could they provide a benefit to your business or cause a hindrance? Establishing which competitors are in your area and their offering could help guarantee you choose the right location for your business. If there is too much competition then it may be a warning sign to expand your horizons to a new location. There are exceptions to this such as car dealerships who want to be near each other as customers compare and choose the best car deal, hence their close proximity. Likewise, if you have an element of your offering that is unique or offers some kind of new innovation, then choosing an area that already has a ripe market could be the ideal way to pick up customers very quickly and establish a presence in a new area in a relatively short time frame.

Cash is king! Cash flow is critical as it determines the viable ability for a business to survive and pay its bills. Therefore, it is important to research the average business rates including rent, utility bills and taxes in the area to ensure you can afford the premises. Simple hidden costs such as deposits and whether you need to pay to park need to be snuffed out before committing to a location. Estimating the living cost of the location will prevent a commitment outside your means.

Find out the skill base in the area – can it fulfil your needs? Take into account employment rates as well. If you rely on skilled workers it is best to go to where there is a healthy bank of talent. Employees are often a business’s biggest asset thus choosing a location that’s lacking in required talent may be the start of your business’s downfall. Some recruitment agencies will happily send you CVs on spec to gauge the market, only charging if you subsequently decide to interview and hire someone. Alternatively, posting a free job via an online job site will quickly show you the calibre of employees in a particular area.

Will the premises be able to accommodate business growth or a spike in demand? Moving premises is a big upheaval and can be time consuming and costly. A decision needs to be made as to whether the premise you are choosing is a short-term location or if you would like to stay there for the long haul. Consequently, a location’s flexibility could be a very important factor regarding the premises’ suitability for your business needs.

Whilst a perfect business location is different for every business, covering these crucial areas will certainly give you the best chance of beating the odds and keeping your business on track for future success.

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Facility Location is the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors:

Overall objective of an organization is to satisfy and delight customers with its product and services. Therefore, for an organization it becomes important to have strategy formulated around its manufacturing unit. A manufacturing unit is the place where all inputs such as raw material, equipment, skilled labors, etc. come together and manufacture products for customers. One of the most critical factors determining the success of the manufacturing unit is the location.

Facility location determination is a business critical strategic decision. There are several factors, which determine the location of facility among them competition, cost and corresponding associated effects. Facility location is a scientific process utilizing various techniques.

Location Selection Factors

For a company which operates in a global environment; cost, available infrastructure, labor skill, government policies and environment are very important factors.

A right location provides adequate access to customers, skilled labors, transportation, etc. A right location ensures success of the organization in current global competitive environment.

Industrialization

A geographic area becomes a focal point for various facility locations based on many factors, parameters and issues. These factors are can be divided into primary factors and secondary factors.

A primary factor which leads to industrialization of a particular area for particular manufacturing of products is material, labor and presence of similar manufacturing facilities. Secondary factors are available of credit finance, communication infrastructure and insurance.

Errors in Location Selection

Facility location is critical for business continuity and success of the organization. So it is important to avoid mistakes while making selection for a location. Errors in selection can be divided into two broad categories behavioral and non-behavioral.

1. Behavioral errors are decision made by executives of the company where personal factors are considered before success of location, for example, movement of personal establishment from hometown to new location facility.
2. Non-behavioral errors include lack of proper investigative practice and analysis, ignoring critical factors and characteristics of the industry.

Location Strategy

The goal of an organization is customer delight for that it needs access to the customers at minimum possible cost. This is achieved by developing location strategy. Location strategy helps the company in determining product offering, market, demand forecast in different markets, best location to access customers and best manufacturing and service location.

Factors Influencing Facility Location

If the organization can configure the right location for the manufacturing facility, it will have sufficient access to the customers, workers, transportation, etc. For commercial success, and competitive advantage following are the critical factors:

Customer Proximity: Facility locations are selected closer to the customer as to reduce transportation cost and decrease time in reaching the customer.

Business Area: Presence of other similar manufacturing units around makes business area conducive for facility establishment.

Availability of Skill Labor: Education, experience and skill of available labor are another important, which determines facility location.

Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing facility by providing incentives in custom duties and levies. On another hand free trade agreement is among countries providing an incentive to establish business, in particular, country.

Suppliers: Continuous and quality supply of the raw materials is another critical factor in determining the location of manufacturing facility.

Environmental Policy: In current globalized world pollution, control is very important, therefore understanding of environmental policy for the facility location is another critical factor.

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