PLANT LOCATION AND

LAYOUT

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Plant Location factors

A plant is a place where men, materials, machinery,

money and equipment are brought together for
manufacturing products
The problem of plant location arises when starting
a new organization.
Plant location involves 2 major activities

Selecting a proper geographic region

Selecting a suitable site within the region

Plant location plays a major role in designing the

production system as it determines the cost of

Getting suitable raw material

Processing raw material to finished goods
Distributing finished products to customers
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INTRODUCTION.

Site selection is an important activity as it decides the fate

of the business.

A good location will reduce the cost of production

&distribution to a large extent. The reduction of cost of
distribution helps in elevating either the competitive
strength or the profit margin of business.

Locating of business involves large & relatively

permanent investment.

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 If the site selection is not done properly, all the

money spent on factory building, machinery & their
installation will go in waste & the owner has to
suffer great loss.
Therefore the site for factory should be selected
very carefully. While selecting a site it is necessary
to consider technical, commercial, &financial
aspects & then select a site that may provide
maximum profit.

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NEED FOR LOCATION

While starting a new factory
During expansion of existing plant
When existing plant is to be re-located at some other place

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STEPS( PROCEDURE) IN
CHOOSING LOCATION
National Decision
Decision

Political, social, economic stability;

Currency exchange rates; . . . . .

Regional
Regional Decision
Decision

Climate; Customer concentrations;

Degree of unionization; . . . . .

Community
Community Decision
Decision

Transportation system availability;

Preference of management; . . . . .

Site
Site Decision
Decision

Site size/cost; Environmental impact;

Zoning restrictions; . . . . .

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FACTORS AFFECTING
LOCATION
What is an ideal location?
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 cost of production and distribution.
For achieving this objective, small-scale entrepreneur
can make use of location analysis for this purpose.
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SELECTION OF
REGION - FACTORS

Availability of raw materials

Nearness to market

Availability of power

Transport facilities

Suitability of climate

Govt. policy

Competition between states

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SELECTION OF
COMMUNITY/LOCALITY
(FACTORS)

Availability of labour

Existence of complementary & competing industries

Finance & research facilities

Availability of water & fire-fighting facilities

Local taxes & restrictions

Personal factors

Disposal of waste

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No location can be ideal. We have to strike a balance

between the various factors affecting a plant
location which are as follows
1.

Nearness to raw material:

2.

Transport facilities

3.

Reduced transportation cost

Ensure easy availability
Ensure regular availability
Nearness to Rail, road, waterway, airway
Cheapest and fastest transportation method suitable can be
chosen

Nearness to markets

Reduced transportation costs

Reduced damages while transportation
Bigger market share
Quicker customer service
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4. Availability of labour
Stable labour force at reasonable rates
Lesser boycotts, lockouts and strikes
Lower cost per unit production
5. Availability of fuel and power
Lower fuel transportation costs
Stable and continuous power supply
6. Availability of water
For processing
For drinking
Sanitary purposes
7. Climatic conditions

Need of heating, ventilating, air conditioning

Money would be required for climate control

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8. Financial and other aids

Loans
Grants
Subsidy
Margin money etc

9. Land
Area
Shape
Cost
Drainage
Disaster proneness
10. Community attitude
Peoples attitude towards work
Peoples attitude towards earning
Peoples attitude towards leisure

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11. Presence of related industries

Better business
Help
Cluster formation etc

12.Infrastructure facilities
Hospital, Housing. school, Bank, Post office, market etc.

13.Local laws, taxes etc.

14.Security
15. Facility for expansion

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Slide 13 of 75

Labour needs of the business: Since the cost of labour is the biggest expense for most
companies, it is important to carefully assess labour needs to find the area that will provide
the most cost-effective, qualified labour.
Proximity to clients or vendors: If the majority of a business' clients or key vendors are
located in a particular region, it may make sense to locate the business in close proximity to
reduce travel or shipping expenses or to provide faster customer service.
Transportation needs: Does the business need to be located near a port or rail system?
With rising fuel costs, more companies are looking for ways to scale back transportation and
shipping of products.
Local tax situation: Even states that boast they are a no-tax state (e.g., no corporate income
tax) do have taxes that will affect your business in one way or another. It is important for a
business to know all the applicable taxes it will face, from franchise taxes to sales and use
taxes.

SIX KEYS TO PLANT SITE SELECTION

Property requirements: The cost of property varies dramatically, up to twice as much,

depending on location. As a starting point, companies should outline the amount and type of
space required to operate the business.
Quality of life: Before locating a business, companies should ask if the area is recognized as
a nice place to "live" beyond a good place to operate a business. Employee retention and
future recruitment depend on offering a good quality of life.

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Slide 15 of 75

PLANT LAYOUT

A plant layout can be defined as follows:

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.

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WHAT IS LAYOUT
PLANNING
Layout planning is determining the best physical
arrangement of resources within a facility
Facility resource arrangement can significantly
affect productivity.
Two broad categories of operations:
Intermittent processing systemslow volume of many
different products
Continuous processing systemshigh volume of a few
standardized products

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FACILITY LAYOUT
Fixed Position
Product is too large to move;
e.g.: building an aircraft

Process
Group similar resources together

Product
Designed to produce a specific product efficiently

Hybrid: combines aspects of both process and product

layouts
Cellular
Modular
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Product Layout
Part #1

G
A

Receiving

Part #3

L
Part #2

Shipping

Product layout, often called production lines or

assembly lines, are designed to accommodate only a
few product designs.
Layout that uses standardized and repetitive
processing operations to achieve smooth, rapid, highvolume flow of highly standardized goods or services
Uses special purpose machines and equipment
Used in discrete unit manufacturing (ex. Automobile
assembly plants) and process manufacturing
(ex.
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Slide 19 of 75
Food, chemical, paper).

PRODUCT PLANT
LAYOUT
Mass production where variety is
small and production volumes are very
high.

More efficient, but less flexible than

functional layout.
Work in progress is minimised, and
jobs are easily tracked.

Investment in specialised capital

equipment is high, so a reliable and
steady demand is required.
Very sensitive to machine breakdown
or disruption to material supply.

A
S
S
E
M
B
L
Y

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Product Layout

Product
A
Product
B
Product
C

7-14

Step 1

Step 2

Step 1

Step 2

Step 3

Step 2

Step 3

Step 1

Step 3

Step 4

Step 4

Step 4

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Advantages and Disadvantages of Product Layouts

High rate of output

Creates dull, repetitive jobs

Low unit cost

Poorly skilled workers may

Labor specialization

not maintain equipment or

Low material handling cost

quality of output

High utilization of labor and

equipment

Fairly inflexible to changes in

Established routing and

scheduling

Highly susceptible to

Routine accounting,
purchasing & inventory
control

Needs preventive

volume
shutdowns
maintenance
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PROCESS LAYOUT
Similar processes/functions are grouped together (job
shop).
Primary advantages--flexibility, utilization of
machinery/equipment.
Disadvantages-greater handling of materials/customers,
more complex scheduling, WIP/waiting lines,
departmental boundaries

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FUNCTIONAL PLANT
LAYOUT
Common for a large variety of
products in batch volumes.
Similar processes are grouped
together.
Inefficient: Long material
transport routes from dept. to
dept. Work in progress is high.
Tracking of orders can be
difficult.
Advantages: Specialist labour
and supervision. Flexibility as
material can be rerouted in any
sequence.

Material 1
Material 2
ASSEMBLY
1
Product 1
Product 2
ASSEMBLY
2

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PROCESS LAYOUT

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CHARACTERISTICS OF PROCESS
LAYOUT
Less expensive because of general purpose
machines used and less duplication.
More flexibility.
Less interruptions.
Higher material handling cost.
Longer production cycle time. Inspection is costlier.
Higher unit cost of production
More floor area.
Production Planning and Control is complicated.
Break down of any machine does not effect the
whole system.
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COMPARISON OF PRODUCT
VS. PRODUCT LAYOUTS
Process Layouts
Products:

large #, different

Resources:

general purpose

Facilities:

more labor intensive

Flexibility:

greater relative to market

Processing
Rates:

slower

Product Layouts
small # efficiently
specialized
more capital intensive
lower relative to market
faster

Handling costs:

high

low

Space requirements:

higher

lower

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FIXED POSITION
LAYOUT

The position of a product or customer is fixed; and

materials, equipment, workers, and other resources
are transported to and from the product or customer.

Usually used because product movement is difficult

(ship building) or for convenience (on-site repair).

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FIXED POSITION

Tools
Machines

Subcontract
parts

Subassembly
Workers

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CHARACTERISTICS
OF FIXED LAYOUT

Capital investment may be minimum.

Low production cost.

Continuity of operations assured.

If machines are heavy, their movements create problems.

Highly skilled workers.

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GROUP LAYOUT
A grouping of machines for performing a sequence of
operations on family of similar components which are
required to produce a unit of product or part.

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HYBRID LAYOUTS
Combine elements of both product & process layouts
Maintain some of the efficiencies of product layouts
Maintain some of the flexibility of process layouts
Examples:
Group technology & manufacturing cells
Grocery stores

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CELLULAR PLANT
LAYOUT
Each cell manufactures products
belonging to a single family.

CELL 1

ASSEMBLY

CELL 2

Productivity and quality maximised.

Throughput times and work in
progress kept to a minimum.

ASSEMBLY

Flexible.

Cells are autonomous manufacturing

units which can produce finished parts.

ASSEMBLY

Commonly applied to machined

parts.
Often single operators supervising
CNC machines in a cell, with robots for
materials handling.

Suited to products in batches and

where design changes often occur.

CELL 3

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Cellular Layout
Process
Process(Functional)
(Functional)Layout
Layout

Group
Group(Cellular)
(Cellular)Layout
Layout
A cluster
or cell

T
T
M
M

T
T
M
M

T
T
D
D

CG
SG
D
D

Similar resources placed

together

CG

SG

SG

CG

CG

D
D

SG

Resources to produce similar

products placed together

DESIGNING HYBRID LAYOUTS

One of the most popular hybrid layouts uses Group Technology (GT)
and a cellular layout
GT has the advantage of bringing the efficiencies of a product layout
to a process layout environment

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PROCESS FLOWS
BEFORE/AFTER THE USE OF GT
CELLS

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RECENT TRENDS IN THE

LOCATION OF INDUSTRY

Priority for sub-urban areas

Industrial development in notified backward areas

Establishment of Industrial estate

Decentralization of industries

Increased role of government in the decision of location of

industries

Competition between Government & Industries

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