UNIT-1 PLANT LOCATION

•Factors influencing plant location

•Theories of plant location
•Location Economics
•Objectives of plant layout
•Principles of plant layout
•Types of plant layout, their merits and
demerits
• A plant is a place, where men, materials, money,
equipment, machinery, etc. are brought together for
manufacturing products
• Plant location means deciding a suitable location,
area, place, etc. where the plant or factory will start
functioning
• Plant location involves two major activities
– to select a proper geographic region
– selecting a specific site within the region
• Plant location plays a major role in the design
of a production system as it determines the
cost of
– getting suitable raw material;
– processing raw material to finished goods;
and
– finished products distribution to customers
 Factors affecting plant location
1. Nearness to Raw Material
2. Transport Facilities
3. Nearness to Markets
4. Availability of Labour
5. Availability of Fuel and Power
6. Availability of Water
7. Climatic Conditions
8. Financial and Other Aids
• Land
• Community Attitude
• Present of related industries.
• Existence of hospitals, marketing centers,
schools, banks, post offices, clubs, etc.
• Local bye-laws, taxes, building ordnances,
etc.
• Housing facilities.
• Security
• Facilities for expansion.
 Theories of Plant Location
• Theory of Maximum Profit Location
• The Interdependence Theory of Location
• Linear Programming Technique
• Location Analogue Model.
• Theory of Least-Cost Location
• Weber's Theory of Location
• Theory of Location by Sargent
• Theory of Location by Predohl and others
• Theory of Location by Losch and Walter Israd
 Theory of Maximum Profit location

• This theory is the proposal of Agus Losch

– The location of a manufacturing establishment
depends upon the firm's cost of production at
alternative locations in the market area which is
also to control from each site.
Green Hut
– He suggested a mathematical model which
considers total cost, total revenues, the sales
radius and the maximizing net-mill price.
The Interdependence Theory of Location

• Fettler and Hotelling

They proposed that plant location should be

based on the ability of a site to control the
largest market area. It is assumed that the cost
of procuring raw materials and processing are
equal at all locations.
 Linear Programming Technique

• It can be used in a situation where it is required

to maximize or minimize some quantity which
is a function of a set of variables
• The quantity to be maximized or minimized is
known as the objective function, and takes the
form of a linear equation.
 Location Analogue Model
• The location of the service points are
determined so as to minimize total
transportation costs with the use of an
analogue computer.
 Theory of Least-Cost Location

• According to Thunen, "the location of different

kind of agricultural production was
determined by the relation between the price
of the products in the market place and the
distance from the market place."
 Weber's Theory of Location
• Alfred Weber analyzed the factors responsible
for location of industry

– Cost of transportation
– Cost of labour
– Cost due to the gather together agglomeration
• Cost of Transportation: Transportation cost
consists of two basic elements
– total weight to be transported at site and
– distance to be covered

As per Weber's theory the best place of location for

a factory was where the cost of transportation,
taking both the raw material and the finished
products into account ton mile rate (total weight
to be carried and distance over which it is to be
carried), is the lowest
• Weber classified raw materials into
categories:
• (a)'ubiquitous' i.e. those materials such as air,
water, sand which are available everywhere
in the country and
• (b) Localized material: such as cotton, iron,
coal etc. found in certain locations.
i. pure material
ii. gross material.
• Pure materials are those which impart their
total or much of their total weight to the
finished product for example raw cotton
looses only a small portion of its weight in the
preparation of yarn.

• Gross materials are those which loose

considerable weight during the process of
production and add little or no part of their
weight to the finished product. An example is
the production of iron from iron ore and coal.
• Cost of Labour:
– Labour cost Index: The ratio of labour cost to the weight
of the finished product.
– Locations Weight: Weight to be transported during the
whole process of production.
• Locational Coupling: Where the bye-product of one
industry can be used as raw material of another
industry, both the industries may select a single place
of location.
• Split in Location: A split in location will occur when
the division of stages of production is possible
because the different stages of production may have
economic advantages in working at different places
 Theory of Location by Sargent
• Prof. Sargent has introduced three new
concepts, for the measurement of the degree
and incidence of location. These are:
i. Location Quotient.
ii. Coefficient of Localisation.
iii. Co-efficient of Linkage.
Theory of Locations By Predohl And Others

i. Economic differences [difference in prices

and markets]
ii. Cost differences [differences of productivity,
transport cost and accessibility]
iii. Human differences [differences among
individual entrepreneurs]
iv. Difference in national character and
environment
 Theory of Location by Losch and Walter
Israd
• that all locations are interdependent
• While some are located in proximity of natural
resources; other are strongly consumer
oriented
 LOCATIONAL ECONOMICS
a) Land
b) Building/Rent
c) Equipment and Machinery
d) Labour
e) Water, Power &Fuel
f) Freight i) In-coming it) Out-going
g) Raw Material
h) Taxes, etc.
 Objectives of Good Plant Layout

1. Material handling and transportation is minimized and

efficiently controlled.
2. Bottlenecks and points of congestions are eliminated
(by line balancing) so that the raw material and semi-
finished goods move fast from one work station to
another.
3. Work stations are designed suitably and properly.
4. Suitable spaces are allocated to production centers
and service centers.
5. The movements made by the workers are minimized.
• Waiting time of the semi-finished products is
minimized.
• Working conditions are safer, better (well
ventilated rooms, etc.) and improved.
• There is increased flexibility for changes in
product design and for future expansion.
• There is the utilization of cubic space (i.e.,
length, width and height).
• There are improved work methods and
reduced production cycle times
• Plants maintenance is simpler.
• There is increased productivity and better
product quality with reduced capital cost
• A good layout permits materials to move
through the plant at the desired speed with
the lowest cost
Types of Plant Layout
 PROCESS LAYOUT
• It is also known as functional layout and is
characterized by keeping similar machines or similar
operations at one location.
• This type of layout is generally employed for industries
engaged in job order production and non-repetitive
kind of maintenance or manufacturing activities.
All workers performing similar tasks are grouped together.

Products pass from one workstation to another

The process layout is best for firms that produce small numbers of a wide variety of
products
 Advantages of process layout
• Flexibility
• Lower investment
• No stoppage of production
• Scope for expansion
• Full utilization of equipment
• Comparatively less number of machines is
needed
• Better product quality
• process layout needs more space
• Automatic material handling is extremely
difficult
• Completion of same product takes more time
• Work-in-process control becomes difficult
• Production control becomes difficult
 PRODUCT LAYOUT
• It is also known as line [type] layout It implies
that various operations on raw material are
performed in a sequence and the machines
are placed along the product flow line.
• This type of layout is preferred for continuous
production.
 Advantages
• Smooth flow of production

• Lower material handling costs

• Lesser work-in-progress

• Optimum space utilization

• Effective utilization of resources

• Effective supervision

• Production control

• Savings in time
 Disadvantages
• Rigidity
• Expansion is difficult
• Costly
• Supervision difficult
• Complete stoppage during breakdown
• Monotony
• High labor cost
 COMBINATION LAYOUT
• A combination of process and product layouts
combines the advantages of the both types of
layouts.
 FIXED POSITION LAYOUT
• Layout by fixed position of the product
inherent in ship building, aircraft manufacture
and big pressure vessels fabrication.
 Principles of Plant Layout
1) Integration 1) Versatility
2) Utilization 2) Regularity
3) Closeness 3) Orderliness
4) Flow 4) Capital Investment
5) Expansion 5) Convenience
6) Flexibility 6) Satisfaction and
Safety