Plant Location & Layout

Plant Location
• That location which, in consideration of all factors affecting products
delivered to customers cost of product to be manufactured, will afford
the enterprise the greatest advantages obtained by virtue of
location”.
• Plant location or the facilities location problem is an important strategic level
decision making for an organization.
• One of the key features of a conversion process (manufacturing system) is the
efficiency with which the products (services) are transferred to the customers.
• This fact will include the determination of where to place the plant or facility?
• The selection of location is a key-decision as large investment is made in
building plant and machinery.
• It is not advisable or not possible to change the location very often.
• So an improper location of plant may lead to waste of all the investments made
in building and machinery, equipment etc.
• The geographical location of the final plant can have strong influence on the
success of an industrial venture.
• Considerable care must be exercised in selecting the plant site, and many
different factors must be considered.
• Primarily, the plant should be located where the minimum cost of production
and distribution can be obtained, but other factors, such as room for
expansion and safe living conditions for plant operation as well as the
surrounding community, are also important.
• A general consensus as to the plant location should be obtained before a
design project reaches the detailed estimate stage, and a firm location should
be established upon completion of the detailed-estimate design. The choice of
the final site should first be based on a complete survey of the advantages and
disadvantages of various geographical areas.
• Before a location for a plant is selected, long range forecasts should be made
anticipating future needs of the company
• The plant location should be based on:
1) Company’s expansion plan and policy,
2) Diversification plan for the products,
3) Changing market conditions,
4) Changing sources of raw materials
5) Many other factors
• The purpose of the location study is to find an optimum location one that will
result in the greatest advantage to the organization.
 Factors
1. Raw materials availability
2 . Markets
3 . Energy availability
4 . Climate
5 . Transportation facilities
6 . Water supply
7 . Waste disposal
8 . Labor supply
9. Taxation and legal restrictions
1 0 . Site characteristics
11. Flood and fire protection
1 2 . Community factors
 Factors
1. Raw materials availability:
The source of raw materials is one of the most important factors influencing the selection of a
plant site.
This is particularly true if a large number of raw materials source permits the considerable
reduction in transport and storage charges.
Attention should be given to the purchased price of the raw materials, distance from the source
of the supply, freight or transportation expenses, availability and reliability of supply,
purity of the raw materials, and storage requirements.
2. Markets:
The location of markets or intermediate distribution centers affects the cost of product
distribution and the time required for shipping.
Proximity to the major markets is an important consideration in the selection of a plant site,
because the buyer usually finds it advantageous to purchase from nearby sources.
It should be noted that markets are needed for by-products as well as for major final products.
 Factors
3. Energy availability:
Power and steam requirements are many times very high in some of the plants, and
fuel is ordinarily required to supply these utilities.
Power and fuel can be combined as one major factor in the choice of a plant site. If the
plant requires large quantities of coal or oil, location near a source of fuel supply
may be essential for economic operation.
The local cost of power, quality of power supply can help determine whether power
should be purchased or self-generated.
Electrolytic processes require a cheap source of electricity, and plants using electrolytic
processes are often located near large hydroelectric installations.
 Factors
4. Climatic conditions:
• The geology of the area needs to be considered together with climatic conditions
(humidity, temperature).
• Climate is really an influencing factor for industries such as agriculture, leather, and
textile, etc. For such industries extreme humid or dry conditions are not suitable for
plant location. Climate can affect the labor efficiency and productivity.
• Abnormally Low Temperatures require additional insulation and special heating for
equipment and pipe runs. Similarly, High Temperature will require special cooling
towers or air conditioning equipment.
• Stronger structures are needed at locations subject to high winds such as cyclone
prone areas or earthquakes.
• Excessive humidity or extremes of hot or cold weather can have a serious effect on
the economic operation of a plant, and these factors should be examined when
selecting a plant site.
 Factors
5. Transportation facility:
▪ Speedy transport facilities ensure timely supply of raw materials to the company
and finished goods to the customers.
• The transport facility is a prerequisites the location of the plant. There are five basic
modes of physical transportation, air, road, rail, water and pipeline.
• Goods that are mainly intended for exports demand a location near to the port or
large airport.
• The choice of transport method and hence the location will depend on relative
costs, convenience, and suitability.
• The kind and amount of products and raw materials determine the most suitable
type of transportation facilities.
• In any case, careful attention should be given to local freight rates and existing
railroad lines.
• The proximity to railroad centers and the possibility of canal, river, lake, or ocean
transport must be considered:
 Factors
5. Transportation facility: (Conti)
▪ Motor trucking facilities are widely used and can serve as a useful supplement to rail
and water facilities.
▪ If possible, the plant site should have access to all three types of transportation,
and, certainly, at least two types should be available.
▪ There is usually need for convenient air and rail transportation facilities between the
plant and the main company headquarters, and effective transportation facilities for
the plant personnel are necessary.
 Factors
6. Water Supply:
▪ The process industries use large quantities of water for cooling, washing, steam
generation, and as a raw material.
▪ The plant, therefore, must be located where a dependable supply of water is
available.
▪ A large river or lake is preferable, although deep wells or artesian wells may be
satisfactory if the amount of water required is not too great.
▪ The level of the existing water table can be checked by consulting the state
geological survey, and information on the constancy of the water table and the year-
round capacity of local rivers or lakes should be obtained.
▪ If the water supply shows seasonal fluctuations, it may be desirable to construct a
reservoir or to drill several standby wells.
▪ The temperature, mineral content, silt or sand content, bacteriological content, and
cost for supply and purification treatment must also be considered when choosing a
water supply.
 Factors
7. Waste Disposal:
• In recent years, many legal restrictions have been placed on the methods for
disposing of waste materials from the process industries.
• The site selected for a plant should have adequate capacity and facilities for correct
waste disposal.
• Even though a given area has minimal restrictions on pollution, it should not be
assumed that this condition will continue to exist.
• In choosing a plant site, the permissible tolerance levels for various methods of
waste disposal should be considered carefully, and attention should be given to
potential requirements for additional waste-treatment facilities.
 Factors
8. Labor supply:
• The type and supply of labor available in the vicinity of a proposed plant site must
be examined.
• Consideration should be given to prevailing pay scales, restrictions on number of
hours worked per week, competing industries that can cause dissatisfaction or high
turnover rates among the workers, and variations in the skill and productivity of the
workers.
• Importing labour is usually costly and involve administrative problem. The history of
labour relations in a prospective community is to be studied
 Factors
9. Taxation and Legal restrictions:
• State and local tax rates on property income, unemployment insurance, and similar items
vary from one location to another.
• Similarly, local regulations on zoning, building codes, nuisance aspects, and transportation
facilities can have a major influence on the final choice of a plant site.
• In fact, zoning difficulties and obtaining the many required permits can often be much more
important in terms of cost and time delays than many of the factors discussed in the
preceding sections.
10. Site characteristics:
• The characteristics of the land at a proposed plant site should be examined carefully.
• The topography of the tract of land and’ the soil structure must be considered, since either
or both may have a pronounced effect on construction costs.
• Cost - The land cost is important. Additionally, local building costs and living conditions.
• Future changes may make it desirable or necessary to expand the plant facilities. Therefore,
even though no immediate expansion is planned, a new plant should be constructed at a
location where additional space is available.
 Factors
11. Flood and fire protection:
• Many industrial plants are located along rivers or near large bodies of water, and
there are risks of flood or hurricane damage.
• Before selecting a plant site, the regional history of natural events of this type
should be examined and the consequences of such occurrences considered
• Protection from losses by fire is another important factor in selecting a plant
location.
• In case of a major fire, assistance from outside fire departments should be available.
Fire hazards in the immediate area surrounding the plant site must not be
overlooked.
 Factors
12. Community factors:
• The character and facilities of a community can have quite an effect on the location
of the plant.
• If a certain minimum number of facilities for satisfactory living of plant personnel do
not exist, it often becomes a burden for the plant to subsidize such facilities.
• Churches, libraries, schools, civic theaters, concert associations, and other similar
groups, if active and dynamic, do much to make a community progressive.
• The problem of recreation deserves special consideration. The efficiency, character,
and history of both state and local government should be evaluated.
• The existence of low taxes is not in itself a favorable situation unless the community
is already well developed and relatively free of debt.
 The major factors in the selection of most plant sites
(1) Raw materials
(2) Markets
(3) Energy supply
(4) Climate
(5) Transportation facilities
(6) Water supply.
For a preliminary survey, the first four factors should be considered.
Thus, on the basis of raw materials, markets, energy supply, and climate, acceptable
locations can usually be reduced to one or two general geographical regions.
In the next step, the effects of transportation facilities and water supply are taken into
account. This permits reduction of the possible plant location to several general target
areas.
As a final step, a detailed analysis of the remaining sites can be made. Exact data on
items such as freight rates, labor conditions, tax rates, price of land, and general local
conditions can be obtained.
General Locational Factors
Following are the general factors required for location of plant in case of all types of
organization's.
CONTROLLABLE FACTORS
1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labor and wages
6. External economics
7. Capital
UNCONTROLLABLE FACTORS
8. Government policy
9. Climate conditions
10. Supporting industries and services
11. Community and labor attitudes
12. Community Infrastructure
• In most cases, it is not possible to select plant location considering one or two
factors. We can pick few promising sites and perform a weighted-score analysis of
the various plant location factors.
• We may start with say 20 possible sites, then after careful analysis of various factors,
we may bring down the list to 4 to 5 equally attractive sites.
• The final choice usually involves a very detailed consideration of economic factors
for such equally attractive sites.
• Quantitative methods are used for consideration at the final stage such methods
are: Factor Rating Method, Cost-Profit-Volume Analysis, Centroid Method, Linear
Programming method, etc.