Data Tech Inc. is a technology company that is growing at a fast rate. The company was established by Jeff Styles. Its major operations include handling and transferring numerous hard copies of documents, which comprise invoices, mail lists, or bills. Many companies globally are adopting paperwork technology and putting data on the CDs, a technology, which has become the wave of the future. When the company was started three years ago, Jeff had its first clients being two major corporations. He bought the needed software for the business to start up. The company, however, has one challenge, which is the aspect of expansion. The technology company was established in a two-car garage hence, as the business expands the space for expansion has become extremely small. It means that the company requires relocation and capacity to operate full-time business on the garage. Nevertheless, the company needs to move into a large facility that will enable it accommodate the ever-growing rate of the business (Monks, 2008).
For effective relocation of business, Jeff should consider moving into larger business premises with potential expansion, so that he can meet demands of the growing business and at the same time make the relocation process cost-effective. Business location is a vital strategic level for a company to venture (Kumar, 2010). One of the main characteristics of conversion procedure is the effectiveness with which company’s services are transferred to the client. The selection of business location is a main decision as Data Tech Inc. plans to relocate to a new business site, since wrong relocation of the business will lead to wastage of resources and lose of opportunities. The plant location should be founded on the firm’s expansion strategies and policy, growth plan for the products, shifting market needs, the shifting sources of raw materials, and other various factors that affect the choice of the locality decision. The key purpose of the location exploration is to find a maximum location that will result in the highest returns of the company (Monks, 2008).
Weighted Factor Rating Method
For Data Tech Inc., facility location plays a key role in the process of the company moving into new location. Jeff must weigh numerous factors when evaluating specific location, comprising proximity to clients and suppliers, transportation costs, and labor costs. Location conditions are complex to determine. Both tangible and non-tangible factors are, however, key factors to consider. Non-tangible factors, which include factors of reliability, security, and availability, can be assessed only through an ordinal or nominal scale. The tangible factors, which comprise of product costs and wages, can be assessed accurately into what constitute excellent business locations. There are numerous models, which are available to identify ideal locations for Data Tech Inc. These models include load-distance methods, weighted factor rating method, break-even analysis, factor rating method, and center of gravity method (Holch, 2007).
In weight factor rating method, in order to combine both the qualitative and quantitative factors, these factors are awarded weights founded on the relative significance and weightage score for each individual location by employing a preference matrix. The location with the highest weighted score is chosen as the best location (Kumar, 2010). In calculating the weight factor rating, weighted score for Data Tech Inc. by multiplying each factor is weight by its corresponding score and summing the results:
Weighted score location 1: = (20x3) + (30x4) + (10x5) + (10x3)
Weighted score location 2: = (20x4) + (30x2) + (10x4) + (10x4)
Weighted score location 3: = (20x4) + (30x5) + (10x4) + (10x4)
From the calculation of the weighted scores, it is clear that the location with the highest weighted score is the best choice. Thus, Data Tech Inc. should select location 3 with the highest score of 310. In addition, if the company moves to a large facility, it will make considerable profits of $ 1,000,000 or $600,000, which depends on the level of demand. If the company moves into a smaller facility, then it will make profits of approximately $ 500,000, when assumed that the demand is low. Shifting into small facility means that it will be needed to expand its business when demand gets high, thus, increase the costs of running business (Monks, 2008).
The company’s profit will be $ 800,000 if Data Tech Inc. undertakes expansion strategy. If the company avoids expansion strategy, then the profit will be $ 500,000. A perfect location is one, which leads to lowest manufacturing cost and minimum distribution cost per unit. These costs are impacted by a numerous factors, which are both tangible and non-tangible. The numerous costs, which dictate site selection economy, include labor, land, building, equipment, and materials. Other conditions such as a community attitude, community equipment, and housing facilities will also affect the selection of the best business site. Economic analysis is undertaken to enable the company to make a decision about the best location (Kumar, 2010).
Therefore, Data Tech Inc. should locate to larger premises that will accommodate the growing business strategies and demands. The location 3 will allow the company to meet the growing spacious challenges. From the profit analysis, it is clear that Jeff, the founder of the company, needs to expand its business and relocate into cost-effective and accessible locations, especially to their clients. In addition, there is a high probability of the company making enormous profits when Data Tech Inc. relocates to spacious premises (Monks, 2008).