DrillBit Anti-Plagiarism Report

OM Diary Session 9
by
Khushboo Rani

Document : 419146 OM Diary C_DB (133 KB)

Submission Id : 190806085154
Submitted Date : 06-Aug-2019 08:51:56 (IST)
 OPERATIONS MANAGEMENT DIARY – SESSION 9
LOCATION STRATEGIES (1)

Date: 06-08-2019
PGDM No.: 19146 Name: Khushboo Rani Section : C
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Learning from Session 9 of Operation Management Class:

The Session’s Objectives include: (i) Understanding location decision (ii) Identifying and
explaining major effect of location decision (iii) applying quantitative methods (Factor – rating
method) to help location decision and (iv) explore global choices.

The class discussion began with a current example of solar company -“Sterling and
Wilson” – and how it is going for capacity expansion with Initial Public Offering. Session
continued with inputs on how location has a significant impact on organisations and its units.
Various characteristics of location decision and strategies of location decision depend on the
organisation’s priorities to reduce cost, increase market share, customer convenience and capacity
addition.

A brief of various macro level factors like political, economic, social, technological, legal
and environmental factors are considered while performing a SWOT analysis on choosing a
location. Flexibility in choice of location varies from manufacturing to service industry. Other
factors that affect location decision are:
 Proximity to source of supply, customers and labour – Availability and Cost
 Community and Site considerations
 Quality of life issues
 Other miscellaneous considerations like future expansion and competition.

The class further witnessed a brief discussion of Industrial locations in India, how different
places affect concentration of different type of industries and the list of top 10 competitive cities
of India. Examples of Indian companies (MRF, Sterlite Industries, Tata motors and ACC) and
institutions (IIT’s and IIM’s) who have been successful in their location strategies. How the
political stance of various state and central government has affected their location strategies were
also briefed.

Importance and definition of Industrial clusters in a demographic area with an example of

Mohali Hitech Metal Cluster was mentioned.

Location decision sequence with reference to SDMIMD, Mysore was briefed.

Listing out (i) the steps involved in location decision problem (ii) Market location decision
analysis (iii) Methods of evaluating location alternatives were elaborated.

The session had a hands-on experience in making location decision using “Factor Rating
Method” through the Excel tools. Factor Rating Method assigns a weight and develops a score for
each relevant location factors called critical success factors.
Feedback and Doubts:
The session was very informative and could be related very easily. How location factors
influence the organisation was made clear. My doubt or concern is, whether a location decided
today will hold good even after a decade or so? Are the methods chosen to finalize the location
reliable? The topic is relatively easier. Practical application is the key.
The question and answer session were a brainstorming point in the class. The questions included:
1) How are weight and score distributed to location factors in Factor Rating Method?
Ans: Weights and scores are distributed arbitrarily depending on the priorities of the
organisation. Hence, it varies across the individuals and organisations.
2) What is Webbers theory of agglomerative factors?
Ans: Webber proposed a theory in which the industry is located where the transportation costs
of raw material and final costs are minimum.

CASE STUDY – Location provides competitive advantage for FedEx.

The United States based firm – Federal Express – believed in the concept of hub for small-
package delivery. Fred Smith started with a hub at Memphis, Tennessee (now its superhub) in
1971. FedEx then went on a global expansion spree including continental hubs in different
countries: France, China, Miami and Toronto. Currently FedEx Corporation maintains a fleet of
around 84,700 vehicles across the globe. Reason for choosing Memphis as central hub:
 It is located at a central point in US.
 It has very few hours of bad weather, thus contributing to the excellent flight operations
and safety.

Every night, except Sunday, FedEx brings to Memphis packages throughout the world that
are going to cities for which FedEx don’t have direct flights. Memphis permits service to a far
greater no. of point with fewer aircraft than the traditional method. It also allowed FedEx to match
aircrafts flights with package loads each night and reroute when required. Central hub system
helped reduce mishandling and delay in transit.

Analyzation and Comments:

FedEx has established a huge network spread across more than 220 countries and territories
worldwide. A network of this strength and size is difficult to replicate for any company. But FedEx
with total annual revenue of $65.450 billion, have just five regions outside the U.S.: Canada; Asia
Pacific (APAC); Europe; Middle East, Indian Subcontinent and Africa (MEISA); and Latin
America, Caribbean (LAC).

Though FedEx entered Indian subcontinent in 1984 and owns an attractive market share, it
has failed to locate a major hub in India. The reasons include logistical challenges of operating in
India such as – complex tax laws, congested airports and outdated road networks. FedEx now
being a global name must concentrate on spreading out its central hubs across various countries
owing to its respective market share. Otherwise it may lose it out to its competitors. It cannot
continue to be over dependent on the US. Overdependence on a country puts the company at a risk
as any political, economic or climatic change in the region could have an adverse impact on the
company’s business.
AN EXAMPLE OF AN INDIAN COMPANY: ONGC – MRPL

Oil and Natural Gas Corporation (ONGC) is an Indian multinational company. ONGC owns
refineries at two locations in India: (i) Mangalore (Karnataka) (ii) Tatipaka (Andhra Pradesh).
Mangalore Refinery Petrochemicals Limited (MRPL) is thus a subsidiary company of ONGC set
up in 1988.

Location is important in a company’s profit and overall success. For an industrial location
decision, minimizing the transportation cost and incorporating a mix of skilled and low-cost
employees are significant.

ICRA identifies MRPL as a coastal refinery, located on western coast close to the Mangalore
port, the company’s location is logistically advantageous for sourcing of crude as well as export
of products. Addition to the deepest west coast port, Mangalore provides refinery with other factors
of locational perks as well:

1. Connectivity: Mangalore enjoys a versatile connection of roads (NH48, NH66, NH13),

rails (3 Railway networks), international airport with direct connect from Middle east and
the congestion-free port. The port situated on the Arabian Sea provides easy commute to
the ONGC’s “Mumbai High” platform.

2. Skilled employees: Being an education hub, Mangalore hosts more than 10 engineering
and MBA colleges including a NIT. The students from these colleges often are a source
of quality interns. Mangalore also enjoys the literacy rate of 94%. Thus, at the times of
high production MRPL need not sweat on assigning jobs to local contractors.

3. Infrastructure: Well-planned wide roads, pipeline cum road corridors connecting to

port, abundant water supply from the river sources (Netravathi and Gurupur), reliable
power sourcing from state grid through automated sub-grid and marine disposal facility
(after proper treatment of waste).

4. Quality of Life: This intangible cost factor including variables like climate and sports
1
teams are crucial for sustainability of employees. Mangalore is ranked as one of the top
global cities in terms of quality of life.

CSR Activities of MRPL

Being in a production industry, it is bound for MRPL to follow the Corporate Social
Responsibilities (CSR). India mandates that large companies have to spend at least 2% of their
profit every year on CSR activities. MRPL too has been an add-on to the city of Mangalore and
helped the needed citizens of in and around city and contributed nationally. A broad view of their
CSR activities is covered in their initiative “Samrakshan” which includes health and sanitation,
education, women empowerment, infrastructure development, SC/ST welfare, local heritage
protection, clean drinking water, infrastructure development and other miscellaneous needs of
needy. Some of their major undertakings include:

 Artificial Limb Camp every year since 2003 at Mangalore.

  Partnered with SPIC Macay – National convention in support of preserving & promotion
of art, culture and Indian Heritage amongst youth of India.
 Donation of books and uniform, providing mid-day meals, set up of Computer labs and
extra classrooms, providing mid-day meals and construction of toilets in the government
and government aided schools and colleges located in Dakshina Kannada, Udupi and other
neighbouring districts.
 Partnered with Dakshina Kannada District Administration to organize Kambala a local
sport (Buffalo Race).
 Training women in remote villages of in and around district to become independent by
training them in stitching and sewing and providing sewing machines.

Sustainability Efforts of MRPL

Efforts on sustainability initiatives save on costs, reuse of resources and meet compliance
requirements they also help to create brand recognition among customers and locals. MRPL
believes in sustainability through effective control of waste management, spillage, leakage and
emission from refinery operations. They also involve in creating awareness, conducting workshops
and competitions, using renewable sources of energy for their domestic uses etc.

Being a refinery, MRPL tends to release harmful gases in the environment. To overcome
the issue, they have installed Ambient Air Quality monitoring systems in and around refinery.
They also keep a close check on Water quality (Ground and Surface) and noise. MRPL has a 24*7
working Biogas plant for its domestic use in the residential colony (located close to refinery).
Preserving the in and around greenbelt and landscaping both in its residential colony and office
premises is their priority.

Safety is a must feature for the employees at refinery. MRPL takes care to provide safe and
healthy work environment to its employees. They had the best accident free days of 1662.

REFERENCES

Case Study on FedEx:

 Book on “Operations Management” by Jay Heizer, Barry Render and Jagadeesh
Rajashekhar.
 Essays, UK. (November 2018). Analysis of the Strengths, Weaknesses and Threats of
FedEx.
 https://marketrealist.com/2015/06/fedex-enough-investors/

Example of an Indian Company: ONGC - MRPL

 https://timesofindia.indiatimes.com/city/mangaluru/MRPLs-CSR-spending-
up/articleshow/6885291.cms
 https://www.mrpl.co.in
 https://www.referenceforbusiness.com/management/Int-Loc/Location-Strategy.html
Plagiarism Details

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