PLANT LOCATION

1. PLANT LOCATION:PLANT LOCATION:
FACTORS & QUANTITATIVE TECHNIQUESFACTORS & QUANTITATIVE TECHNIQUES
Presented ByPresented By
Hardeep Kaur ChauhanHardeep Kaur Chauhan
Pankaj GoyalPankaj Goyal

2. IMPORTANCE OF PLANTIMPORTANCE OF PLANT
LOCATIONLOCATION

3.  Determines operating and capital costs.Determines operating and capital costs.
 Determines the nature of investment costs toDetermines the nature of investment costs to
be incurred and also the level of manybe incurred and also the level of many
operating costs.operating costs.
 Implies a new allocation of capacity toImplies a new allocation of capacity to
respective market area.respective market area.
 Fixes some of the physical factors of theFixes some of the physical factors of the
overall plant design e.g. heating andoverall plant design e.g. heating and
ventilation requirements etc.ventilation requirements etc.

4. NATURE OF PLANT LOCATIONNATURE OF PLANT LOCATION

5. Plant RelocationPlant Relocation

 Shift in the structure of the market orShift in the structure of the market or
movement of the markets.movement of the markets.
 Changes in the nature and costs ofChanges in the nature and costs of
transportationtransportation
 Changes in the costs and availability ofChanges in the costs and availability of
materialsmaterials
 Changes in the pricing policy of theChanges in the pricing policy of the
enterpriseenterprise

6. CONTD….CONTD….
 Undesirable labor situationUndesirable labor situation
 Demolition, compulsory purchase of premises orDemolition, compulsory purchase of premises or
national legislation.national legislation.
 In availability of labor, rise in labor costs, change inIn availability of labor, rise in labor costs, change in
other factor viz. education housing facilities etc.other factor viz. education housing facilities etc.
 Relocation of various associated industries andRelocation of various associated industries and
plantsplants
 Scientific discoveries and developments, new fieldsScientific discoveries and developments, new fields
of technology. Increasing competition etc.of technology. Increasing competition etc.

7. ALTERNATIVES FORALTERNATIVES FOR
RELOCATIONRELOCATION

8.  Not to expand the plant and to allow theNot to expand the plant and to allow the
growth in business to be enjoyed by othergrowth in business to be enjoyed by other
competitors in the field.competitors in the field.
 Instead of expanding the physical facilitiesInstead of expanding the physical facilities
the sub-contracting policy may be expandedthe sub-contracting policy may be expanded
to achieve overall expansionto achieve overall expansion
 Expand the plant at the present locationExpand the plant at the present location

9. CONTD…
 The existing plant may be retained butThe existing plant may be retained but
other facilities may be developed at otherother facilities may be developed at other
placesplaces
 Abandon the existing plant and relocate allAbandon the existing plant and relocate all
facilities elsewhere.facilities elsewhere.

10. LOCALISATIONLOCALISATION

11. Disadvantages
 Localization leads to accumulation of too many workers atLocalization leads to accumulation of too many workers at
one place making the atmosphere crowdy and unhealthyone place making the atmosphere crowdy and unhealthy
 It leads to an unbalanced development and unequalIt leads to an unbalanced development and unequal
distribution of wealthdistribution of wealth
 It is unsafe in the case of war and due to other safetyIt is unsafe in the case of war and due to other safety
reasonsreasons
 Local population becomes economically dependent on theLocal population becomes economically dependent on the
industries of that area and may face financial difficultyindustries of that area and may face financial difficulty
when the industries in the area fail in their performancewhen the industries in the area fail in their performance
 The market of the product may be over exhausted.The market of the product may be over exhausted.

12. DELOCALIZATIONDELOCALIZATION

13.  Development of large national marketsDevelopment of large national markets
 Various incentives and concessions in tax, building,Various incentives and concessions in tax, building,
land etc. given by urban and rural communities toland etc. given by urban and rural communities to
encourage establishment of industries in their areaencourage establishment of industries in their area
 Many times decentralization leads to betterMany times decentralization leads to better
coordination, improved supply of labor and rawcoordination, improved supply of labor and raw
material and better distribution of productsmaterial and better distribution of products
 Balanced regional developmentBalanced regional development
Reasons responsible for DELOCALISATION

14. FACTORS RESPONSIBLE FORFACTORS RESPONSIBLE FOR
PLANT LOCATION CHOICESPLANT LOCATION CHOICES

15.  Availability of raw materialAvailability of raw material
 Nearness to the potential marketNearness to the potential market
 Location should be near to the source ofLocation should be near to the source of
operating requirementsoperating requirements
 Supply of labourSupply of labour
 Transport and communication facilitiesTransport and communication facilities

16.  Integration with other group ofIntegration with other group of
companiescompanies
 Suitability of land and climateSuitability of land and climate
 Availability of housing, other amenitiesAvailability of housing, other amenities
and servicesand services
 Local building and planning regulationsLocal building and planning regulations
 Safety requirementsSafety requirements

17.  Other consideration for the choice ofOther consideration for the choice of
location can be:location can be:
 Availability of raw material in futureAvailability of raw material in future
 Market expansion due to increase inMarket expansion due to increase in
local population or due to changes inlocal population or due to changes in
habits and tastes of consumers.habits and tastes of consumers.

18. LOCATION ANALYSISLOCATION ANALYSIS

19. Measures for the selection of the locationMeasures for the selection of the location
 Involving quantitative factorsInvolving quantitative factors
 Comparative cost analysisComparative cost analysis
 Break-even and dimensional analysisBreak-even and dimensional analysis
 Comparison of quantitative factorsComparison of quantitative factors

20. ANALYSIS BASED ONANALYSIS BASED ON
QUANTITATIVE FACTORSQUANTITATIVE FACTORS

21. Comparative Cost ChartComparative Cost Chart

22. Least Cost Centre AnalysisLeast Cost Centre Analysis
The transportation costs associated with variousThe transportation costs associated with various
location alternatives are considered.location alternatives are considered.
Limitations are:Limitations are:
 Choice of plant location is assumed to beChoice of plant location is assumed to be
entirely dependent upon the minimization of theentirely dependent upon the minimization of the
operational costs.operational costs.
 Operational costs are assumed to be linearlyOperational costs are assumed to be linearly
related to the distances involved.related to the distances involved.

23. Break-even ChartBreak-even Chart

24. Dimensional AnalysisDimensional Analysis

25. Contd…Contd…

26. COMPARISON OFCOMPARISON OF
QUALITATIVE FACTORSQUALITATIVE FACTORS

27. COMPARATIVE CHARTCOMPARATIVE CHART

28. Ranking and Weight methodRanking and Weight method
Step (I)Step (I)
Examine the various factors and assign to these someExamine the various factors and assign to these some
weights representing the significance of the factors to theweights representing the significance of the factors to the
situation being studied. It is convenient to isolate the leastsituation being studied. It is convenient to isolate the least
significant factors and give it a weight one. All othersignificant factors and give it a weight one. All other
factors are then expressed as a multiple of this factor andfactors are then expressed as a multiple of this factor and
appropriate weight are assigned. Evidently extremeappropriate weight are assigned. Evidently extreme
accuracy cannot be expected in assignment of weightsaccuracy cannot be expected in assignment of weights
Step (II)Step (II)
Each location is examined and ranked for each factor.Each location is examined and ranked for each factor.

29. Contd…Contd…
Step (III)Step (III)
Each ranking is then multiplied by the correspondingEach ranking is then multiplied by the corresponding
weight and the scores so obtained are totaled over factorsweight and the scores so obtained are totaled over factors
for each location. The location having maximum total isfor each location. The location having maximum total is
considered to be most suitable.considered to be most suitable.
It is observed that a location selected on the basis ofIt is observed that a location selected on the basis of
quantitative factors may not tally with the choice based onquantitative factors may not tally with the choice based on
comparison of qualitative factors. In case both the choicescomparison of qualitative factors. In case both the choices
agree then the final selection is made otherwise theagree then the final selection is made otherwise the
management may make a subjective choice. Generally costmanagement may make a subjective choice. Generally cost
criterion is given preference.criterion is given preference.

30. Selection of SiteSelection of Site
 Should be well connected with rail, road, and riverShould be well connected with rail, road, and river
transportstransports
 Should have efficient sewage system for the disposalShould have efficient sewage system for the disposal
of water and waste material.of water and waste material.
 Should have good and peaceful surroundings.Should have good and peaceful surroundings.
 Should have sub-soil which is capable of bearing theShould have sub-soil which is capable of bearing the
load of the building, plant and equipment.load of the building, plant and equipment.
 Should have sufficient land to meet the present asShould have sufficient land to meet the present as
well as the future space requirements of the plant.well as the future space requirements of the plant.

31. Advantages & DisadvantagesAdvantages & Disadvantages

32. THANK YOUTHANK YOU