Growing Company Specializing in Transferring the Hard

¶ … growing company specializing in transferring the hard copies documents such as bills, invoice and mailing list into CD. Since Data Tech has started the operations, the company is enjoying stream of orders as more companies are migrating into paperless environments. Jeff started the company in his two-car garage and was able to sign a contract with two large corporations. He was also envisaging signing another contract with another corporation. The business that he envisages to be a small enterprise is suddenly turning into a big business. The operation of Data Tech is simple. The company receives orders with the instruction to convert documents into discs and Jeff always receives between 10,000 and 30,000 orders per day. The business operation involves unpacking the mail, scans them into one of the scanning machines, and transfers the contents into disc. After verifying the accuracy of the contents transferred into disc, Jeff sends the discs to customers and the company keeps the back-up copies for record.

Situation Analysis

Jeff is facing challenges to run a full time business because Jeff spends a great deal of time to ensure that the operation runs smoothly without problems. Within the last few months, the business has proven to be successful. Jeff has just signed a long-time contract with his two original customers and has recently acquired two new additional customers. With the situation at hand, the two-car garage could no longer accommodate the larger business. Based on the situation at hand, Jeff is considering moving to a larger or smaller location, which should be closer to the postal service to deliver the package as well as being very close to the airport because Jeff always travels to customer location. However, Jeff is facing challenges to choose between smaller location or larger location.

Fundamental objective of this study is to assist Jeff to choose a facility location. The report also suggests whether Jeff should give a greater priority to smaller facility that has possibility of expansion or move immediately to a large facility.

Recommendation for Jeff

Based on the data provided in the case study, the best alternative for Jeff is to choose facility 3 out of the three facilities that Jeff is considering. Several factors make the report to choose facility 3 out of the three facilities identified by Jeff.

First, facility location 3 is a smaller facility with the possibility for expansion. As being revealed in Table 1, the facility location 3 is very close to the airport and the factor score for the facility 3 is 4. More importantly, facility 3 provides the closest proximity to the postal service. Based on the nature of the Jeff's business, closer proximity to the airport and postal service are the most important factors that Jeff needs to consider before choosing a facility location. Typically, the success of Jeff's business depends on the proximity of facility location to the postal service and the airport. These important factors will contribute to the growth of the business. When comparing facility 3 to other facilities, the facility 3 has higher factor score for proximity to postal service and airport. Typically, facility 3 scores 9 while facility 1 scores 7 and facility 2 scores 6. Considering the strategic location of facility 3, the facility 3 will be a better choice for Jeff.

Table 1: Factor Score at each Location

Factor Score at each location

Factor

Factor Weight

Facility 1

Facility 2

Facility 3

Proximity to airport

20

3

4

4

Proximity to postal service

30

4

2

5

Facility with excess capacity

4

5

0

Facility with potential expansion

0

1

5

Closeness to business community

10

5

4

4

Pleasant environment

10

3

4

4

Total Score

70

19

20

22

Kumar, Athawale, & Chakraborty (2010) argue, "facility location selection is a vital element in the decision-making process." (P 21). In response to the increasing inflexibility of customer demand, a firm needs to maintain on-time delivery performances, increase customer service and adopt strategy for cost reduction. Selection of the most suitable location is one of the most strategic issues that could be used to satisfy all the above-mentioned condition. Proper selection of facility location makes a firm to achieve competitive advantages. Kumar et al. (2010) further reveal that proximity to market is one of the most important factors when considering selection of facility location. When a firm is closer to market, it stands to enjoy competitive market advantages because it will provide quicker delivery of product and services. Dasci, & Laporte (2005) support this argument by pointing out that location choice of firm facility is very critical for firm survival, and location choice has a direct impact on the level of demand for product and service. When a facility is very close to customers, the firm is sure to achieve a success. The authors further argue that power buyer index is also important in the facility location. When a firm has a facility that has higher proximity to market, the business is sure enjoy higher competitive advantage.

Based on the argument of the literatures reviewed, it is revealed that facility 3 is closer to the market that other facilities identified and it has the potential to enhance Jeff productivity. Typically, "the better the location, the more is its return on investment with higher profit and productivity. The best facility location decision can result in significant productivity improvement with lower operating costs and higher delivery performance." (Kumar, Athawale, & Chakraborty, 2010).

Fig 1: Graphical illustration for Factor Score at each Location

More important factor that makes this paper to select facility 3 for Jeff is that facility 3 has higher potential for expansion. Based on the data in Table 1 and Fig 1, it is revealed that facility location 3 could expand in the future if the business continues to grow. It is essential to realize that if Jeff moves to smaller facility, the company will maintain the profitability of $500,000 and if Data Tech decides to expand in the future, the profitability will increase to $800, 000. There is a need to realize that Data Tech is a small but growing business, it is not yet operating to the full capacity. If Data Tech decides to move to a larger facility location, this means the company will need to incur higher costs for running the company. The company will need to incur the higher costs for the maintenance of the facility. One of the advantages that the company will enjoy from choosing smaller facility is that the company will be able to lower the cost of operation thereby increasing the profitability. Apart from the factors considered above, the facility location 3 is closer to the business community and it is located in a pleasant environment. Looking at the overall factor score for all locations, the facility location 3 scores 22, which is higher than the scores of facility location 1 and 2. Based on the overall factors considered, the facility location 3 will be the best choice for Data Tech.