As it has been said for hundreds of years, the most important thing in business, in real estate, is “location, location, location” (Safire, 2009, p. 1). The location of an organization as it contributes to the success or failure of the organization is about more than the costs of land and labor. Transportation must be factored in as well. Understanding the effects of transportation in location determination and the different things that an organization may take into account that are a bit more obscure than the three primary components of land costs, labor, and transportation, are vital to understanding the intricacies of selecting the ideal location for an organization.
The location of an organization, regardless of the industry in which it does business, plays a key role in the success of the business, the amount of overhead it carries, and the amount of profit that it is able to maintain (Lun, Hilmola, Goulielmos, Lai, & Cheng, 2012; Porter, 2011). In addition to taking into consideration the cost of land and the average wage paid within the area in which the organization is located, it is also necessary to ensure that the location of the business is strategically placed in relation to its customers and its suppliers, as well as taking into consideration any other aspects associated with the location itself that may prove beneficial or detrimental to the organization (Lun et al., 2012; Porter, 2011). Furthermore, the location of the organization must also take into account the economic environment of the location in which it chooses to operate (Porter, 2011).
With so many different factors about the location of the organization affecting the potential success or failure of the business when it comes to the location of the organization, it is unsurprising that transportation also plays a role in determining the most appropriate location in which to set up shop, so to speak. When it comes to location and transportation, the organization must ensure that it’s supply chain remains in effect. Depending on the type of organization, whether it be a supplier or a location for the end stage distribution of the organization, the company must ensure that it has multiple avenues available, allowing for contingencies in case of failure in the supply chain, weather, manmade or natural disasters, and so on (Stadtler, 2014). Failure to take into account the transportation logistics of supply chain management when choosing a location is ill-advised from a business perspective (Stadtler, 2014). The business should, ideally, have at least two methods by which it can fulfill the supply chain to the target location, all of which should be cost effective to the degree possible and which should ensure the continued operation of the organization, factoring not only into the original location decision, but into risk management as well (Stadtler, 2014).
Other areas of consideration that a company may wish to take into account when selecting a location are based, in part on the industry in which it operates, but others are of a more structural nature. For example, if an organization must choose between two buildings which in all other respects are equal, but one is located in an area known for foundational issues while the other is located in an area that is known for its flooding, the organization will need to make a determination regarding which of those is the lesser of two evils and, ultimately, which will cost the company less in the long run. Still other factors for consideration may be more aesthetic in nature, requiring an organization to make a decision as to whether it wants to be located closer to its supplier, but in a more run down area of town, or further away from the supplier with a nice vista instead. Such a decision may seem trivial, but it is one that can have an effect on employee morale, which can in turn have an effect on employee productivity.
Where to locate a company may at first seem like a simple decision, but it may be one of the most complex decisions necessary in starting a business. Careful consideration of labor, costs, land costs, transportation, and the potential damages to a building are just some of the many factors that must be taken into consideration. Appropriate knowledge and awareness of all factors is vital to the success of the organization.
- Lun, Y., Hilmola, O., Goulielmos, A., Lai, K., & Cheng, T. (2013). Transportation Logistics: A Case Study of Bio-Diesel Factory Location Plans. Springer London, 91-103. Retrieved from http://link.springer.com/chapter/10.1007%2F978-1-4471-2921-9_6
- Porter, M. (2011). The Role of Location in Competition. International Journal Of The Economics Of Business, 1(1), 35-40. http://dx.doi.org/10.1080/758540496
- Safire, W. (2009). Location, Location, Location. Nytimes.com. Retrieved 4 September 2016, from http://www.nytimes.com/2009/06/28/magazine/28FOB-onlanguage-t.html
- Stadtler, H. (2014). Supply Chain Management: An Overview. Springer Texts In Business And Economics, 3-28. http://dx.doi.org/10.1007/978-3-642-55309-7_1