PLANT LOCATION AND LAYOUT

CONCEPT:

A plant is a place where men, materials, money, equipment,

machinery etc. are brought together for manufacturing
products.

The problem of plant location arrives when starting a new

plant or during the expansion of existing plant.

Plant location means deciding a suitable location, area, place

where the plant or factory will start functioning.

SELECTION OF LOCATION IS IMPORTANT BECAUSE..

A good location may reduce the cost of production and

distribution up to certain extent.

If the site selection is not proper it will be a great loss of

investment.

Location of plant determines the nature of investment

costs and also the level of many operating costs.

It involves two major activities: 1) to select a proper

geographic region and 2) selecting a specific site within region.

Plant location determines the cost of:

1) getting suitable raw material
2) processing raw material to finished goods.
3) products distribution to customers.

Hardly any location can be ideal or perfect.

One has to balance between the factors affecting plant
location.

The fundamental object of location analysis is to maximize

the profits by minimizing the total cost of production
associated with the production process.
Total costs = Fixed costs + Operational costs

Fixed costs include expenditure on land, building,

machines and other equipment etc.

Operational costs are the expenditure incurred on inputs,

transformation process and the distribution of output etc.

RELOCATION OF PLANT BECAUSE OF..

Shift in the structure of markets
Changes in the nature and cost of transportation
Changes in the cost and availability of raw
materials
Undesirable labour situation
Relocation of various associate industries and
plants
Increasing competition
Changes in government policies

The Location of the plant can have a crucial effect

on the Profitability of a Project, and the scope for
future expansion.

Many factors must be considered when selecting

a suitable site,

FACTORS TO BE CONSIDER

Nearness to raw material

Transport facilities
Proximity to market
Availability of labour
Availability of fuel and power
Availability of water
Climate conditions
Financial and other aids
Land

Community attitude
Presence of related industries
Existence of hospital, school, bank etc.
Local bye-laws, taxes, etc.
Housing facilities
Security
Facility for expansion

REGULATIONS ON LOCATION

Problems because of concentration of industries

in few areas as:
Unbalanced industrial growth leads to unemployment in
other areas.
Increasing fixed, operating and living costs due to
concentration of industries.
Problems of pollution- air and water
Congestion and traffic in urban areas
Social and industrial inrests

GOVERNMENT POLICIES

Positive measures to encourage establishment

of industries in certain areas (backward areas).

Negative
measures
to
discourage
establishment of industries in areas having
concentration of industries.

MEASURES TAKEN TO MINIMIZE REGIONAL

UNBALANCE

Establishment of industrial estates to emphasis on

small scale industries.
Liberal issue of licences for starting industries in less
developed regions.
Rural electrification on large scale.
Concessional power, water and finance for backward
areas.
Special training facilities in under developed regions.

LOCATIONAL ECONOMICS

An ideal plant location is one which results in lowest production

cost and least distribution cost per unit.
The various cost which decides the location economics are:
- Land
- Building - rent
- Equipment
- Labor
- water, power and fuel
- raw material
- taxes etc..
Apart from these costs, community attitude, facilities and housing
facilities are also worth considering.

EXAMPLE:

Various costs and other considerations have been listed

below as regards to locations 1 and 2. Select the overall best
location.

Factors
Cost of

Location-1
(Rs.)

Location-2
(Rs.)

Land

100000

90000

Building

1200000

1300000

Water

5000

6000

Power

15000

17000

Labour

140000

120000

Fuel

40000

35000

Raw materials

140000

130000

Taxes

4000

2000

Total cost

1644000

1700000

Community facilities

Good

Excellent

Community attitude

Alright

Encouraging

Housing facilities

Good

Good

Cost of Living

High

Normal

RURAL V/S URBAN PLANT SITES:

Selecting a plant site in city,
o

Advantages:
o

o
o
o

o
o
o

It is very well connected by rail, road and air

Right labour force is available.
It provides a good market also.
Power and water is easily available.
It has good hospitals, marketing centers, schools, banks, etc.
Services of experts and specialists are easily available.
Many other small industries existing nearby can work as ancillaries
Security is there.

Disadvantages,
o
o

o
o
o

Land available for the building is limited in area.

Cost of land and building construction is high.
Expansion of industry may not be possible.
Local taxes are high
Labour salaries are high.
Union problems are more.

SELECTING A SITE IN RURAL AREA:

Advantages,

Plenty of land is available for building and expansion.

Unskilled labour is available which can be trained to suit the
requirement.
Taxes are low.
No union problems.

Disadvantages,

Rail, road and air links may not be adequate.

Power is problem sometimes.
Rural areas are far from selling markets.
Hospitals, banks and markets are not available

PLANT LAYOUT AND FACTORY BUILDING:

It means diposition of various facilities and services of the

plant within the area of site selected.

Plant layout begins with the design of the factory building

and goes up to the location and movement of a work table.

All the facilities like equipment, raw materials, machinery,

tools, workers, etc. are given proper place.

FACTORS AFFECTING
Type of manufacturing process
Plant location
Material handling
Factory layout
Provision of facilities
Future expansion
Safety and security
Flexibility

OBJECTIVES OF GOOD PLANT LAYOUT:

In a good plant layout,
Material handling and transportation are minimized and
efficiently controlled.

The materials and semi-finished goods should move fast

from one work station to another.

Suitable space are allocated to production centres and

service centres.

The movements made by the workers are minimized.

Waiting time of semi-finished products is minimized.

The working conditions are safer, better and improved.

There is increased facility for expansion.

Plant maintenance is easier.

SITUATIONS LEAD TO LAYOUT PROBLEMS

When starting a new plant
Changes in product design or new product
introduction
Changes in volume of production
Poor working conditions
Frequent accidents

PRINCIPLES OF PLANT LAYOUT:

(a) Overall Integration:
- It means integration of all the facilities in a logical
balanced manner.
(b) Minimum movement and material handling:
- It is better to transport materials in optimum bulk rather
than small amounts. Gravity should be used.

(c) Smooth and continuous flow:

- Bottlenecks should be removed by proper line balancing
techniques.

(d) Cubic space utilization:

-Besides using the floor space of a room, if the ceiling height is
also utilized, more materials can be accommodated in the same
room. Overhead material handling equipment save a lot of
valuable floor space.

(e) Safe and Improved environments:

- Working places safe, well ventilated and free from dust, noise
and other hazardous conditions increases the efficiency of the
workers.
(f) Flexibility:
- In automotive and other industries where models of product
change after some time, It is better to permit flexibility in plant
layout.

TYPES OF LAYOUT:

Process layout

Product layout

Combination layout

Fixed position layout

PROCESS LAYOUT:

It is also known as functional layout and is characterized by

keeping similar machines or similar operations at one
location or place.

For example, all lathe will be at one place, all milling

machines at another place and so on.

This type of layout is generally employed for industries

engaged in job order production.

Material 1

Material 2

Product 1

Product 2

Process Layout:

Advantages:
Flexibility

in allotment of work to equipment

and machines.
Better utilization of the available equipment.
Better product quality as supervisors and
workers attend to one type of machines and
operations.
Workers in one section are not affected by the
nature of the operation carried out in another
section.

Disadvantages:

Automatic material handling is very difficult.

More materials in process remains in queue for
further operations.
Completion of the same product takes more
time.
Production control becomes difficult.
It need more inspection and efficient coordination.

PRODUCT LAYOUT:

It is also known as line type layout. In this, various operations

on raw material are performed in sequence in which the raw
material will be operated upon.

This type of layout is preferred for continuous production.

Lathe
Lathe

Drill

Mill
Mill

Drill

Grinder

Advantages:

Less space requirement for the same volume of production.

Less in process inventory.
Automatic material handling is possible.
Simple production planning and control.
Smooth and continuous work flow.

Disadvantages:

Since a product defines layout, a change in product involves major

change in layout.
The pace rate of working depends on the output rate of the slowest
machine. It causes idle time for another machines.
It is difficult to increase production beyond the production lines.

COMBINATION LAYOUT:

It is the combination of process and product layout.

A combination layout is possible where an item being made

in different types and sizes.

In this case machinery is arranged in a process layout but the

process grouping is then arranged in sequence to
manufacture various types and sizes of products.

COMBINATION PLANT LAYOUT

L

ASSEMBLY

CELL 1

ASSEMBLY

CELL 2

ASSEMBLY

CELL 3

FIXED POSITION LAYOUT:

The fix position of the product is required in ship building,

aircraft manufacturing and big pressure vessel fabrications.

In other layouts the product moves past stationary

equipment, whereas in this case the reverse applies, men and
material are moved to material, which remains at one place
and it is completed at that place.

Advantages:

Maximum flexibility, one or more skilled worker can work to finish

the project.

FIXED POSITION LAYOUT

Fixed Position Layout
Single
large,
high
components or products.

cost

COMPONENTS

MATERIAL

Product is static. Labour, tools

and equipment come to the work
rather than vice versa.

LABOUR

PRODUCT

LABOUR

MATERIAL
COMPONENTS