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Location Planning and Analysis

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Mohammed Raihan

on 23 July 2016

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Transcript of Location Planning and Analysis

Location Planning and Analysis
design by Dóri Sirály for Prezi
Need For Location Decision
Marketing strategy
THANK YOU!
Nature of Location Decisions
Strategic Importance of location decisions
Long term commitment/costs
Impact on investments, revenues, and operations
Supply chains
Objectives of location decisions
Profit potential
No single location may be better than others
Identify several locations from which to choose
Location Options
Expand existing facilities
Add new facilities
Do nothing
Move

Making Location Decisions
Decide on the criteria
Identify the important factors
Develop location alternatives
Evaluate the alternatives
Identify general region
Identify a small number of community alternatives
Identify site alternatives
Evaluate and make selection

Factors that Effect Location Decision
Overview of Bashundhara Group
Started business in the year 1987 as a real estate company
Location Planning for Bashundhara Group
Meghna Cement Mills Limited
First manufacturing venture of the group, set up in 1992
Bashundhara Steel Complex Limited
Bashundhara Food and Beverage Industries Limited

Bashundhara Paper Mills Limited
Bashundhara LP Gas Limited
Some organizations take decision to set up storage, production and sales facilities based on location of main markets for their product or service.
Helps cut costs
Lead time
ensure better support & service
Various costs are involved in running a business which are mainly production, transportation, distribution and marketing costs.
Location may help lower the cost of business
The challenge for an organization is to choose a location which provides a perfect balance in terms of the costs for running the business like labor cost, raw materials, transport, etc.
When choosing a location, the organization must keep in mind the suitability of the location to support their planned future growth
Organizations should choose a location close to the abundant of raw materials needed for its production
Went for expansion setting up manufacturing plants for cement, paper and pulp, tissue paper, steel and LP gas In the 1990's
The Group now has 20 different businesses set up in different areas of Bangladesh.
Some of the Major Areas of Business of Bashundhara Group
Real Estate
East West Property Development Limited
Media and Entertainment
Daily KalerKontho
Bangladesh Protidin
BanglaNews24.com
Daily Sun
News24 (TV)

Steel
Bashundhara Steel Complex Limited

Food and Beverage
Bashundhara Food and Beverage Industries Limited

Cement
Meghna Cement Mills
Bashundhara Cement

Paper
Bashundhara Paper Mills
Bashundhara Multi Paper Mills
EWMGL Printing and Packaging

We will show practical reasons for location decisions for some of the manufacturing businesses of Bashundhara Group
Now one of the largest cement manufacturing factories in Bangladesh, started commercial operations in 1996
Listed both in DSE and CSE
Annual production capacity of 0.79 million MT/annum.
Location
9.83 acres land in Mongla Port Industrial Zone, on the bank of Pashur River
Needs for location planning
Marketing Strategy
Cost of doing business
Growth
Depletion of resources
Objectives of location decisions
The main objective of any organization is to maximize profits. There are various ways to do so. By choosing Mongla as location for its factory, MCML has effectively been able to
minimize transport
,
labor
and
land costs
and been able to achieve its objectives
Steps involved in location decision
Criteria selection
lower cost, higher profit
Important factors identification
operating costs
Location alternatives
Narayanganj, Sylhet, Jessore

Alternatives evaluation
good road and river transport connectivity at Mongla area

Decision
good road and river transport connectivity at Mongla area

Factors Leading to Location Decision of MCML
Regional factors
As Mongla is a sea port, MCML easily import raw materials using the port. Additionally labor cost is less expensive in the region compared to other parts of the country
Community considerations
By setting up in an established government developed industrial area, MCML is basically assuring itself of achieving some basic facilities such roads and utilities connections.

By setting up at the particular site, MCML is taking advantage of river transport connectivity which it utilizes to reduce transportation and thus operating costs.

Site related considerations
Businesses want to stay close to their customers to provide them better service and support.

MCML has set up plant on the banks of Pashur River which it uses for both receiving raw materials and dispatching finished goods.
It is set up in a well-established industrial area with good road connectivity.
MCML can easily dispatch finished goods to its many dealers and agents using advantage of both river and road transportation

Cost of labor is relatively cheaper in Khulna division area than in Dhaka, Chittagong or Sylhet Divisions.
For Bangladesh, the cheapest mode of transportation is through waterways. By setting up on the bank of PashurRiver, it can use cheap river transportation both to bring raw materials into the factory and to dispatch finished goods.
When doing business with areas without river connectivity, it can also use the alternative of road transportation.

The industrial complex for MCML is a very large one at 9.83 acres thus allowing space for further growth or expansion.
Price of land is relatively less costly in Mongla area and also infrastructure is well developed. Therefore MCML has a good option of easily purchasing more land to support expansion of existing facilities in the area.
As major portion of raw materials for cement production is imported, MCML did not consider this need as important for location selection.

Set up in 1999
The company has achieved great success and has been able to create its own niche in the relatively highly competitive steel market
Its three main products are a) MS deformed bars, angles and channels, b) MS and GI pipes and c) LPG cylinders
Location
Golora, Jagir, Manikganj on Dhaka-Aricha Highway and near Aricha river port
Needs for location planning
Marketing Strategy
Cost of doing business
Growth
Depletion of resources
Objectives of location decisions
The main objective of any organization is to maximize profits. There are various ways to do so. By choosing Manikganj as location for its factory, MCML has effectively been able to
minimize transport
,
labor
and
land costs
and been able to achieve its objectives
Steps involved in location decision
Criteria selection
lower cost, higher profit, Dhaka market share
Important factors identification
operating costs, proximity to target market
Location alternatives
Narayanganj, Gazipur, Savar, Manikganj

Alternatives evaluation
cheap land and labor cost, proximity to Dhaka

Decision
choose Manikganj to set up factory

Factors Leading to Location Decision of BSCL
Regional factors
As Manikganj is very much part of Dhaka division and close to Dhaka city, and Dhaka region is biggest market for construction materials, BSCL has managed to set up factory near its main customers.

Community considerations
By setting up in Manikganj, BSCL can make utilization of hard-working labor force at cheaper salaries and without threat of collective bargaining as evident in more developed industrial areas like Gazipur, Savar and Narayanganj.


By setting up at the particular site, BSCL is taking advantage of river transport connectivity which it utilizes to reduce transportation and thus operating costs.


Site related considerations
Business organizations want to
set up near their potential customers
, which allow them to carry out distribution and promotional activities more efficiently.
Dhaka is by far the fastest growing city in the country, and demand for construction materials is ever increasing.
Most of the real estate developers, who are wholesale buyers of construction materials such as steel, are based in Dhaka.
By choosing to set up in Manikganj, which is neighboring district from Dhaka, BSCL is enjoying proximity to key market of Dhaka metropolis, and is thus being able to provide better support to main customers

By setting up in Manikganj, BSCL is greatly reducing its transport cost.
It is near Dhaka, it can easily transport goods to its main market.
It is very close to Aricha, it can use river based transportation to send the goods to its many customers throughout the country in the most cost-saving manner.
Land in Manikganj is relatively much cheaper than other neighboring districts of Dhaka such as Narayanganj, Munshiganj and Gazipur. Therefore BSCL has managed to save investment cost.
Labor cost is relatively much cheaper in Manikganj than in other neighboring districts of Dhaka such as Narayanganj, Munshiganj and Gazipur.


Organization strives to grow larger by reducing overhead costs/unit and thus maximize profit making ability. Choice of location plays a key role in determining whether a company can achieve required growth as and when required by it.
As land cost is relatively cheap in Manikganj despite having good road and river transport connectivity and proximity to Dhaka, BSCL can easily buy more land to support its expansion plans.
This is not a need considered by BSCL in location planning

One of the newest ventures of Bashundhara Group
Currently it is manufacturing products such as wheat, flour, course flower and semolina
Distinction of being South Asia’s largest modern mill of this type having production capacity of 1,000 tons per day
Following Total Quality Management (TQM) method with state of the art laboratory for product quality testing and quality management.

Uses high quality raw materials sourced internationally from Canada, Australia, Asian and European countries to maintain high product quality standard
Location
BFBIL is situated in its own large industrial complex situated at Pangaon
Needs for location planning
Marketing Strategy
Cost of Production
Growth
Depletion of resources
Objectives of location decisions
In this age of high competition, the only way to maximize profits is by minimizing costs. By choosing strategic location on the banks of River Buriganga, BFBIL can enjoy long term savings in transportation cost. Also it is also enabled to go for future expansion easily due to the presence of Bashundhara’s own industrial village in the area.

Steps involved in location decision
Criteria selection
lower cost, higher profit, Dhaka market share, country wide marketing
Important factors identification
operating costs, proximity to target market, transport mode
Location alternatives
Savar, Gazipur, Keraniganj

Alternatives evaluation
river transportation, proximity to Dhaka, existing industrial village


Decision
chose Pangaon, Keraniganj to set up factory

Factors Leading to Location Decision of BSCL
Regional factors
As Pangaon, Keraniganj is just adjacent to Dhaka; this provides BFBIL close proximity to its key market. Additionally it can easily and cost-effectively transport goods to different parts of the country due to good access to river connectivity.


Community considerations
Quality of life and service availability status is good in Keraniganj as it is just adjacent to Dhaka city.
Skilled professionals and technicians can easily stay in Dhaka city and still work at the factory on daily basis
. Additionally amenities and facilities at Keraniganjis also quite good. Furthermore as the area is not yet heavily industrialized,
viewpoint of local community towards the factory is be rather positive
. Utility availability is also good, as the factory is situated inside Bashundhara’s own industrial complex.



By setting up at the particular site, BFBIL is taking advantage of river transport connectivity which it utilizes to reduce transportation and thus operating costs. Also road transportation to and from Dhaka should also be cheaper.

Site related considerations
To support marketing and promotions of products, companies look to set up their manufacturing facilities near their target markets to cut down on supply lead time and to provide best possible support to targeted customers.
The biggest premium market for these products exists in the capital city, Dhaka
BFBIL has set up its plant in Pangaon, Keraniganj which is just adjacent to Old Dhaka. Therefore BFBIL is able to provide supplies to these distributors within shortest possible time and in a smooth manner.
The factory is situated on the banks of River Buriganga, BFBIL can easily make supplies of the food products to different parts of the country using cost-effective water transportation or quicker road transportation as and when required.

BFBIL is set up inside Bashundhara’s own industrial village. Thus it can centralize utility services such as electricity, gas and water supply. Therefore BFBIL can make large savings in terms of uninterrupted production and utilities costing.
Being situated very near to its most high priority customers allows it to save large amount of money from transportation cost.
Being situated next to a major river, allows BFBIL flexibility of using much cheaper water transportation as and when possible to further reduce the transportation costing.



Bashundhara already owns large of amount of land in the Keraniganj area. Therefore the location of the factory will allow BFBIL to go for future expansion of the project very smoothly and easily.
As it has its own industrial village in the area, BFBIL can enjoy cost savings in terms of shared costing of utilities and infrastructure once the planned expansion does take place
As the raw materials are imported, BFBIL did not consider depletion of resources when choosing the location.


Location
Units 1 and 2 are situated on the banks of river Meghna, in Meghnaghat, Naranganj, around 30 km from Dhaka city centre, with easy access to Dhaka-Chittagong Highway. Units 1 and 3 are situated in Gazaria, Munshiganj, 35 km from Dhaka city, and also having easy access to Dhaka-Chittagong Highway and River Meghna.
Needs for location planning
Marketing Strategy
Cost of doing business
Growth
Depletion of resources
Objectives of location decisions
BPML can easily take advantage of cheap river transportation and highly skilled labor available in the Narayanganj belt to sustain its competitive advantage over rivals.

Steps involved in location decision
Criteria selection
lower cost, higher profit, better transportation
Important factors identification
needs location to serve country wide mass market

Location alternatives
Narayanganj, Gazipur, Savar

Alternatives evaluation
river transportation, near major highway

Decision
choose Narayanganj/Munshiganj to set up factory

Factors Leading to Location Decision of BSCL
Regional factors
The factories are situated such that both raw materials and finished goods can easily be transported to and from the mills. Additionally, high skilled labor force is easily available in the Narayanganj belt.


Community considerations
Quality of life and service availability status is good in Narayanganj as it is relatively near to Dhaka city. Additionally amenities and facilities at Narayanganj are also quite good. Utility availability is also good, as the factory is situated in an already well-developed industrial region.


BPML is taking advantage of river transport connectivity which it utilizes to reduce transportation and thus operating costs.
Paper mills need proper functioning of ETP to abide by environmental regulations. Being situated by river bank allows BPML to use ETP effectively.
Site related considerations
BPML is creating diverse range of product, demand exists for its products throughout the country. Therefore it has to choose location from where it is best suited to distribute finished goods throughout Bangladesh in an economic and efficient manner.
It has set up factory in a central area of the country and it enjoys good road connectivity (due to proximity to Dhaka-Chittagong highway) and river transport connectivity to different parts of the country.
The factory is located in a good location from a strategic point of view (as it is placed on the lifeline of the country- the Dhaka-Chittagong corridor).

Because it is placed on the bank of river Meghna, BPML can easily transport imported raw materials from Chittagong or Mongla ports using the relatively much cheaper river transportation.
It can distribute finished goods to different parts of the country using the same cost-effective river channel.
As Narayanganj is a traditionally industrialized area, BPML can hire more skilled workers which help them to gain productive efficiency, and thus reduce operating costs.



BPML is already market leader in Bangladesh paper products industry.
It has now started exporting, and due to its high quality, it will achieve success in foreign markets as well. .
BPML already owns additional land around the paper mills. So they can easily expand their current production capacity using the current land.
Due to the location of the mills, BPML will be easily able to attract high quality labor force required to go for expansion.

As most of the raw materials are imported, BPML did not consider depletion of resources when choosing the location.


Location
Units 1 and 2 are situated on the banks of river Meghna, in Meghnaghat, Naranganj, around 30 km from Dhaka city centre, with easy access to Dhaka-Chittagong Highway. Units 1 and 3 are situated in Gazaria, Munshiganj, 35 km from Dhaka city, and also having easy access to Dhaka-Chittagong Highway and River Meghna.
Needs for location planning
Marketing Strategy
Cost of Production
Growth
Depletion of resources
Objectives of location decisions
BLPGL wants to retain its market leadership position and the location of the plant near both sea port and river bank allows it to enjoy much lower transportation costs than the competitors to provide it with required competitive advantage to retain its position.


Steps involved in location decision
Criteria selection
lower cost, higher profit, better transportation
Important factors identification
needs location to serve country wide mass market


Location alternatives
Chittagong, Comilla, Mongla.


Alternatives evaluation
River transportation, near major highway

Decision
choose Mongla to set up factory
Factors Leading to Location Decision of BSCL
Regional factors
The factories are situated such that both raw materials and finished goods can easily be transported to and from the plant.



Community considerations
Utility availability is good, as the factory is situated in an already well-developed industrial region. Quality of life and services is quite good in the region as it hosts one of the country’s major sea ports. The local community is also happy to play host to one of the country’s major LP gas industries.



By setting up at the particular site, BLPGL is taking advantage of river transport connectivity which it utilizes to reduce transportation and thus operating costs.

Site related considerations
LP gas is very popular product throughout the country due to a dearth of government gas connections, BLPGL had to consider a location from which it can distribute the gas in the most efficient and cost effective manner.
Being situated at Mongla, and on the banks of Pashur River and having in-house jetty facilities, BLPGL can distribute the LP gas cylinders easily throughout the country using the waterways as an inexpensive mode of transportation.
The Mongla Industrial Area is well connected by roads, which allows transportation by road as and when required (especially in cases of bulk gas supply).


As BLPGL has to consider whole of Bangladesh as target market, it had to choose location for which transportation and distribution costs will be minimized.
From its plant in Mongla, BLPGL is able to save costs as it can use the inexpensive river transportation method to send the finished goods throughout the country.
Its raw materials transport cost is reduced, as international ships carrying the LP gas can berth directly at Mongla Port adjacent to the factory.
Land cost in the area is relatively cheaper compared to Dhaka and Chittagong regions. Labor cost is also relatively less expensive.


As land and labor cost is relatively cheaper in Mongla area, BLPGL can easily opt for expansion as and when required. The location being adjacent to one of the country’s major sea ports means BLPGL can decide to increase LP gas imports as and when required to go for expansion.


As the raw materials are imported, BLPGL did not consider depletion of resources when choosing the location. Ironically it is the lack of raw materials supply (natural gas) in the country, which has played a big role in making the company a success.

Conclusion
Bashundhara is one of the most successful industrial conglomerates of the country. It has achieved this position not only by luck, but through meticulous planning in every step of the way. This sophisticated level of planning is highly evident in the plants location selections to set up it industrial concerns.

The industrial concerns discussed in the report share some commonalities which are as below:

All the plants are
situated in river banks
. This shows Bashundhara’s conscious strategy to serve the mass market of the country, and therefore use the
inexpensive river transportation
method to reach its desired customers and also to transport its
imported raw materials
to the facilities.
The plants are
not situated in typical industrial regions
of the country. This is done consciously to
avoid worker violence or other mishaps
which occur in densely industrialized regions of the country. Also by choosing these locations,
labor cost and land cost is relatively cheaper
, thus allowing the management to go for expansion as and when required.
The plants are
located near important national highways
to provide excellent connectivity to allow Bashundhara to distribute its products in most efficient and effective manner.
Started its operations in 1999
First private LP gas bottling and marketing company of Bangladesh
Bottling and marketing under brand name ‘Bashundhara LP Gas’ using bright red cylinders
also supplies LP gas in bulk form
The plant has production capacity of 1,000 cylinders/hour or 3,000 MT/month.

One of the most successful ventures of the Bashundhara Group
started operations in 1997
Under BPML, there are three separate paper mills.
Its diverse range of products makes it is easy to contemplate Bashundhara’s dominating position in the paper industry
It is the market leader in Bangladesh with more than 70% market share, and BPML also exports to different countries of the world
Cost of doing business
Growth
Depletion of resources
Prepared by :
Anup Kumar Dey
131 0130 060

Kazi Shihab Ashraf
141 1769 060

Mohammed Raihan Akash
132 0890 060

References

Stevenson, W. (2007). Operations Management (9th ed.). Boston: McGraw-Hill.

Bashundhara Group - For the people, for the country. (n.d.). Retrieved November 16, 2014,
from http://www.bashundharagroup.com/

Bashundhara Steel Complex Limited. (n.d.). Retrieved November 17, 2014
, from http://www.bashundharasteel.com/

Bashundhara Paper Mill. (n.d.). Retrieved November 17, 2014
, from http://www.bashundharapapermill.com/

Meghna Cement Mills Limited. (n.d.). Retrieved November 17, 2014
, from http://meghnacementmills.com/

Bashundhara Food and Beverage industries Ltd. (n.d.). Retrieved November 17, 2014
, from http://www.bashundharafood.com/

Bashundhara LP Gas. (n.d.). Retrieved November 16, 2014
, from http://www.bashundharalpgas.com/
Full transcript