MODULE-2

PLANT LOCATION AND LAYOUT

MEANING OF PLANT LOCATION
It refers to the area where the plant will operate to produce goods or services. It
is the function of determining where the plant should be located for maximum
operating economy and effectiveness.
DEFINITION: According to R.C. DAVIS,” Plant location is the function of
determining where the plant should be located for maximum operating economy
and effectiveness”.
NEEDS FOR THE SELECTION OF THE PLANT LOCATION
 When a new plant is to be established.
 When the old plant undergoes expansion, decentralization and
diversification to meet increased demand for its products.
 The existing factory is not in a position to obtain renewal of lease.
 An undesirable location is to be abandoned.
 The tendency of shifting the market, depletion of raw materials, changes
in transportation facilities, new process requiring a different location are
observed in the factory.
 New branches are to be opened for increasing the volume of production
or distribution or both.
 Social or economic reasons.
Factors to be considered while selecting a suitable plant location.
1.Within the country or outside: A suitable plant location can be selected
within home country or abroad. The selection will consider the availability of
future market consideration and huge demand of the product. If the company
decides to go international, it will become necessary to decide upon a particular
country as countries compete with each other to attract foreign investment. T
2.Selecting the region: The various factors to be considered while selecting a
particular region are given below:
(i)Availability of raw materials: Raw materials usually constitute 50 to 60
percent of the total product cost, it is important that the firm gets its
requirements of raw materials at the right time and at the reasonable price for
which the plant must be located in the neighbourhood of some source which can
meet the raw material requirements of the unit “proximity to supply of raw
material” factors which can meet the raw materials are of perishable nature.
(ii)Nearness to the market: plant location should be nearness to the market
which facilitates the easily distribution and transportation. This makes it
necessary to locate the plant near market. Nearness to the market gives the
manufacturer certain advantages such as:
 Provision of after sales services.
 Execution of replacement orders without delay.
 Rendering of effective and prompt services to customers and
 Reduced transportation costs. Every company is in the business to
market and it can survive only of their product reaches the
consumers on time and at the competitive price.
(iii) Adequate power supply: The area of plant location should ensure the
adequate power supply facilities. No industry cannot function without the
availability of adequate power. Coal, electricity, oil and natural gas are the main
sources of power.
(iv)Transport facilities: Transportation cost to the value added is a key
determinant of the plant location. The structure of the transportation cost
depends on:
 Characteristics of the commodity
 Average distance of shipment
 Medium of shipment: road, rail and air sea.
The need for transport arises because raw materials and fuel are to be moved to
factory site and finished goods are to be transported from factory to markets.
(v) suitability of climate: climatic factors may not have a major influence these
days because of modern air conditioning facilities available today. However, it
is important factor for certain industries like textile mills, which require high
humidity. Climate plays a very important role in the location of a plant.
3. Selection of the locality or community: Having selected a particular region
in a particular country, the management now needs to select a particular locality
or community. This is influenced by the following factors:
 Labour and wages
 Civic Amenities
 Finance and research facilities
 Complementary and competing industry.
 Legislation and taxation
 State assistance.
4.Selction of exact site:
 (i)suitability of the land: Site selection should also take into account
topography and soil structure of the land. The soil structure must be capable
of bearing loads of foundations. Though modern building techniques can
overcome the limitations of the soil, but if considerable improvement is
required then selection of a low cost and may ultimately turn out to be
expensive.
(ii) Availability and cost of the land: site size must be large enough to
accommodate the present production facilities, parking and access facilities
but also leave sufficient room for future expansion.
(iii)waste disposal: The site chosen should have facilities for effective
disposal of waste in order to avoid health hazards to the society and people.
There must be enough vacant land for dumping of solid waste.
THEORY OF PLANT LOCATION
1.Median location theory
A basic principle of location theory stating that an activity will select the
median or middle point of location when selling an output to, or buying an input
from, activities located a disperse points.
2.Linear market competition: (Hotelling)
Hotelling was one of the first to introduce the principle of spatial competition
by investigating how sellers would choose locations along a linear market. The
total price of the customer is thus the market price plus the transport price.
3.Alfred weber’s plant location theory
Alfred Weber formulated a theory of industrial location in which an industry is
located where the transportation costs of raw materials and final product is a
minimum. He singled out two special cases. In one the weight of the final
product is less than the weight of the raw material going into making the
product. This is the weight losing case. In the other the final product is heavier
than the raw material that require transport. Usually this is a case of some
ubiquitous (everywhere available) raw material such as water being
incorporated into the product. This is called the weight-gaining case.

COST FACTORS IN LOCATION

1.Labor costs: The cost of labour is a significant consideration. This includes
wages, benefits, and other labor related expenses. labor costs can vary widely
depending on the locations local wage rates, labor laws, and the skill level
required for the workforce.
2.Real estate and rental costs: The cost of acquiring or renting a property for
the business operation is a major expense real estate costs can differ greatly
based on factors such as location, property type, and local property markets.
3.utilities and infrastructure costs: The availability and cost of utilities such
as electricity, water, gases and telecommunications can be operating expenses.
proximity to reliable infrastructure also influences costs.
4.Transportation and Distribution costs: The costs associated with the
transporting raw materials, components and finished products to and from the
business location are important. Access to transportation networks, highways,
ports, and airports can impact distribution costs.
5.Supply chain costs: Proximity to suppliers and customers can influence costs
related to transportation, inventory management, and order fulfillment. Being
closer to suppliers can reduce lead times and transportation costs.
6.Taxation and Incentives: Tax rates, both at the local and national levels, can
greatly affect our business bottom line. some locations offer tax incentives or
subsidies to attract businesses.
7.Competition: The competitive landscape in a particular location can affect
pricing strategies and overall profitability.
8.Risk Factors: Environmental risks, political stability, and economic volatility
in a region can impact business continuity and costs.
TYPES OF SITE LOCATION
1.Village site location: The facilities available at a village site are not as many
as are found in a city but they are more attractive.
Advantages of village site location
 Advantage of single storied buildings.
 Land is available at cheaper rates.
 Open spaces are available.
 Fewer labour troubles
 Absence of restrictions on smoke and disposal of waste.
  The rates and taxes are lower.
Disadvantages of village site location
 Lack of transportation facilities.
 Less number of skilled workers.
 Lack of civic amenities for employees.
 Less number of technical and commercial institutions.
2. City site location: A big city has all the facilities which favour a location for
a plant.
Advantages of city site location:
 Adequate skilled labours
 Municipal services for disposal of waste, water, public health and
education are available.
 High advertising value is available.
 Better Transport facilities
 Banking, repair and related services are available.
 A large local market is available.
Disadvantages of city site location:
 The cost of land is high
 The cost of labour is high
 Factory buildings are not well shaped, ill lighted and ill ventilated.
 House taxes, water taxes, sanitation taxes and other similar taxes are
fairly high.
3.Suburban site location
Suburban sites offer a compromise between the city and the village.
Advantages of suburban site location:
 Open spaces are available
 Fewer labour troubles.
 Adequate skilled labours.
 Better transport facilities.
 Banking, repair and related services are available.

Disadvantages of suburban site location:

  Single storied buildings are costly because land cost is higher than the
village site.
 The cost of labour is high.
 The rates and taxes are higher than the village site location.
 Restrictions have been imposed in regard to smoke and the disposal of
effluents.
PLANT LAYOUT
Meaning of plant layout
It refers to the arrangements of machinery, equipment and other industrial
facilities such as receiving and shipping departments, tool rooms and
maintenance rooms, employment amenities for the purpose of achieving the
quickest and smoothest production at the least cost.
DEFINITION OF PLANT LAYOUT:
According to Moore,” plant layout is a plan of an optimum arrangements of
facilities including personal, operating equipment, storage space, material
handling equipment and all other supporting services along with the design of
the best structure to contain all these facilities.
Objectives of plant layout;
 To ease the manufacturing process.
 To maintain high turnover of in-process inventory
 To modernize the flow of materials through the plant.
 To minimize the materials handling and cost.
 To make effective utilization of cubic space.
 To ensure the flexibility of manufacturing operations and arrangements.
 To provide for employee convenience, safety and comfort.
 To minimize investment in equipment.
 To assist the organizational structure.
Principles of plant layout
 Principle of minimum movement
 Principle pf unidirectional flow
 Principle of efficient space handling
 Principle of inherent safety
 Principle of maximum accessibility
 Principle of minimum handling
 Principle of maximum protection.
 Principle of maximum flexibility.
  Principle of integration of all factors.
FACTORS TO BE CONSIDERED WHILE DESIGNING PLANT
LAYOUT
1, Materials: Materials influence plant layout that is there is a need to provide
for the storage and movement of raw materials in a plant until they are
converted into finished goods. Every factory should buy raw materials
economically when they should be stored properly and moved through
production centre’s efficiently for manual or mechanical operations.
2.product: A layout is designed with the ultimate purpose of producing a
product and its type, i.e. whether a product is light or heavy, big or small, liquid
or solid and its position related to plant layouts.
3.Workers: The layout should also consider the type, position and requirements
of employees. If women workers are employed the layout must be planned after
keeping in mind their particular requirements. Employee facilities like health
and related services, Locker rooms and toilets also influence the layout
significantly.
4.Machinery: The type of the product the volume of production, the type of
process and management policy determines the size and type of machinery to be
installed which in turn influences the plant layout.
5.Type of industry: The type of industry and the method of production influence
the layout of the plant to a great extent. There are 4 types of industry, namely:
 Synthetic
 Analytical
 Conditioning
 Extractive
6.Mangerial policies: Top management policies such as:
 Volume of production and provision for expansion
 Extent of automation
 Purchase policy
 Personnel policy
 Make/Buy decision of a particular component

Importance of good plant layout

  Economics in movement
 Successful use of available area
 Reduction of production delays
 Improved quality control
 Minimum investment in equipment
 Avoidance of bottlenecks
 Better production control
 Better supervision
 Better utilization of labours
Types of plant layout.
1.process or functional layout: This type of layout is also called functional
layout. All machines performing a similar type of operations are grouped at one
location in the process layout e.g., all lathes, milling, machines, cutting
machines etc. in the engineering shop are clustered in their like groups. Thus, all
forging will be done in one area and all the lathes will be placed in another area.
In this type of layout, the process rather than the product has dominating role.
The product is given secondary consideration and is moved for the purpose of
operations to the process section with like machines stationed at a particular
point. This type of layout is more suitable to job order type of production.

Advantages of Process Layout

 It eliminates the duplication of machines and enables the optimum use of
installed capacity.
 It facilitates flexibility in production. It is more flexible than a line layout.
 Different products can be made without changes in the arrangements of
the machine.
 The production capacity is not arranged in rigid sequence.
 The breakdown of one machine does not interrupt the entire production
flow.
  Specialization in supervision becomes possible.
individual incentive schemes can be developed.
Disadvantages of Process Layout
 Due to a lack of straight-line sequence of production, it is impossible to
maintain the line balancing in production. So the problems of bottleneck
and waiting and the idle capacity.

 The cost of material handling increases due to long routing and

backtracking between the processes.
 The processing time is prolonged which reduce the inventory turnover
and increases the investments in inventories.
The inspection cost increases.
 Due to frequent changes in the machine set up, inspection is required at
each stage of the process.
 The cost of supervision increases due to specialist supervisors and more
number of supervisors are required at each process unit.
 The production planning and control become difficult due to complexities
arising in routing, scheduling, dispatching and follow-up.
 It is not possible to implement the group incentive schemes on the basis
of the quantity of the products manufacturing.
 More space is required for internal storing, a reservoir of materials and
provision for the expansion of the particular process section.
2.Product or line layout:
In this type of layout, the machines are arranged in the sequence as required by
the particular product. All machines as required to balance the particular product
line are arranged in a sequential line but not necessarily in the straight line. It is
also known as “the product line layout.”
In this layout, one product goes through all the machines lined up, in the order
required by its manufacture. The best-known example of this type of layout is
seen in motor car production. To make this layout successful, the workload on
the various machines must be balanced. The process of getting even loading at
each stage of production is called line balancing.
In this type of layout, the product is dominating over the process, in the sense
that the product is given the primary importance and the process machine must
remain present at a point where the product needs its services.
Thus, unlike the process layout, the process is given secondary importance in
relation to the product. Product layout is more suitable for continuous flow-
production with few items of production. It does not require frequent changes in
machine set up.

Advantages of Product layout

 Reduced material handling cost due to straight-line production flow.

 Mechanization of material handling between fixed points.

 Line balancing may eliminate bottlenecks and idle capacity.

 Shorter operating cycle due to shorter and speedy movement of materials.

 Maximum utilization of machine and labour capacity through developing

a proper balance between them.

 Effective control over production with reduced supervision by generalists

supervisor. By reducing the manufacturing to simple steps we can often
use less skilled labour.

 Effective quality control with reduced inspection points. It does not

require frequent changes in machine set-up.

 Effective production planning and control. Unlike process layout, the

routing, scheduling, dispatching and follow up are relatively easier.
  Maximum use of space due to straight production flow and reduced need
of interim storing.

 It facilitates the implementation of group incentive schemes for the

workers.

 It is relatively easy to control.

Disadvantages of Product layout
 The duplication of machines and equipment necessitates the increased
investments in them sometime resulting in idle capacity.

 The production flow is regulated through the straightline sequence and

fixed rated capacity, and thus makes it highly inflexible.

 The breakdown of one single machine in the line interrupts the entire
production flow.

 Unlike process layout, the benefits of specialized supervision is not

possible.

 As the entire production is the result of the joint efforts of all operations
in the line, it is difficult to implement individual incentive schemes.

 They are less flexible than others. Any change in product requires
rebalancing the line.
3.Combined Layout
Generally pure process or pure product layout is not found in practice. Both
process and product layouts are mutually exclusive. Proper compromise reaping
the benefits of both the layouts is possible to some extent. So efforts are made to
have the combined layout incorporating the benefits of process and product
layout.
Combined layout is developed as under:
 Product layout for the main product with a process layout for joint or by-
product tapping the idle capacity of product layout along with marginal
 investments required in process layout.

 To diversify the production with a view to tap the idle capacity of the
product layout. Products with a complete negative correlation with the
product line can make the maximum use of idle capacity of the product
layout.

 In the product layout, some process may be segregated from the product
line e.g., objectionable, hazardous, requiring special treatment and
repetitive performance etc.

Advantages of combined layout

 Supervision can be more effective and specialized
 Smooth and continuous operations.
 Manufacturing concerns where several products are produced in repeated
numbers.
Disadvantages of combined Layout
 Higher initial capital investment.
 More skilled labour is required resulting in higher costs.
 Breakdown of one machine will disturb the production process.

4.Fixed position or location layout

It involves the movement of manpower and machines to the product which
remains stationary. This type of layout is preferred where the size of the job is
 large and heavy. Examples for such type of layout is locomotives, ships, boilers,
generators, wagon building, aircraft manufacturing etc.
labour
Final product
resources equipment Ship building yard
(ship)
material

Advantages of fixed position layout:

 The investment on layout is very small.
 The layout is flexible as change in job design and operation sequence can
be easily incorporated.
 Adjustments can be made to meet shortage of materials.
Disadvantages of fixed position layout:
 As the production period being very long so the capital investment is very
high.
 Very large is required for storage of materials and equipment near the
product.
 As several operations are carried out simultaneously so there is possibility
of confusion and conflicts among different workgroups.

5.Cellular plant layouts

Cellular layout is a manufacturing technique that organizes machines,
workstations, and other resources into cells. These cells are self-contained,
meaning that they can perform all the necessary tasks required to produce a
specific product or component.
 Advantages of cellular Layout:
 Reduced material handling costs.
 Shorter flow time in production.
 Simplified production planning
 Cellular layouts are lower work-in-progress inventories.

Disadvantages of cellular Layout:

 Reduced manufacturing flexibility and potentially increased machine
down time.
 Duplicate pieces of equipment may be needed so that parts need not be
transported between cells.