3.facilities planning


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3.facilities planning

  1. 1. Facilities planning: location  Site selection is an important activity which decides the fate of the business. A good location reduces the cost of production and distribution to a considerable extent.
  2. 2. Need for selecting a good location may arise in following conditions (i) While starting a new factory (ii) During the expansion of existing plant (iii) Where the existing plant is to be relocated at some other place, to remove the drawbacks of the present location or to gain the benefits of a still better location.
  3. 3. Problem of location The problem of site selection of a factory can be solved in following three stages: (i) Selection of region (ii) Selection of locality (iii) Selection of actual site.
  4. 4. Selection of region  Generally, the geographical area is divided on the basis of natural regions or political boundaries within the nation. The suitability of various regions is considered on the basis of comparative cost advantage available out of the possible regions.
  5. 5. Selection of locality (i) Urban area (ii) Rural area (iii) Suburban area
  6. 6. Selection of site  While selecting the site, the type of development of land, cost of leveling etc., possibility of plant expansions and other infrastructure facilities like transport, banking, power, communication, postal facilities etc. are considered.
  7. 7. Factors affecting size of firm (i) Availability of capital (ii) Entrepreneurial ability and efficiency (iii) Risk of uncertanities: It is of four types (a)Permanent change (b)Cyclical change (c)Seasonal fluctuations (d)Erratic fluctuations
  8. 8. (iv) Type of organization (v) Availability of inputs (vi) Nature of products (vii) Law of returns (viii)Government regulation
  9. 9. Factors affecting plant location Primary factors (I) Supply of raw material (II) Nearness to the market (III) Transport facility (IV) Labor supply (V) Availability of power (VI) Supply of capital
  10. 10. • Facilities • Natural factors • Political factors • Government subsidies and facilities • Historical and religious factors • Initial start and goodwill • Personal factors • Miscellaneous factors (B) Secondary factors
  11. 11. Selection of actual site Availability of cheap land to build and expand this plant Cost of land development Repair facilities Facility for housing the workers and if necessary their transport from the place of residence of work site Cost of laying the water supply and providing sewage and disposal of waste Post and telegraph facility
  12. 12. Cheap facilities for disposing of trade waste Any restriction imposed by the town planning department, local bye laws Taxes, fire protection etc Economic survey of site selection Computation of investment and cost of production and distribution
  13. 13. • Urban area • Rural area • Sub-urban area There are broadly three possible alternatives open for the selection of the locality of the industrial unit
  14. 14. Urban area • Good transportation facilities are available • Good postal and communication services are available • Banking and credit facilities are available • Insurance services available • Sufficient storage facilities including cold stores • Advantage of vicinity of market • Facility of ancillary and service units Advantages of urban area
  15. 15. Ample availability of skilled and unskilled workers Sufficient passenger transport facility Educational medical and recreational facilities Water supply, drainage and fire fighting facilities available
  16. 16. Disadvantages of urban area High cost of land Sufficient land is not available Cost of labor is high Strong trade unions Extra taxes Municipal restrictions The industrialization in city gives birth to slums and dirty residence which creates the typical problems of sanitation and health
  17. 17. Rural areas:- Advantages Land is available at cheaper rates Sufficient land availability Cheap labor Low rate of labor turnover No local taxes No municipal restrictions No slums and dirty residence No danger of fire as there is no congestion No danger of bombardment in war time
  18. 18. Limitations of rural areas Lack of transport facilities Lack of postage and telegraph services Lack of banking and credit facilities Absence of insurance services Storing and warehousing facility not available Passenger transport facility not available Lack of ancillary and service units High cost of distribution Lack of skilled workers Absence of recreational facilities, good educational institutes etc
  19. 19. Sub urban area: Advantages Land is available at cheaper rates as compared to urban area Adequate land Good infrastructure facility Labor easily available Good educational facilities Nearness to market
  20. 20. Limitations of sub urban area It may get converted into urban area through development process and we may face the same difficulties as in the case of urban areas.
  21. 21. Recent trends in the location of industries Priority to the suburban areas Industrial development in notified backward areas Establishment of industrial estate Decentralization of industry Increased role of govt. in location decision of industry
  22. 22. The end