MANAGEMENT
Dr.Nitin K.
Operations
Management
PLANT LOCATION
Introduction
Need for plant location:
Starting new factory
Expansion of existing plant
Re-location of existing plant
Plant location:
Plant location refers to the choice of region
and the selection of a particular site for
setting up a business or factory.
Ideal location
Demographic Analysis
Trade Area Analysis
Competitive Analysis
Site economics
Nearness to market.
Transport facilities .
Labour supply .
Availability of power .
Supply of capital .
B) Secondary Factors :
Facilities.
Natural factors .
Government subsidies and facilities .
Personal factors.
C) Miscellaneous factors :
Suitability of the Land.
Disposal of Water.
Availability of Water and fire- fighting facilities.
Community attitudes.
Transport Facilities :
Speedy transport facilities are needed for the regular and
timely supply of raw materials at low cost and for
transporting finished products on time to the market.
Transport facilities with good speed and capacity are
needed for transporting laborers and establishing contacts in
the market, and controlling supply according to change in
demand.
Supply of Labour :
Plant
Availability of power :
power is necessary for process of production and for
transporting finishing goods and raw materials
All type of power like electricity , diesel and atomic energy
are localized and mobile .power shortage lead to tremendous
losses due to the stoppage of machinery.
Supply of Capital :
Industries require capital for initial promotion and
expansion. Therefore, a capital market must be developed in
industries centres.
Facilities :
An
Natural Factors :
Climatic
Personal Factors :
Miscellaneous Factors :
a) Suitability of the land :
Site selection should also take into account topography and soil
structure of the land.
Though modern building techniques can overcome the
limitations of the soil.
b) Disposal of waters :
The problems of the disposal of effluents is common to many
industries , particularly chemical , sugar , steel and leather
industries .
The site selected for the location of the plant should have
provision for the disposal of waste .
c) Availability of Water and Fire-fighting Facilities :
Some industries require plentiful supply of water for water for
their working. e.g. fertilizer units , bleaching. These factories
must be located in places where. water is available in
abundance.
Contd
Industrial units are exposed to fire hazards.
In such case , adequate fire-fighting facilities must be available.
Otherwise , the loss from a pire will be considerable .
d) Community attitudes :
Community attitudes towards work as well as their attitudes
towards the incoming entrepreneurs can make or mar an
industry. Locational decisions , therefore , must take such
factors also into account particularly while setting up labour
intensive units.
Selection of Site
There are broadly three possible
alternatives open for selection of the
locality of the industrial unit
Urban or City area.
Rural area.
Suburban area.
Rural Area
Advantages
Cost of land
Cost of labour
Labour turnover
Taxes
Industrial relationship
Municipal restrictions
Others
Suburban Area
Advantages
Cost of land and area
Infrastructure facilities
Type of labour
Training facilities
Near to the market
Other facilities
Location Models
Various models are available which
help identify a near ideal location.
The most popular models are:
1. Factor Rating Method
2. Point rating Method
3. Break-even Analysis
4. Qualitative Factor Analysis
ILLUSTRATION
TABLE : FACTOR RATINGS AND
LOCATION RATINGS FOR LOCATION
ALTERNATIVES.
LOCATION
RATING
PRODUCT OF
RATING
FACTOR
RATI
NG
FACTORS
LOCATION A
LOCATIO
NB
LOCATIO
NB
LOCATION A
1. TAX ADVANTAGE
32
24
3. PROXIITY
18
15
4. PROXIMITY TO SUPPLIERS
10
20
5. ADEQUACY OF WATER
6. RECEPTIVITY OF COMMUNITY
20
15
10
30
24
9. SUITABILITY OF CLIMATE
14
18
12
TO CUSTOMERS
ILLUSTRATION:
Points assigned to locations
Factors Rated
Maximum
Possible Points
Location A
Location B
Future availability of
fuel
300
200
250
transportation
flexibility and growth
200
150
150
Adequacy of water
supply
100
100
100
Labour availability
250
220
200
Pollution regulations
30
20
20
Site topography
50
40
30
Living conditions
150
100
125
830
875
Total
ILLUSTRATION
Location
Fixed
cost/year
Rs.25000
Rs.50
Rs.50000
Rs.25
Rs.80000
Rs.15
Solution
To determine the most economical location for an expected
annual volume of production of 2000 units, calculate the
total cost of production at each of the locations for the
annual production volume Q= 2000nos.
Total cost = ( Fixed cost per annum) + (Variable cost per
unit) x (Quantity produced)
Total cost at location A, TC = (FC) + (VC) x Q
TC=25000 + 50 x 2000
=125000
Similarly
Total cost at location B, TC = 50000 + 25 x 2000
= 100000
Total cost at location C, TC = 80000 + 15 x 2000
= 110000
GOVERNMENT CONTROL ON
LOCATION OF INDUSTRIES
Licensing policy
Incentives for the spread of the
industries in the industrially
backward areas
Establish the giant public sector units
in the relatively less developed areas
OBJECTIVES OF STATE
INTERVENTION AND CONTROL
To attain balanced regional development.
To narrow down the gap of inequality of
income and wealth through creating and
providing employement 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
losses in war time.
THANK YOU