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Plant location

  2. 2. Introduction :- <ul><li>Plant location may be understood as the function of determining where the plant should be located for maximum operating economy and effectiveness. </li></ul><ul><li>The selection of a place for locating a plant is one of the problems, perhaps it is one of the task for the entrepreneur while launching a new enterprise. </li></ul>
  3. 3. <ul><li>Selection of a location is on pure economic considerations will ensure an easy and regular supply of raw material, labour, efficient plant layout to reduce cost of production. </li></ul><ul><li>Once a mistake is made in locating a plant, it becomes extremely difficult and costly to correct it. </li></ul>
  4. 4. Need for plant location :- <ul><li>When the business is newly started. </li></ul><ul><li>The existing business has outgrown its original facilities and expansion not possible. </li></ul><ul><li>The volume of the business or the extent market necessitates the establishment of branches. </li></ul><ul><li>A lease expires and the landlord does not renew the lease. </li></ul><ul><li>Social and economic reasons i.e., in-adequate labour supply and shifting of the market. </li></ul>
  5. 5. Steps in location :- <ul><li>With in the country or outside </li></ul><ul><li>Selection of the region </li></ul><ul><li>Selection of the locality or community </li></ul><ul><li>Selection of the exact site </li></ul>
  6. 6. With in the country or outside
  7. 7. 1.With in the country or outside :- <ul><li>The first step in locating a plant is to decide whether the plant is located domestically of internationally. </li></ul><ul><li>Due to globalization the issue of home or foreign is gaining more relevance. </li></ul><ul><li>The choice of particular country depends on such factors like political stability, export & import quotas, currency, and exchange rates </li></ul>
  8. 8. 2: Selection of the region
  9. 9. 2.Selection of the region :- <ul><li>Availability of raw material </li></ul><ul><li>Nearness to the market </li></ul><ul><li>Availability of power </li></ul><ul><li>Transportation facilities </li></ul><ul><li>Suitability of climate </li></ul><ul><li>Government policy </li></ul><ul><li>Competition between states </li></ul>
  10. 10. a. Availability of raw material:- <ul><li>As a manufacturing unit is engaged in conversion of raw materials in to finished products, it is very essential that it should be located in a place where the supply of raw materials is maximum. </li></ul><ul><li>Advantages :- </li></ul><ul><li>- Reduce in cost of transportation. </li></ul><ul><li>- Regular and proper supply of raw material </li></ul>
  11. 11. <ul><li>Saving in the cost of storage of material </li></ul><ul><li>Example :- </li></ul><ul><li>Nizam sugar plant is located in Nizambad district where you find sugarcane is cultivated more in this district. </li></ul><ul><li>Sugarcane is a raw material for sugar factory. </li></ul>
  12. 12. b. Nearness to the market :- <ul><li>Since goods are produced for sale, it is very essential that a plant should be located near to the market. </li></ul><ul><li>Advantages :- </li></ul><ul><li>- Reduction in cost of transportation of finished goods to the market </li></ul><ul><li>- Availability of render prompt services to the consumer </li></ul>
  13. 13. <ul><li>The ability to adjust production program to suit the likes and dislikes of consumers. </li></ul><ul><li>Example :- </li></ul><ul><li>- Auto-servicing and repairing units. </li></ul>
  14. 14. c. Availability of power :- <ul><li>Power is essential to move the wheels of an industry. </li></ul><ul><li>Industries using electricity have to be located where the supply of power is available more </li></ul><ul><li>Example:- </li></ul><ul><li>Steel industries are located near to power industries </li></ul>
  15. 15. D:- Transport facilities:- <ul><li>Transport facilities are very important for bringing raw material to the factory. </li></ul><ul><li>Transport facilities are very important for carrying finished goods to the market. </li></ul><ul><li>A place which is well connected by rail, road, air and water transport facilities is suitable for plant location. </li></ul><ul><li>Example :- Mumbai is best suitable for transport facilities to locate industries </li></ul>
  16. 16. E : Suitability of climate:- <ul><li>It is important for two reasons: </li></ul><ul><li>- There are certain industries which mainly depends on nature of production. </li></ul><ul><li>Example :- Humid climate for Cotton textiles and Jute. </li></ul><ul><li>- Based on climate which also affects the labour efficiency </li></ul>
  17. 17. F: Government policies:- <ul><li>Government policies like </li></ul><ul><li>- licensing policy </li></ul><ul><li>- Freight rate policy </li></ul><ul><li>- Establishing a unit in the public sector in remote areas </li></ul><ul><li>- Institutional finance and government subsidies </li></ul><ul><li>Example :- NANO car projected </li></ul>
  18. 18. G :- Competition between states:- <ul><li>Various states offer investments, susidies and sales tax exemptions to new units. </li></ul><ul><li>The incentives may not be big but help to large scale industries but not for small and medium scale industries. </li></ul><ul><li>Example :- </li></ul><ul><li>Pasco steel company in Orissa </li></ul>
  19. 19. 3: Selection of the community
  20. 20. <ul><li>Selecting a particular community is the third step in the process of plant location. </li></ul><ul><li>The selection of a locality in a particular region influence following factors :- </li></ul>
  21. 21. A : Availability of labour :- <ul><li>Labour is an important factor in the production of goods. </li></ul><ul><li>A sufficiency of labour supply at reasonable wages is very essential for smooth and successful working of the industries. </li></ul><ul><li>Now a days the influence of skilled labour on plant has lost because of mobility. </li></ul>
  22. 22. B : Finance and research facilities: <ul><li>Adequate capital is essential for the successful working of any organisation </li></ul><ul><li>A place where facilities for raising capital are available attracts new industries. </li></ul><ul><li>Example :- Gujarath </li></ul><ul><li>The manufacturing unit has to be dynamic i.e., it should always be on the look out for new technology. </li></ul>
  23. 23. C :- Civic amenities for workers:- <ul><li>Besides of working conditions inside the factory, the employees need facilities outside it. </li></ul><ul><li>Recreation facilities such as clubs, parks, schools for children etc must be provided for the employees. </li></ul><ul><li>Example: All facilities provided by BHEL to their employees </li></ul>
  24. 24. D : Availability of water & fire:- <ul><li>Some industries require plenty of water for there working. </li></ul><ul><li>Example: NHPC power plant which uses water to produce power </li></ul><ul><li>Some industries require fire for there working. </li></ul><ul><li>Example: NTPC power plant which makes fire from coal to produce power </li></ul>
  25. 25. E: Local taxes and restrictions:- <ul><li>Local authorities collect charges for the supply of water, electricity and other facilities. </li></ul><ul><li>They also collect various other taxes from industrial units. </li></ul><ul><li>The imposed restrictions on the location of new unit in the public interest. </li></ul>
  26. 26. 4: selection of the exact site
  27. 27. A: Soil, size and topography: <ul><li>For the industries based on agriculture require fertile soil to locate a plant. </li></ul><ul><li>The area of the land should be such as to accommodate not only the existing purpose but offer for scope for future expansion also. </li></ul><ul><li>The topography of the place deserves consideration to some extent. A hilly rocky and ruff terrain is unsuitable for plant location. </li></ul>
  28. 28. B: Disposal of waste :- <ul><li>The problem of the disposal of waste is common to many industries, particularly chemical, sugar, steel and leather industries. </li></ul><ul><li>The site selected for location of the plant should have provision for the disposal of waste. </li></ul><ul><li>Example: NTPC use coal ash ( waste ) to construct bricks </li></ul>