The decision to make a new product usually involves changing equipment and altering the layout of an existing factory, or constructing a new production facility. A production facility can be defined as the place where goods and services are actually produced. Site selection is the process of determining where a plant facility should be located. Buying land and building a plant on it represent a major investment. So mistakes in this area are costly. When deciding where to locate a plant or factory, a company has to take into consideration a number of factors, such as the efficiency of the region’s infrastructure, including telecommunications, roads and rail transport; its utilities (e.g. the supply of energy), the cost of land and construction as well as tax rates. Land usually becomes cheaper the further you go from a city centre, but a company must make sure that it will be able to find appropriate labour skills at a suitable price. It also needs to determine the availability and cost of raw materials, components and supplies. The company must also take into account the cost of transporting raw materials and components from suppliers and subcontractors, as well as distributing products to wholesalers’ warehouses and retailers. Transportation costs and time constraints make it logical to produce close to the customer.
