Plant Location

Plant Location
• Plant location refers to the choice of region
and the selection of a particular site for
setting up a business or factory.
• An ideal location is one where the cost of the
product is kept to minimum, with a large
market share, the least risk and the maximum
social gain. It is the place of maximum net
advantage or which gives lowest unit costof
production and distribution.
Plant location studies are conducted in three
phases :
• Regional factors ,
• Community factors , and
• Site factors
Factors Affecting the Plant Location
• The location of an industry is determined by
taking into consideration the followingfactors:

• Primary Factors:
– Supply of raw materials
– Nearness to the market
– Transport Facilities
– Supply of Labour
– Availability of power
– Supply of Capital
• Secondary Factors :
– Natural Factors:
– Government Subsidies and Facilities
– Personal Factors
• Miscellaneous Factors :
• Suitability of the land
• Disposal of waters
• Availability of Water and Fire-fightingFacilities
• Community attitudes
 Selection of Site
• Urban or City area.

• Rural area.

• Suburban area.
 Advantages of Urban area
• Good transport facilities are available for the movement of raw-materials and
finished products by rail and road and at times, by water and air.
• Good and prompt postal and communication services areavailable.
• Banking and credit facilities available.
• Services of insurance companies are available in city areas.
• Sufficient storing facilitiesincluding cold-storage , are available.
• Ample availability of skilled and unskilledworkers.
• Advantages of vicitinty of the market for the product. Due to large population,
• The local demand for the product is fairlyhigh.
• Facility of the ancillary and services units, which develop around the
• industrial strip of the city area.
• Sufficient passenger transportfacilities by road and railways are available
• to employees.
• Development of the training institutes for workers and management institutes for
executives put the city area units into privileged position.
• Educational, medical and recreational institutes increase the amenities of lives in the
city area .
• Certain specific municipal services facilities are available only in the city areas,
like water supply, drainage, fire fighting facilities, sufficient police protection etc.
 Disadvantages of Urban or CityArea
• Thecost of land is very high ascompared to ruralareas

• Even at high cost, sufficient land is not available, which puts constraints on the
arrangement of plants and machines. Sometimes multi-story buildings are used which
are not suitable for the installation of heavy
• plant and machines
• Due to high standard of living in city area, the cost of labour is relatively high

• Due to possibilities of changing jobs from one unit to another, and tendency of
competitors to snatch away the good employees, the rate of labour turnover is very
high in city area
• The trade union movement is very strong in city area. Militant trade unionists disturb
the amicable industrial relations, which gives rise to strikes andlockouts

• Various types of taxes is levied in city areas. The rates of taxes are relative high. Eg. Octroi is
a typical tax of the city area which is not levied in rural areas.

• Certain municipal restrictions put constraints and involve extra cost due to height of the
building, disposal of waters, treatment of affluent water , elimination of air pollution
caused by smoke etc.

• The industrialization in the city areas gives birth to slums and dirty residence which
creates the typical problems of sanitation andhealth.
 Advantages of Rural area
• Ascompared to the city area, the land is available atcheaper rates.

• Large plots of the land area available which can be developed for a factory sites,
office buildings and residential quarters. Horizontal arrangement of plant
machines in the vast areas of land ispossible.
• Due to lower standard of living, the rates of labour are relatively lower.

• As compared to the city area, the labour force is more or less stable which reduces
the rate of labour turnover.
• The industrial relations between labour and management are relatively amicable.

• The local taxes which are found in the city areas are practically nonexistent in rural
areas.
• The municipal restrictions which are found in city areas do not exist in ruralareas.
E.g. height of buildings.

• Slumps and dirty residence are not found in rural areas. The rural areas is
conducive to good health of workers.
 Disadvantages of Rural Area
• Transportation facilities are not available in good condition and sufficient quantities.

• Banking and credit facilities are also not available. The indigenous money-lenders
are charging exorbitantly for these services.
• Absence of insurance facilities.
• Storing and warehouse facilities are not available in rural areas.
• Passenger transport facilities are not available, as are available in city area.
• Like in city areas, the advantage of ancillary and service units is not available.

• Such units are very far from the market place and this increases the cost of
distribution of finished goods.
• Sometimes the means of transport are not available.
• It is not possible to tap the advantage of industrial training institutes or management
development pragrammes which is possible in city areas.
• It is generally not easy to get skilled workers in rural areas.
• Municipal facilities like water supply, drainage, fire-fighting etc. are not available in
rural areas.
• There is absence of recreation facilities, good educational institutes, good and
sufficient medical facilities.
 Advantages of Suburban Area
• Land is available at a cheaper rate ascompared to urban areas.
• Adequate land is available for future expansion unit. The machines can be installed
horizontally and still the provision for futureexpansion can be made.
• Infrastructure facilities like road, water supply, drainage, banking, warehousing,

insurance etc. are developed Government, municipal authorities or industrial

associations.
• Ascity area is nearest, the skilled and unskilled, both type of labour areavailable.

• It is possible to tap the advantage of industrial training institutes, management

development programmes, research institutes etc. which are available in nearby city
area.

• The nearby city area provides a substantial market for the products of the unit. This
reduces the cost of marketing the finished products and other ancillary advantages
of marketing are available.
 Location Models
• 1. Factor Rating Method
• 2. Point rating Method
• 3. Qualitative FactorAnalysis
Factor Rating Method
Point rating Method
Qualitative Factor Analysis
 Government Control on Location of
Industries
• Theobjectives of state intervention and controlare:
• Toattain balanced regional development.

• Tonarrow down the gap of inequality of income and wealth through

creating and providing employment opportunities to less developed
areas

• To reduce the concentration of population and congestion of industries in

city areas

• As strategic defence policy, spread of industries reduces the chances of

heavy lossesin war time.
PLANT LAYOUT
Plant layout refers to the arrangement of physical facilities such as machinery,
equipment, furniture etc. with in the factory building in such a manner so as to
have quickest flow of material at the lowest cost and with the least amount of
handling in processing the product from the receipt of material to the shipment of
the finished product.

DEFINITION
According to Riggs, “the overall objective of plant layout is to design a physical
arrangement that most economically meets the required output – quantity and
quality.”
According to J. L. Zundi, “Plant layout ideally involves allocation of space and
arrangement of equipment in such a manner that overall operating costs are
minimized.
DETERMINENTS OF PLANT LAYOUT
1. TYPE OF PRODUCT (size, shape and quality)
2. TYPE OF PROCESS (technology employed, sequencing etc)
3. VOLUME OF PRODUCTIONS- (INCREASE OR DECREASE)

IMPORTANCE OF PLANT LAYOUT

• It is long-term commitment
• It facilitates the production process, minimizes material handling, time and
cost, and allows flexibility of operations
• It facilitates easy production flow, makes economic use of the building,
promotes effective utilization of manpower, and provides for employee’s
convenience, safety, comfort at work, maximum exposure to natural light and
ventilation.
• it affects the flow of material and processes, labour efficiency, supervision
and control, use of space and expansion possibilities .
OBJECTIVES OF PLANT LAYOUT
•Proper and efficient utilization of available floor space
•To ensure that work proceeds from one point to another point without any delay
•Provide enough production capacity • Reduce material handling costs
•Reduce hazards to personnel
•Utilize labour efficiently
•Increase employee morale
•Reduce accidents
•Provide ease of supervision and control
•Provide employee safety and health
•Allow ease of maintenance
•Allow high machine or equipment utilization
•Improve productivity
•To minimize cost of productions • Better inter department relationship
FACTORS INFLUENCING PLANT LAYOUT
1. Factory building :- The nature and size of the building determines the floor
space available for layout. While designing the special requirements, e.g. air
conditioning, dust control, humidity control etc. must be kept in mind.
2. Nature of product :- Product layout is suitable for uniform products whereas
process layout is more appropriate for custom-made products.
3. Production process :- In assembly line industries, product layout is better. In
job order or intermittent manufacturing on the other hand, process layout is
desirable.
4. Type of machinery: General purpose machines are often arranged as per
process layout while special purpose machines are arranged according to
product layout.
5. Repairs and maintenance :- Machines should be so arranged that adequate
space is available between them for movement of equipment and people
required for repairing the machines.
6. Human needs :- Adequate arrangement should be made for cloakroom,
washroom, lockers, drinking water, toilets and other employee facilities,
proper provision should be made for disposal of effluents, if any.
7. Plant environment :- Heat, light, noise, ventilation and other aspects should
be duly considered, e.g. paint shops and plating section should be located in
another hall so that dangerous fumes can be removed through proper
ventilation etc. Adequate safety arrangement should also be made.
8. Management policies :- management policies regarding size, quality,
employee facilities and delivery schedules should be considered while
deciding plant layout.
DYNAMICS OF PLANT LAYOUT
• Increase in the output of the existing product
• Introduction of a new product and diversification
• Technological advancements in machinery, material, processes, product
design, fuel etc.
• Deficiencies in the layout unnoticed by the layout engineer in the beginning.
PRINCIPLES OF PLANT LAYOUT
• Principle Of Minimum Movement
• Principle Of Flow
• Principle Of Space
• Principle Of Safety
•Principle Of Flexibility
•Principle Of Interdependence
•Principle Of Overall Integration
•Principle Of Minimum Investment
TYPES OF LAYOUTS
1. Product or Line Layout
2. Process or Functional Layout
3. Fixed Position or Location Layout
4. Combined or Group Layout
PRODUCT OR LINE LAYOUT
• Under this, machines and equipments are arranged in one line depending upon
the sequence of operations required for the product.
• The materials move from one workstation to another sequentially without any
backtracking or deviation.
• Under this, machines are grouped in one sequence. Therefore materials are
fed into the first machine and finished goods travel automatically from
machine to machine, the output of one machine becoming input of the next.
The grouping of machines should be done keeping in mind the following general
principles.
a)All the machine tools or other items of equipments must be placed at the point
demanded by the sequence of operations.
b)There should no points where one line crossed another line.
c)All the operations including assembly, testing, packing must be included in the
line
ADVANTAGES OF PRODUCT OR LINE LAYOUT
1) Low cost of material handling, due to straight and short route and absence of
backtracking.
2) Smooth and uninterrupted operations
3) Continuous flow of work
4) Lesser investment in inventory and work in progress
5) Optimum use of floor space
6) Shorter processing time or quicker output
7) Less congestion of work in the process
8) Simple and effective inspection of work and simplified production control
9) Lower cost of manufacturing per unit
DISADVANTAGES OF PRODUCT OR LINE LAYOUT
1) High initial capital investment in special purpose machine
2) Heavy overhead charges
3) Breakdown of one machine will hamper the whole production process
4) Lesser flexibility as specially laid out for particular product.
SUITABILITY OF PRODUCT OR LINE LAYOUT
1) Mass production of standardized products
2) Simple and repetitive manufacturing process
3) Operation time for different process is more or less equal
4) Reasonably stable demand for the product
5) Continuous supply of materials.

Therefore, the manufacturing units involving continuous manufacturing process,

producing few standardized products continuously on the firm’s own
specifications and in anticipation of sales would prefer product layout e.g
chemicals, sugar, paper, rubber, refineries, cement, automobiles, food processing
and electronics etc.
PROCESS OR FUNCTIONAL LAYOUT
• In this type of layout machines of a similar type are arranged together at one
place. E.g. Machines performing drilling operations are arranged in the
drilling department, machines performing casting operations be grouped in the
casting department.
• Therefore the machines are installed in the plants, which follow the process
layout.
• The work, which has to be done, is allocated to the machines according to
loading schedules with the object of ensuring that each machine is fully
loaded.
• Used when the operations system must handle a wide variety of products in
relatively small volumes (i.e., flexibility is necessary)
The grouping of machines should be done keeping in mind the following general
principles.
1) The distance between departments should be as short as possible for avoiding
long distance movement of materials.
2) The departments should be in sequence of operations
3) The arrangement should be convenient for inspection and supervision
ADVANTAGES OF PROCESS LAYOUT
1) Lower initial capital investment in machines and equipments. There is high
degree of machine utilization, as a machine is not blocked for a single product
2) The overhead costs are relatively low
3) Change in output design and volume can be more easily adapted to the output
of variety of products
4) Breakdown of one machine does not result in complete work stoppage
5) Supervision can be more effective and specialized
6) There is a greater flexibility of scope for expansion
DISADVANTAGES OF PROCESS LAYOUT
1) Material handling costs are high due to backtracking
2) More skilled labour is required resulting in higher cost.
3) Time gap or lag in production is higher
4) Work in progress inventory is high needing greater storage space
5) More frequent inspection is needed which results in costly supervision
SUITABILITY OF PROCESS LAYOUT
1) Products are not standardized
2) Quantity produced is small
3) There are frequent changes in design and style of product
4) Job shop type of work is done
5) Machines are very expensive

Thus, process layout or functional layout is suitable for job order production
involving non-repetitive processes and customer specifications and non
standardized products, e.g. tailoring, light and heavy engineering products, made
to order furniture industries, jewelry.