Trade-offs are involved in deciding to have a single large, centrally located facility
What trade-offs are involved in deciding to have a single large, centrally located facility instead of several smaller, and dispersed facilities? Who needs to be involved in this decision? And, how can technology facilitate an optimal decision in the present circumstance? Visit the web and identify an organization that made similar decisions. If you can, tell us how the organization made the decision
Trade-offs involved in choosing single large, centrally located facility instead of several smaller dispersed facilities
Stone (2010) defines a trade off as a decision that is situational as regards to diminishing either one quality, quantity or even property of the company for purposes of gaining in in other ways in return. This essay states the tradeoff that are involved in deciding to have a single large, centrally located facility instead of several smaller dispersed facilities, those that need to be involved in this decision, how technology facilitate optimal decision in the present circumstance. The essay shall conclude by presenting Toyota Company as an organization that made similar decisions.
In the contemporary business world, the geographic dispersion of an organization has impact on its corporate decision making. Research has proved that when social factors are combined with informational considerations make geography to be critical to corporate decisions (Spee & Douw, 2003). In single large, centrally located facilities, there is effectiveness in terms of flow of information from one unit to another (Stone, 2006). According to William (n.d.), organizations that are geographically dispersed are not friendly to employees. Spee & Douw (2003) find that there are less divisional employee dismissals in divisions whose locations are closer to corporate headquarters. Further, it is established that firms tend to adopt ‘”pecking order” in addition to divesting out- of -state entities before those in-state entities (William, n.d.). While exploring this concept, notice is made that in most cases firms the likelihood of organizations in the protection of proximate employees in soft industries is higher (Spee, R., & Douw, 2003). Stone (2006) on his part avers that employee protection only works well in an organization whose headquarters is located in a county that is less populated.
All stakeholders of an organization should be involved in trade-offs decision making. However, it should be noted that this requirement is not mandatory since the final decision is to be made by the overall leader who bears responsibility of any decision that is made (William, n.d.). In this regard, at the stage of stakeholder discussion stage, all agreements and disagreements must be well documented accompanied with reasons for each (Spee & Douw, 2003). This would in turn highlight the difference between views of non-technical stakeholders from those of technical stakeholders. The person in charge of the organization’s overall decision making therefore relies on these deliberations to develop a final decision. According to Stone (2006), technology can facilitate an optimal decision in this case by aiding effective conveying of information from all stakeholders through the digital information technology to the final decision making body segment in time. The internet could also serve as a critical source of information that reference is made to for a trade-off decision making of an organization (Spee & Douw, 2003).
Toyota Company has a centralized decision making system (Rooney, 2010). According to Rooney (2010), the company is characterized by a rigid corporate structure and hierarchy of seniority. Toyota is also described as a family company. The board of directors include 29 Japanese men and all of them are Toyota insiders (Rooney, 2010). There is no delegation of authority in this company because of its centralized nature (Rooney, 2010). As such, the decision making process is designed in a way that the U.S executives have a Japanese assignee to mentor them. It must also be noted that the U.S Toyota executives have no authority to make a recall (Rooney, 2010). Toyota’s decision to recall faulty vehicles that had been sold in the U.S after confrontation by the United States transportation secretary (Rooney, 2010) is an example of the type of decisions being discussed herein.
As observed, a centrally located facility requires a single management team to operate and lead the workers of the same location, which is not the case of several smaller facilities (Patnaik, 2015). In this regard, it is expected that HR costs would be lower in the same location case. This is viewed in terms of the costs incurred to reach staff in various dispersed smaller facilities versus reaching staff in a single central facility. It is obvious that more resources in terms of time, transport, communication fee (voice calls, messages, mailing), supervision, monitoring and evaluation would be required in a severally dispersed smaller facilities as compared to centrally placed facility.
Patnaik, A. (2015). Central Asia: Geopolitics, Security and stability.
Rooney, B. (March 2, 2010). Toyota to let U.S unit to order recalls. Available at https://money.cnn.com
Spee, R., & Douw, W. (2003). Cost-reduction location strategies. Journal of Corporate Real Estate, 6(1), 30.
Stone, P.A. (2006). The structure, size and cost of urban settlements. Cambridge: Cambridge University Press.
William, J.S. (n.d.). Instructor’s Manual to Accompany Operations Management. (9th Edition) Available at https://www.amazon.com
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