PLANT LOCATION

Plant location refers to the choice of region and the selection of a particular site for location of a plant or factory. It is an important strategic decision which cannot be changed once it is made. An ideal location is one where the cost of the product is kept to the minimum with the least risk and maximum market gain. For manufacturing a commodity or a product, a set of machines are used. These machines are installed in a building in a systematic manner, called a factory or plant. The selection of place for manufacturing is important for all the manufacturing and distribution activities of the product. The performance of a firm is significantly affected by its location. A plant site is located after consideration various selection criterions. These criterions are based on mainly economics of manufacturing, ease of manufacturing, skill levels re uired and environmental conditions. !ocio"political environment also plays a ma#or role in deciding the site of the plant. $hile selecting plant location, nature of the product is considered as the base, if the product is non"perishable, then it can be produced away from the market but if it is perishable then it%s plant location should be very near to the market. If a product consumes heavy raw materials then it has to be located near the raw material site. According to &r. 'isvesvrirya the decision of plant location should be based on nine (%s, namely, (oney, (aterial, (anpower, (arket, (otive, (anagement, (achinery, (eans of

communication and (omentum and one P ) Power, to an early start. In particular the choice of plant location should be based on following considerations) 1. Nature and Availability of Raw Material ) An ideal location is the one where the main raw material needed is sufficiently available. Proximity to the source of the raw materials is also an important criterion especially when raw material is of perishable nature. Also if a raw material is heavy, it is difficult to transport and if it is re uired in large uantities, then the manufacturing plant has to be located at the site where such material is available. *therwise the cost of loading and transportation can be very high. The time consumed and managerial effort inputs due to this will also increase. As a result, the economics of manufacturing goes out of scale and the product becomes uncompetitive. This is the reason why !teel (ills are located at +ihar and !ugar (ills near the sugarcane producing regions like ,olhapur and !angli in (aharashtra. 2. Type of Wor for!e Re"uire#ent) !ome of the manufacturing operations re uire skilled workforce in its manufacturing operations. !killed workforce itself re uires well"cultured surroundings, opportunities of advancement through further studies and experience sharing, competition and recreational facilities. -ormally, such a facilitating environment is there in urban areas. *ne can establish such an environment in rural areas also but it is a very costly and time consuming process. Absence of these factors makes the retaining of skilled workers a very difficult task. !killed workforce is already available at urban places. !o such plants are located very near to cities. The

software industries are located at +anglore, .yderabad, and Pune. These cities have good educational and training institutions along with other promotional factors, which are providing ample skilled workforce for the software industry. /ngineering and Automotive sector which needs skilled workforce are located in well developed areas. In some manufacturing operations, unskilled labor force is re uired in more numbers. -ormally, rural areas have larger unskilled workforce. .ence, labor intensive plants are located away from the city in rural areas. $. Pro%i#ity to Mar et) !ince perishable products do not last long, the market has to be nearby. For low cost of transport and distribution, nearness to the markets is necessary. This is the reason for milk and milk product industries to be near cities while non"perishable products like T', Fridge, and /ngineering products are in Industrial Areas. &. Availability of Infra'tru!ture) +asic facilities of land, well connected roads, power and water are called as infrastructure. !uch facilities are not only essential but are the backbone of the industry. Presence of these facilities makes management of manufacturing easy and less costly, whereas the absence of infrastructure makes manufacturing very difficult and costly. a( Availability of Power and )uel) Industries consume power in large uantities. They depend on power. An industry will choose a site where there is uninterrupted and cheap power supply available. This is what was observed in the Industrial &evelopment of (aharashtra, whereas $est +engal is far behind in industrial development. In place of power, if coal or other

materials are used as the fuel their availability will locate the plants nearby. $e find a thermal power station in 0handrapur and -agpur where coal is available cheaply. b( Availability of Water) 0hemical industries, food industries dose a lot of water for their processing. !imilarly, waste and bi" products of these industries are ha1ardous and re uired to be discharged in flowing water after treatment. !o, one finds that chemical and pharmaceutical industries are located near to sea or river. At Thal 2aishet in (aharashtra and +haruch, Ankaleshwar in 3u#arat special chemical industrial 1ones are created and industries such as dyes, pigments and pharmaceutical are located there. !( Tran'port )a!ilitie') /very industry re uires transport of raw materials, finished products as well as their workforce and support services. Availability of transport network facilities decides the site selection. 0heaper transport reduces transportation costs. *ne can observe that well connectivity by rail and good roads brings in lot of industries. $ater transport is the cheapest. $here there is sea and connecting rivers4 canals then the industries are developed very fast. $ell connectivity by sea, rail, road and air along with other promotional factors has made (umbai , business capital of India. d( Land) 5ocating a plant6ant re uires land. The land must be suitable to support the industry. It should have good natural drainage. It should be free from all encroachments. It should be easily accessible. 5and must be available not only as per present re uirements but for future expansion also. The cost factor should also be paid attention to, as this will lead to, low capital investment.

*. Cli#ati! and At#o'p+eri! Condition' ) The climatic conditions of the site wrt. .umidity, temperature and other atmospheric conditions should be favorable to the plant. 0ertain manufacturing processes re uire special or typical climatic and atmospheric conditions. !uch factories are located in that particular climatic conditional 1one. The Tea and 0offee industry needs a cold climate hence they are situated in cold areas such as *oty and Assam. The textile industry re uires humid atmospheric conditions. This is why one finds that textile industries are concentrated in (umbai and Ahmedabad. ,. Pre'en!e of An!illarie'-Related Indu'trie') 0apital goods manufacturing re uire number of sub"assemblies4spares. It is practically, the existence of ancillaries4related industries which help the selection of the location of the factory site. In and around Pune, Tata (otors has developed number of ancillary units7 this has given boost to other engineering units. .. Availability of /upport /ervi!e' and A#enitie' ) $hile selecting a factory location one must also see availability of recreational facilities, post and telegraph facilities, hospitals etc.If these facilities are not available, these are made available for ease of the production operation as well as to retain the workforce. 0. Indu'trial Poli!y of /tate1 3overnments have the challenging task of industrial development for employment generation and overall development of a state. !tate forms industrial policies for attracting industries and investment in the state. 8nder industrial policy, land at low cost, cheap and ample power and water supply, exemption of stamp duty, subsidy on capital investment

and other benefits of !ales tax concession are given. This keeps the initial cost of operation low.