Locating Service Faciliies
The capital investment required for setting up a new service facility is much less than that required for setting up a manufacturing facility. As a result, there has been phenomenal growth in new service facilities during the last decade. Despite this growth, in some cases the growth in services facilities did not match population growth.
Services cannot be stored, therefore they have to be developed and delivered in close contact with customers. Therefore, location decisions are dependent on the choice of target markets. If teenagers constitute the target market of a service facility, it would not be advisable to develop the facility at a location where the majority of the people are elderly, even though materials might be easily available there and even cost less. The target market also influences the number, size, and other characteristics of locations. While manufacturing location decisions focus on minimizing cost, service facility location decisions focus on the maximization of profit potential.
Decisions regarding the number of locations in a geographical area and the location of service facilities in the area are complex and critical for the long-term profitability of a service organization. These decisions become even more complex if several locations in different geographical areas with multiple locations under each are available. In other words, finding the best option for locating a service facility can be very time consuming.
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