Module - 2

Location
Strategy
 Plant Location may be understood as the function of
determining where the plant should be located for
maximum operating economy and effectiveness.
An ideal Location may not, by itself, guarantee success
but it certainly contributes to the smooth and efficient
working of the organization.
The need of selection of the location may arise under
following conditions
1) When the business is newly started.
2) Existing business has outgrown its original facilities.
3) A lease expires.
4) Other social economic reasons
 FREEDOM OF LOCATION
An entrepreneur seeking location for his enterprise has
greater freedom than in the past .How difficult the task of
selecting the location in the past was is better explained by
narrating the ordeal that was gone through by the founders
of the great Tata Iron & Steel Company (TISCO)
The site ( present Jamshedpur) was selected after extensive
geological survey which established the existence of coal,
iron, ore and other minerals.
The site selected was at the confluence of small rivers
amidst thick jungle. Between the two rivers, a city had to be
planned As the jungles were cleared , in place of towering
trees ,steel chimneys arose
 Though the Maharaja of Mayurbhanj had given highly
favorable terms to Tatas , the local kings of the jungle were
less hospitable .
Tigers killed two tribal laborers .An elephant driven frantic by
the din of dam construction stampeded over a number of
huts and flattened them.( One night a she-bear crawled into
the hut of the Railways Superintendent and delivered a cub
under his table)
Erecting a plant of this nature in the wilderness was called by
contemporaries a titanic enterprise. Communication were
slow , machinery was hauled over vast distances from
homes or abroad ; labor had to be trained.
 Developments.
That was at the beginning of the present century. Now we
are at the end of the century The passage of time has
made site selection easier for contemporary
businessmen , thanks to certain specific developments
that have taken place over a period of nine decades.
Following are the developments
1. Improvements in transportation and communication
facilities and speed of services.
2. Reduction of wages differentials between regions.
3. Mobility of workers and management.
4. Improvements in construction methods and designs for
plant buildings which make less expensive to build.
 Developments.
5. Vigorous policy pursued by the Government to remove
regional imbalances in Industrial development, thus
making all regions almost equal in attraction.
6. Improvements in processing and machine designs that
reduce the relative number of employees required for a
given output.
7. Availability of air-conditioning equipment to counteract
adverse climatic conditions for employees and
processes.
8. Expansion of markets for almost all goods and services
so that more enterprises are needed to meet the
demands.
 Importance of Location Decision
1. Efficiency and effectiveness
Efficiency and effectiveness are dependent upon location.
Location affect the operating cost such as production and
distribution costs. In service, its affects the demand and
effectiveness of the entire operation.
2. Long term commitment Involves huge amount of capital.
3. Fixed Cost Involve the cost of constructing or purchasing
new plant, renovating (if renting).
4. Revenues Revenue may depends on having the facility
near the potential customer.
5. Variable Costs Cost of labor, and material also depend on
location.
 ERRORS IN SELECTION
Though location selection is relatively easy ,businessmen
commit errors and wrong locations are selected.
Interestingly ,errors in site selection seem to fall into a
pattern .
Some of the most common errors are:
1. Lack of thorough investigation and consideration of
factors involved.
2. Personal likes and prejudices of Key executives or
owners overriding impartially established facts.
3. Reluctance of key executives to move from traditional
established home ground to new and better locations.
4. Moving to congested areas already or about to be over
industrialized.
 ERRORS IN
SELECTION
5. Preference for acquiring an existing structure (usually at
an imagined bargain)that is improperly located or not
designed for the most efficient production.
6. Choice of community with low cultural and educational
standards ,so they key administration and technical
personnel eventually accept employment elsewhere.
In order to avoid the errors occurring and to ensure
selection of a good location, a selection committee
comprising people knowledgeable on facts and factors, as
well as those responsible for operating the factors should
be constituted. The committee should then tour places,
select two or three locations ,study their plus and minus
points, and finally select one among them .
 Steps in Location Selection
1. Within the country or Outside
2. Selection of the Region
3. Selection of the locality or community
4. Selection of exact site
1. Decision on Domestic or International Location

It is advisable that the selection committee

first selects a country, a region out of the
country ,locality out of the region and the
exact site out of the chosen locality .
Selection of the site out of locality and
locality out of region and a particular
region out of the country should be based
on a thorough investigation into relevant
factors.
 Decision on Domestic or
International Location
National Selection
1. Political Stability
2. Currency & exchange rate
3. Culture
4. Natural environment
 Selection of Region
1. Availability of raw Materials
. Sugar industry in Bihar & Uttar Pradesh
. Steel Bihar, West Bengal, Orissa & MP
. Paper Mill Dandeli
. Iron & Steel factory at Bhadravati
. Weight Losing and Non-weight losing
materials
 Selection of Region..
2. Nearness to Market
- Goods are produced for sale
- Reduction in the cost of transporting Finished
goods
- Adjust the production program to the likes and
dislikes of consumers
- Provide prompt service & after sale service to
consumers
Examples: Perishable and Bulky products,
Servicing units, repairing, Tyre retreading units,
Wooden accessories , distilled water concerns etc
 Selection of Region..
3. Availability of Power
- Coal, electricity, oil and natural gas
are sources of power
- Example: Aluminum extraction
plant, semi mechanized bakery
etc
 Selection of Region..
4. Transport Facilities
- Essential for bringing raw materials
and men to factory and transporting
finished goods to market.
- Well connected with rail, road and
water transportation.
 Selection of Region..
5. Suitability of Climate
Some industries by nature of their production,
require a particular climatic condition.
Ex: Humid climate is required for cotton textile and
jute.
- Mumbai Cotton textile industries are concentrated
- Kolkota Jute industries are concentrated.
- Of late scientific technology developments
artificial climate can be created but at high cost.
- Extreme climate conditions affect the efficiency of
labour
 Selection of Region..
6. Government Policy
- Balanced regional development
- Any firm that is looking for the subsidies or incentives
have to locate factory in states which provide them.
Ex: Establishment of textile units in Rajasthan, Orissa
Assam and Punjab
Sugar Factories and distilleries in AP, TN, KA and
MH
Steel rolling mills in Assam, MP, Kerala and Bihar etc..
GOI influences plant location in following ways
- Licensing policy
- Freight rate policy
- Establishing a unit in the public sector in a remote area
and developing it to attract other industries
- Institutional finance and govt subsidies.
 Selection of Region..

7. Competition among states

States vie(Compete) with each other
to attract new industries.
Various states offer investment
subsidies and sales tax exemptions
to new units.
Such incentives may not help big
sized plants
But for small & medium sized plants
incentives do matter.
 Selection of Community
1. Availability of labour
-. Adequacy of labour supply at reasonable
wages is very essential
-. Availability of skilled labour influences plant
location
Ex: Glass industry @ Firozabad
Woolen Carpet industry @ Mirzapur
Lock Industry @ Aligharh
Silk Sarees @Dharmavaram & Kanjeevaram
Etc.
 Selection of
Community
2. Civic amenities for workers
- Recreation Facilities Clubs,
theaters and parks
- Schools for their children
- Hospitals
 Selection of
Community
3. Existence of complimentary and
competing industries
- Secure materials at better terms
- Improves labour market, which is better for
both employer and employee
- Specialized centers, Banks become familiar
with the requirements of the industry,
makes loan granting easy.
- Attract repair plants, foundries, machine
shops, tool makers etc..
 Selection of
Community
4. Finance and Research Facilities
- Adequate capital is essential
- A place where facilities for raising
capital are available attract new
industries.
- Manufacturing units lookout for new
technology, so research facilities are
essential
 Selection of
Community
5. Availability of water and
firefighting facilities
- Some industries require plentiful
water for their working
- Ex: Fertilizer units, Rayon
Manufacturing units, absorbent
cotton manufacturing units, leather
tanneries.
 Selection of
Community
6. Local taxes and Restrictions
7. Momentum of an early start
8. Personal Factors
 Selection of Site
1. Soil, Size and topography
2. Disposal of waste
- Chemical, sugar, steel, leather
industries, Breweries etc
Village, Suburban or City
Site
(i) Rural Site/Village Site
Attractive because of following points:
(-) Land is available at cheaper rates
(-) The rates and taxes are negligible
(-) Spacious layout available and open spaces are
possible
(-) Advantages of single storey buildings are available
(-) Low wages for unskilled workers but high wages for
skilled workers
(-) Fewer labour troubles
(-) Avoidance of danger from fire and other hazards
resulting from the operations of neighboring units
(-) Avoidance of undesirable neighbors
(-) Absence of restrictions on smoke and disposal of waste
(i) Rural Site
Problems:
(-) Lack of supply of skilled workers
(-) Lack of civic amenities for employees
(-) Lack of transportation facilities
(ii) Suburban Site
- Compromise between the city and the village and
have the advantages of both.
- They are less costly
- All the rail and road transport facilities are available
- Labour can be drawn from the nearby city or villages
- Quarters for the workers can be provided by the local
authorites or by private entrepreneurs
- Facilities like parks, schools and clubs easily be
provided for land is available at fairly cheap rates
(iii) Urban Site
Attractive because of following points:
- Transport facilities are no problem
- Labour is available in plenty
- Municipal services for water, sewage disposal, public
health and education are available
- All type of technical and commercial institutions and
universities for the training of staff and workers are
available
- Banking, repair and related services are available
- Facilities for contracting out a portion of the are available
- A large local market is available
- High advertising value is avaialable
(iii) Urban Site
Problems
- The cost of the land is exorbitant
- House taxes, water taxes, sanitation taxes and other
similar taxes and rates are fairly high
- Labour unions are many and labour unrest is frequent
- The cost of labour is high
- Because of limited space, factory buildings are
awkwardly shaped. Ill-lighted and ill-ventilated
- Several restrictions have been imposed in regard to
smoke and disposal of effluents.
PLANT LAYOUT
 Meaning of Plant Layout
Meaning, Definition
A plant Layout refers to the arrangement of
machinery & other industrial facilities such as
receiving & shipping departments,Employer
amenities for achieving quickest and smoothest
production at least cost.

Plant layout refers to the physical arrangement of

production facilities. It is the configuration of
departments, work centres and equipment in
the conversion process. It is a floor plan of the
physical facilities, which are used in production.
According to Moore Plant layout is a plan of
an optimum arrangement of facilities
including
Personnel
Operating equipment
Storage space
Material handling equipment and
All other supporting services along with the
design of best structure to contain all these
facilities.
 Scope
The subject of plant layout not only covers the
initial layout, but encompasses improvement
in ,or revision of existing layout
A more simple definition is given by Knowles
& Thomson they say the plant layout involves
Planning & arrangement of machinery &
other industrial facilities & services for the
first time in completely new plant
The improvement of layout already in use ,in
order to introduce new methods
 Objectives of Plant
1.
Layout
Provide enough Production Capacity
2. Reduce material handling cost
3. Reduce hazards to personnel
4. Increase employee moral
5. Reduce accidents
6. Utilize available space
7. Provide ease of production
8. Provide ease of maintenance
9. Provide ease of supervision
10.Improve productivity
11.Allow high machine utilization
 Principles of Plant
Layout
The principle of Minimum travel
The principle of sequence
The principle of usage
The principle of compactness
The principle of safety
The principle of satisfaction
The principle of minimum investment
 Classification of layout
Layouts can be classified into the
following five categories:
Process layout or Job layout or
Functional layout
Product layout or Line processing layout
Fixed position layout
Cellular Manufacturing layout
Combinational or Hybrid layout
1. Process Layout

Model of process Layout

 Advantages of process
Layout
Flexibility
better utilization of production facility
Lower investment
Increase knowledge of supervisors
Limitation of process Layout
Reduce material handling efficiency
Increase in cost
Decrease productivity
 2. Product Layout
In this type of layout, machines and auxiliary
services are located according to the
processing
sequence of the product. If the volume of
production of one or more products is large, the
facilities can be arranged to achieve efficient
flow of materials and lower cost per unit.
Special
purpose machines are used which perform the
required function quickly and reliably
Model of product Lay-out
 Advantages of product
Layout
In-process inventory is less
Decrease handling cost
Mechanized handling systems
Unskilled workers can learn and
manage the production.
Manufacturing cycle is short due to
uninterrupted flow of materials.
 Limitation of product
Layout
Stop entire production
Difficult to change product design
Required high investment
Lack of flexibility
Product V/S Process
Layout
 3. Fixed Position Layout
This is also called the project type of
layout. In this type of layout, the
material, or major components remain in a
fixed location and tools, machinery, men and
other materials are brought to this location.
This type of layout is suitable when one or a
few pieces of identical heavy products are to
be manufactured and when the assembly
consists of large number of heavy parts, the
cost of transportation of these parts is very
high.
Fixed type of position Layout
 Advantages of Fixed Position
Layout
Interest and pride in doing the job
Enlargement and upgrades the skills
Flexibility
Layout capital investment is lower.
 Cellular Layout
There is a trend now to bring an element of
flexibility into manufacturing system as regards to
variation in batch sizes and sequence of
operations.
A grouping of equipment for performing a
sequence of operations on family of similar
components or products has become all the
important.
Group technology (GT) is the analysis and
comparisons of items to group them into families
with similar characteristics.
GT can be used to develop a hybrid between pure
process layout and pure flow line (product) layout.
This technique is very useful for companies that
Cellular Layout
Process flow before the group
technology
Process flow after the group
technology
Advantages of Cellular Layout

Group Technology layout can increase

1. Component standardization and
rationalization.
2. Reliability of estimates.
3. Effective machine operation and productivity.
4. Customer service.
It can decrease the
1. Paper work and overall production time.
2. Work-in-progress and work movement.
3. Overall cost.
Limitations of Group Technology
Layout
This type of layout may not be
feasible for all situations.
If the product mix is completely
dissimilar, then we may not have
meaningful cell formation.
5. Combination Layout
A combination of process and product layouts
combines the advantages of both types of layouts.
A combination layout is possible where an item is
being made in different types and sizes.
Here machinery is arranged in a process layout but
the process grouping is then arranged in a
sequence to manufacture various types and sizes
of products.
It is to be noted that the sequence of operations
remains same with the variety of products and
sizes.
 combination
type of layout for manufacturing different sized
gears

SERVICE LAYOUT
The major factors considered for service providers, is an
impact of location on sales and customer satisfaction.
Customers usually look about how close a service
facility is, particularly if the process requires
considerable customer contact. Hence, service facility
layouts should provide for easy entrance to these
facilities from the freeways.
Well-organized packing areas, easily accessible
facilities, well designed walkways and parking areas are
some of the requirements of service facility layout.
Service facility layout will be designed based on degree
of customer contact and the service needed by a
customer. These service layouts follow conventional
layouts as required.
For example, for car service station, product layout is
adopted, where the activities for servicing a car follows
a sequence of operation irrespective of the type of car.
Product Layout at Car
Servicing
Process Layout at
Hospital
Special arrangements for particular
type of plants
JOB PROCESSES

Investment in automation is for general purpose

technology rather than product specific investment.
Many different products are run throughout the plant
and materials handling has to be modified and
adjusted to suit many different products and types
Detailed planning will evolve around sequencing
requirements for each product, capacities for each
work centre and order priorities: because of this
scheduling is relatively complicated, in comparison
to repetitive line manufacture.
Special arrangements for particular
type of plants
BATCH PROCESSES
Automation, especially for lower volumes of batch
manufacturing, tends to be general purpose,
rather than dedicated to a particular product
whose volume does not demand product-specific
investment in automation.
Scheduling is complicated and has to be
completely reviewed on a regular, on-going basis -
this applies to new products, one-offs that may
be required, together with relatively high volume,
standard products: all of these types will need to
be scheduled.
Special arrangements for particular
type of plants
BATCH PROCESSES
Operators have to be able to perform a number
of functions - this is obviously true of job
types processes. In batch, though, this
flexibility is crucial in that it will allow operators
to move to various workstations as required.
Where automation is being used, set-up time
should be short: the ideal set up times is quick
enough to accommodate run lengths of just
one unit, switching over to other models and
volumes as, and when, required.
Special arrangements for particular
type of plants
Line PROCESSES
Process times should be fast - which is critical in
order to satisfy delivery speed requirements
There should be simplification in production
planning and control and the tasks themselves
should also be simplified for each workstation.
There should be small amounts of work in process:
in fact, work in process (which, in accounting
terms, can be viewed as an asset) is a liability to
the company which can ruin cash-flow and stifle
quick response to market requirements
 Materials handling between stations should be
placed as closely as possible to each other.
Materials flow and control are critical : Just-in
Time lends itself most noticeably to line or
very high volume batch production. Stock-outs
have to be avoided although, at the same time,
excess stock is a waste and a liability, rather
than an asset (materials can be viewed as an
asset on the balance sheet which is misleading
and alien to world class manufacturing.
Continuous PROCESSES
The volume of a product is very high and
the process is dedicated to making,
typically, only one product.
Huge investment in dedicated plant is often
required.
Much automation tends to be evident and
labour input is one of policing rather than
being highly skilled as an integral input to
the overall process.