Factor rating method

Factor rating method

To set up a new factory, an important strategic decision to be taken by the management of the company is where lies a new factory location such. There are several ways to determine the location of the factory, one of the methods or the trick is to use the Factor Rating Method or in the language of Indonesia is called the method of Weighting factors.

Method of Weighting Factor or Factor Rating Method this is a method that is widely used because it combines quantitative and qualitative in determining the best locations for manufacturing or service companies.

The steps in the Factor Rating Method (method of Weighting Factors)

The following are some steps to determine the location of the plant or the location of facilities using the Factor Rating Method or a method of Weighting factors.

1. Identify the important factors that will be analyzed location.


2. Give the weight or value to each factor based on the level of the importance of these factors. The higher the weight or the value, the higher the level of importance of the factor anyway. Total Weights used in General is 1 or 100%.


3. Specify alternative locations.


4. Give value to each alternate location based on important factors have been determined. The given value usually ranges between 0 to 100.


5. Calculate the total value for each of the alternate location by way of multiplying the weight on factors determined by the location of each alternative.


6. Compare and select alternate location that have the highest total value.

Examples of Cases the Calculation Factor Rating Method (Method of Weighting Factors)

A multinational company that engaged in manufacturing mobile phone type smartphone plans to set up a plant in Indonesia. These companies then use Factor Rating Method or a method of Weighting factors to determine the location of where best to plant their smartphone. After a survey in several cities, determine some cities as their alternate location and some of the important factors that affect the location of the factory.

The completion of the assessment of alternative locations against the specified Factor

Factor	Weights	The Town A	City B	City C
Proximity to Distributors	0.06	50	70	40
Proximity to Suppliers	0.08	70	50	50
Transportation Facilities	0.1	60	80	50
The Availability Of The Infrastructure	0.1	70	70	50
Availability Of Labor	0.15	80	80	70
Waging Systems & UMK	0.15	80	40	80
The policy of local government	0.1	70	70	70
Geology and climate	0.1	80	80	80
Land Price	0.08	60	30	70
Other support services	0.08	70	70	40
Total Weights	1

 

The result of multiplying the weighting Factor to the value of alternative locations

Factor	Weights	The Town A	City B	City C
Proximity to Distributors	0.06	3	4.2	2.4
Proximity to Suppliers	0.08	5.6	4	4
Transportation Facilities	0.1	6	8	5
The Availability Of The Infrastructure	0.1	7	7	5
Availability Of Labor	0.15	12	12	10.5
Waging Systems & UMK	0.15	12	6	12
The policy of local government	0.1	7	7	7
Geology and climate	0.1	8	8	8
Land Price	0.08	4.8	2.4	5.6
Other support services	0.08	5.6	5.6	3.2
Total	1	71	64.2	62.7

 

From the calculation Factor Rating Method above, A City gets a 71, town B get value of 64.2 and City C get value of 62.7. Thus, A Town that gets the highest value i.e. 71 was selected as the best location to set up a multinational manufacturer of smartphone.