Page 533 - Business Principles and Management

Unit 6
facts & cost, and convenience. Very bulky, fragile, or perishable products need special
figures
E-commerce is creating new
pressures on manufacturers
for quicker response and
shorter cycle times. “Lean
manufacturing” is aimed at
the elimination of waste in
customer relations, product
design, supplier networks,
and factory management.
Its goal is to reduce human
effort, inventory, and time
to develop products—while
producing top-quality prod-
ucts in the most efficient and types of businesses can and cannot locate. A company must be sure to locate
economical manner possible.
520
air, rail, truck, water, and pipeline. Each has specific advantages based on time,
transportation. Companies may decide to locate close to a railroad, an interstate
highway system, or a major airport to be able to conveniently access the type of
transportation needed. If the company is involved in international business, it
may need to locate near a variety of transportation sources.
SUPPLY AND COST OF ENERGY AND WATER
The costs and supply of energy that manufacturers use is an important consider-
ation in production planning. The company must have an uninterrupted supply
of energy (such as electricity, gasoline, or coal) at a reasonable cost. There have
been times in recent years when several types of energy, including electricity and
gasoline, have been in short supply. Energy prices can change dramatically in a
short time, making it difficult to control costs. As a result, companies had to
switch to other forms of energy or reduce operations.
Water supplies are limited in many parts of the United States as well as in other
countries. Governments tightly control access to water as well as the requirements
for treatment and discharge of wastewater. Cities and states have passed environ-
mental laws that regulate access to water and energy resources and where specific
where it will have enough energy and water to be able to operate for many years.
LAND AND BUILDING COSTS
Some companies can operate in small buildings, but others may need several
hundred acres of land. Companies can purchase or lease land and buildings.
Constructing a large manufacturing building costs many millions of dollars. A
company will need a source of financing for the construction and will normally
pay the cost of the building over many years.
As a business grows, it must plan for possible future expansion. Many com-
panies have had to expand several times since they started business. Expansion
is easier if enough land is available close to the existing buildings and buildings
are designed to be flexible and allow for expansion.
Companies must carefully consider how the manufacturing process will affect
other people and organizations in the same area. Businesses with production
processes that create odors or high noise levels may be severely restricted in
where they can locate or may face lawsuits from adjoining neighborhoods.
LABOR SUPPLY
Well-trained employees are an important part of most manufacturing operations.
Few businesses can operate effectively today without well-educated employees. In
selecting a location, a company should look at the available supply of workers, the
training they might need, and the cost of the labor. The choice of location depends
on whether the company needs highly skilled employees or unskilled labor. The
days of easily available and inexpensive labor providing the skills a company
needs are over. Businesses are working with government agencies, colleges, and
universities to design training programs to ensure a competitive workforce.
LOCATION OF CUSTOMERS
Just as some companies need to locate near the source of raw materials, others
may consider the location of their customers. This is an important factor when