8
/.
tn aoaPlant Location
Proper and well planned industrial location and plant layout is an important
managerial decision. It is a long term decision making it almost impossible to
consider any change in the location later on. As such, the performance of an
enterprise is considerably affected by its location. The location of an industry is
as important as the choice for the location of an office or a shop in a.city or
locality. Unscientific and unplanned location is harmful not only to the industrial
unit but also to the social and ezonomic structure of the country as a whole. Bad
location and layout contribute to the cost of manufacture and add nothing to
the value of enterprise.
The degree of significance for the selection of location' for any enterprise
mainly depends on its size and nature. A small scale industry mainly selects
the site where market for the product is available. It can easily shift to another
place when there any change in the market. But for large scale industries,
requiring huge amount of investment, there are many considerations other than
the local demand in the selection of proper plant location. These plants cannot
be casily shifted to other places and an eror in judgment in the selection of site
can be very expensivë to the organisation:
Importance of Plant Location: Plant location is of paramount importance,
both for a new enterprise as well as for the existing ones. The fundamental
Objective of an organisation is to maxímise its profits. Profits can be increased
either by increased sales or by decreasing cost of production. The reduction in
cost of production is possible when the firm is of optimum size and when the
,Plant Location
ST40
8.3
A Location of procurcment centres to assemble necessary inputs in the
selected site.
s Location of warehouse facilities.
Responsibility for the Plant Location Decision: The responsibility for
making this decision ultimately rests upon the chief executive, subject to
anproval by the board of directors. In India, plant location decisions are taken
by promoters and entrepreneurs. However, there should be a plant location
committee headed by the plant engineer, which can prepare cost analysis with
proper supporting data for all proposed locations. A management consultant
may also be retained. The management team will consider the committee's
recommendations, the cost analysis and the supporting data for the proposed
locations before voting adecision to locate one or another of the prospective
locations. In turn, the president and board of directors must approve the team's
decision.
Objectives in Plant Location
(9 Reduced capial investment and operating cost: An ideal location should
have the objective of reducing capital inyesment For instance, if location is at
aplace where raw materials are readily and corveHiently available in the quantity
so desired, the plant can operate with minimum inventories on hand, requiring
lesser investment in storage buildings and lesser amount of investment in
inventories.
(i) Ensuring effective Plant Layout: Plant layout and plant location are
interdependent and influence each other. The facilities available in the nearby
areas, the topography of the land, the climate and geographical
several other factors influence the plant location. An ideal conditions and
the inconvenience and cost. For instance, if location should reduce
are readily and cheaply available in the area, sub-contracting and repair facilities
the managers may decide to get
some of the parts manufactured by these
any elaborate repair shop, resulting in sub-contractors and may not establish
lesser investment in buildings and
equipment and causing lesser problems in plant layout. If the climate is
cold, the factory may require more covered areas and very
the climate is very hot, open space and have to install heaters. If
installation of coolers may be required.
(ii) Coordination with government policies: While
managers should first consider whether the government selecting will
a location,
start a factory at proposed location. Moreover, what will be issue licence to
the policy of the
government regarding
also be considered. establishment of factories in a particular region shoula
() Employee welfare and public needs: The non-economic objective of
nancing employee welfare and catering to public needs should also be served
y plant location. If aplace is selected, where educational, recreational, medical,
eligious and such other needs of emplovees are met properly, the empioyoes
, Production and Materials
8.4
will be
contended and
will be
needs, theyemployment
will have high
morale. Ifthey are deprived
Ifan area is
selected for
plant ManageCmbasien k
of these
opportunities to the local public wholocation.
unhappy.
wil
such a open
throw welcome
decision. Selection of a site, in a highly congested area will be resented
by the
()public.
Security: It is one ofthe important objcectives. The plant should be free
from foreign attack, anti-social elements and should not be prone to loods
of the: above factors wil|
location with any one
as extremely poor. eventhough other social and economic factors be
earthquakes, etc. A
regarded
may be vers
favourable in establishing a factory there.
Aspects of Plant Location: Plant location may be defined as deciding a
suitable location or place etc., where the factory or plant- will start functioning
three different aspects to a location problem. "
There are
(regional factors)
(i) Selection of a region
(community factors)
(ü) Selection of a locality
factors)
(üi) Selection of a site (site determined L
Regional Factors: Selection of a region should beof motive n
to the source
(a) availability of raw materials, (b) nearness
of transport facilities d
(c) proximity to the market, (d) availability
(e) suitability of climate.
Community Factors: The factors generally considered in selection of a
community (locality) are: (i) Supply of labour, (ii) Prevailing wage rates
(iii) Existence of supplementary or complementary industries, (iv) Banking.
insurance and communication facilities, (v) Attitude of the people in the locality,
(vi) Local taxes and-the bye laws, (vii) Living conditions for the workers and
(vii) Water supply and fire fighting services.
Site Factors: They are determined by two factors: (i) Price of land (ü)
Disposal of waste.
) Price of land: The prevailing price of land is an important consideration
in locatinga site which should be affordable to the organisation.
(i) Disposal of waste:Disposal of solid waste such as ash, etc., is an impotant
aspect that has to be sorted out before production is commenced.
Sufficient land should be available for dumping ash, etc., otherwise it
will cause problems such as air pollution, etc., to the enyployees and other
residents of the locality. i a sdetes
LOCATION THEORIES
There are afew location theories available. Each of these theories is based
on certain assumptions. The theories are as
follows:is
1. Theory of Least Cost Location: This theory based on the assumptions
that product has no effect on Outof all
demand as a result off Incation chosen.
/.
tn aoaPlant Location
Proper and well planned industrial location and plant layout is an important
managerial decision. It is a long term decision making it almost impossible to
consider any change in the location later on. As such, the performance of an
enterprise is considerably affected by its location. The location of an industry is
as important as the choice for the location of an office or a shop in a.city or
locality. Unscientific and unplanned location is harmful not only to the industrial
unit but also to the social and ezonomic structure of the country as a whole. Bad
location and layout contribute to the cost of manufacture and add nothing to
the value of enterprise.
The degree of significance for the selection of location' for any enterprise
mainly depends on its size and nature. A small scale industry mainly selects
the site where market for the product is available. It can easily shift to another
place when there any change in the market. But for large scale industries,
requiring huge amount of investment, there are many considerations other than
the local demand in the selection of proper plant location. These plants cannot
be casily shifted to other places and an eror in judgment in the selection of site
can be very expensivë to the organisation:
Importance of Plant Location: Plant location is of paramount importance,
both for a new enterprise as well as for the existing ones. The fundamental
Objective of an organisation is to maxímise its profits. Profits can be increased
either by increased sales or by decreasing cost of production. The reduction in
cost of production is possible when the firm is of optimum size and when the
,Plant Location
ST40
8.3
A Location of procurcment centres to assemble necessary inputs in the
selected site.
s Location of warehouse facilities.
Responsibility for the Plant Location Decision: The responsibility for
making this decision ultimately rests upon the chief executive, subject to
anproval by the board of directors. In India, plant location decisions are taken
by promoters and entrepreneurs. However, there should be a plant location
committee headed by the plant engineer, which can prepare cost analysis with
proper supporting data for all proposed locations. A management consultant
may also be retained. The management team will consider the committee's
recommendations, the cost analysis and the supporting data for the proposed
locations before voting adecision to locate one or another of the prospective
locations. In turn, the president and board of directors must approve the team's
decision.
Objectives in Plant Location
(9 Reduced capial investment and operating cost: An ideal location should
have the objective of reducing capital inyesment For instance, if location is at
aplace where raw materials are readily and corveHiently available in the quantity
so desired, the plant can operate with minimum inventories on hand, requiring
lesser investment in storage buildings and lesser amount of investment in
inventories.
(i) Ensuring effective Plant Layout: Plant layout and plant location are
interdependent and influence each other. The facilities available in the nearby
areas, the topography of the land, the climate and geographical
several other factors influence the plant location. An ideal conditions and
the inconvenience and cost. For instance, if location should reduce
are readily and cheaply available in the area, sub-contracting and repair facilities
the managers may decide to get
some of the parts manufactured by these
any elaborate repair shop, resulting in sub-contractors and may not establish
lesser investment in buildings and
equipment and causing lesser problems in plant layout. If the climate is
cold, the factory may require more covered areas and very
the climate is very hot, open space and have to install heaters. If
installation of coolers may be required.
(ii) Coordination with government policies: While
managers should first consider whether the government selecting will
a location,
start a factory at proposed location. Moreover, what will be issue licence to
the policy of the
government regarding
also be considered. establishment of factories in a particular region shoula
() Employee welfare and public needs: The non-economic objective of
nancing employee welfare and catering to public needs should also be served
y plant location. If aplace is selected, where educational, recreational, medical,
eligious and such other needs of emplovees are met properly, the empioyoes
, Production and Materials
8.4
will be
contended and
will be
needs, theyemployment
will have high
morale. Ifthey are deprived
Ifan area is
selected for
plant ManageCmbasien k
of these
opportunities to the local public wholocation.
unhappy.
wil
such a open
throw welcome
decision. Selection of a site, in a highly congested area will be resented
by the
()public.
Security: It is one ofthe important objcectives. The plant should be free
from foreign attack, anti-social elements and should not be prone to loods
of the: above factors wil|
location with any one
as extremely poor. eventhough other social and economic factors be
earthquakes, etc. A
regarded
may be vers
favourable in establishing a factory there.
Aspects of Plant Location: Plant location may be defined as deciding a
suitable location or place etc., where the factory or plant- will start functioning
three different aspects to a location problem. "
There are
(regional factors)
(i) Selection of a region
(community factors)
(ü) Selection of a locality
factors)
(üi) Selection of a site (site determined L
Regional Factors: Selection of a region should beof motive n
to the source
(a) availability of raw materials, (b) nearness
of transport facilities d
(c) proximity to the market, (d) availability
(e) suitability of climate.
Community Factors: The factors generally considered in selection of a
community (locality) are: (i) Supply of labour, (ii) Prevailing wage rates
(iii) Existence of supplementary or complementary industries, (iv) Banking.
insurance and communication facilities, (v) Attitude of the people in the locality,
(vi) Local taxes and-the bye laws, (vii) Living conditions for the workers and
(vii) Water supply and fire fighting services.
Site Factors: They are determined by two factors: (i) Price of land (ü)
Disposal of waste.
) Price of land: The prevailing price of land is an important consideration
in locatinga site which should be affordable to the organisation.
(i) Disposal of waste:Disposal of solid waste such as ash, etc., is an impotant
aspect that has to be sorted out before production is commenced.
Sufficient land should be available for dumping ash, etc., otherwise it
will cause problems such as air pollution, etc., to the enyployees and other
residents of the locality. i a sdetes
LOCATION THEORIES
There are afew location theories available. Each of these theories is based
on certain assumptions. The theories are as
follows:is
1. Theory of Least Cost Location: This theory based on the assumptions
that product has no effect on Outof all
demand as a result off Incation chosen.
