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
Political, social, economic stability;
National Decision Currency exchange rates; . . . . .

Climate; Customer concentrations;

Regional Decision Degree of unionization; . . . . .

Transportation system availability;

Community Decision Preference of management; . . . . .

Site size/cost; Environmental impact;

Site Decision 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:
• Reduced transportation cost
• Ensure easy availability
• Ensure regular availability
2. Transport facilities
• Nearness to Rail, road, waterway, airway
• Cheapest and fastest transportation method suitable can be
chosen
3. 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
• People’s attitude towards work
• People’s attitude towards earning
• People’s 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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 SIX KEYS TO PLANT SITE SELECTION
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.
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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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 systems—low volume of many
different products
• Continuous processing systems—high 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 L L M D G
A A
Receiving L M G G
Part #2

Part #3 L M D 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, high-
volume 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
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(ex.
Food, chemical, paper). Slide 19 of 75
 ‘PRODUCT’ PLANT
LAYOUT
• Mass production where variety is
small and production volumes are very L M D G
high.
•More efficient, but less flexible than
A
‘functional’ layout. S
• Work in progress is minimised, and S
E
jobs are easily tracked. L M D G
M
• Investment in specialised capital B
equipment is high, so a reliable and L
steady demand is required. Y

• Very sensitive to machine breakdown

or disruption to material supply. L M D G

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 Product Layout

Product
A
Step 1 Step 2 Step 3 Step 4

Product
B
Step 1 Step 2 Step 3 Step 4

Product
C
Step 1 Step 2 Step 3 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 Fairly inflexible to changes in
equipment volume
 Established routing and Highly susceptible to
scheduling shutdowns
 Routine accounting,
Needs preventive
purchasing & inventory
maintenance
control 22
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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 L L M M
products in batch volumes.
• Similar processes are grouped L L M M
Material 1
together.
• Inefficient: Long material Material 2
transport routes from dept. to D D
ASSEMBLY
dept. Work in progress is high. 1
Tracking of orders can be D D
difficult. Product 1

• Advantages: Specialist labour

and supervision. Flexibility as Product 2
material can be rerouted in any G G
ASSEMBLY
sequence. 2
G G

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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 Product Layouts
Products: large #, different small # efficiently

Resources: general purpose specialized

Facilities: more labor intensive more capital intensive

Flexibility: greater relative to market lower relative to market

Processing slower faster

Rates:

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 Subcontract
Machines 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. L M ASSEMBLY
• Cells are autonomous manufacturing CELL 1
D G
units which can produce finished parts.
• Commonly applied to machined
parts.
M M
• Often single operators supervising ASSEMBLY
CNC machines in a cell, with robots D G CELL 2
for materials handling.
• Productivity and quality maximised.
Throughput times and work in
progress kept to a minimum. L L ASSEMBLY
• Flexible. L G
CELL 3

• Suited to products in batches and

where design changes often occur.
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 Cellular Layout

Process (Functional) Layout

Process (Functional) Layout Group
Group(Cellular)
(Cellular)Layout
Layout
A cluster
or cell
T T T CG CG T T T
M
T T T SG SG M M T

D D M D
M M D D D
SG CG CG D

M M D D D SG

Similar resources placed Resources to produce similar

together 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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