Question

How do facility location decisions differ for service facilities and manufacturing plants?

Short answer

Facility location refers to identifying an area or a geographical region for the smooth operation of a firm. The managers of both the firms, i.e., service facilities and manufacturing plants, need to look over different factors before deciding on any location. Those factors could be the presence of customers, availability of suppliers and raw materials, etc.

Step-by-step solution

Requirement of service firm and manufacturing firm

Because of the variety of the service firms, it requires low cost compared to that of themanufacturing plants as the manufacturing firms require warehousing, supply chain, etc.

Labor requirements of service and manufacturing firms

Service firmsinvolve more human power as the person is the one who delivers the service, and the quality of the service is decided by the delivery person. Hence, the service firms need to decide the locality where literate labors are easily available, whereas, in the case ofmanufacturing firms, it requires machinery more than human power. It may also involve less literate laborers or workers.

Main difference in the facility located between the service and manufacturing firm

The main difference between the facility location decision between the service facilities and manufacturing plants is the involvement of logistics. Service facilities do not involve logistics or supply chain as the service is perishable. The manufacturing plants involve logistics because it is not necessary to use the inventory at the same moment when it is produced, so it needs to store for further use.