Plant location

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PLANT LOCATION

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Plant location

  1. 1. PLANT LOCATION:PLANT LOCATION: FACTORS & QUANTITATIVE TECHNIQUESFACTORS & QUANTITATIVE TECHNIQUES Presented ByPresented By Hardeep Kaur ChauhanHardeep Kaur Chauhan Pankaj GoyalPankaj Goyal
  2. 2. IMPORTANCE OF PLANTIMPORTANCE OF PLANT LOCATIONLOCATION
  3. 3.  Determines operating and capital costs.Determines operating and capital costs.  Determines the nature of investment costs toDetermines the nature of investment costs to be incurred and also the level of manybe incurred and also the level of many operating costs.operating costs.  Implies a new allocation of capacity toImplies a new allocation of capacity to respective market area.respective market area.  Fixes some of the physical factors of theFixes some of the physical factors of the overall plant design e.g. heating andoverall plant design e.g. heating and ventilation requirements etc.ventilation requirements etc.
  4. 4. NATURE OF PLANT LOCATIONNATURE OF PLANT LOCATION
  5. 5. Plant RelocationPlant Relocation   Shift in the structure of the market orShift in the structure of the market or movement of the markets.movement of the markets.  Changes in the nature and costs ofChanges in the nature and costs of transportationtransportation  Changes in the costs and availability ofChanges in the costs and availability of materialsmaterials  Changes in the pricing policy of theChanges in the pricing policy of the enterpriseenterprise
  6. 6. CONTD….CONTD….  Undesirable labor situationUndesirable labor situation  Demolition, compulsory purchase of premises orDemolition, compulsory purchase of premises or national legislation.national legislation.  In availability of labor, rise in labor costs, change inIn availability of labor, rise in labor costs, change in other factor viz. education housing facilities etc.other factor viz. education housing facilities etc.  Relocation of various associated industries andRelocation of various associated industries and plantsplants  Scientific discoveries and developments, new fieldsScientific discoveries and developments, new fields of technology. Increasing competition etc.of technology. Increasing competition etc.
  7. 7. ALTERNATIVES FORALTERNATIVES FOR RELOCATIONRELOCATION
  8. 8.  Not to expand the plant and to allow theNot to expand the plant and to allow the growth in business to be enjoyed by othergrowth in business to be enjoyed by other competitors in the field.competitors in the field.  Instead of expanding the physical facilitiesInstead of expanding the physical facilities the sub-contracting policy may be expandedthe sub-contracting policy may be expanded to achieve overall expansionto achieve overall expansion  Expand the plant at the present locationExpand the plant at the present location
  9. 9. CONTD…  The existing plant may be retained butThe existing plant may be retained but other facilities may be developed at otherother facilities may be developed at other placesplaces  Abandon the existing plant and relocate allAbandon the existing plant and relocate all facilities elsewhere.facilities elsewhere.
  10. 10. LOCALISATIONLOCALISATION
  11. 11. Disadvantages  Localization leads to accumulation of too many workers atLocalization leads to accumulation of too many workers at one place making the atmosphere crowdy and unhealthyone place making the atmosphere crowdy and unhealthy  It leads to an unbalanced development and unequalIt leads to an unbalanced development and unequal distribution of wealthdistribution of wealth  It is unsafe in the case of war and due to other safetyIt is unsafe in the case of war and due to other safety reasonsreasons  Local population becomes economically dependent on theLocal population becomes economically dependent on the industries of that area and may face financial difficultyindustries of that area and may face financial difficulty when the industries in the area fail in their performancewhen the industries in the area fail in their performance  The market of the product may be over exhausted.The market of the product may be over exhausted.
  12. 12. DELOCALIZATIONDELOCALIZATION
  13. 13.  Development of large national marketsDevelopment of large national markets  Various incentives and concessions in tax, building,Various incentives and concessions in tax, building, land etc. given by urban and rural communities toland etc. given by urban and rural communities to encourage establishment of industries in their areaencourage establishment of industries in their area  Many times decentralization leads to betterMany times decentralization leads to better coordination, improved supply of labor and rawcoordination, improved supply of labor and raw material and better distribution of productsmaterial and better distribution of products  Balanced regional developmentBalanced regional development Reasons responsible for DELOCALISATION
  14. 14. FACTORS RESPONSIBLE FORFACTORS RESPONSIBLE FOR PLANT LOCATION CHOICESPLANT LOCATION CHOICES
  15. 15.  Availability of raw materialAvailability of raw material  Nearness to the potential marketNearness to the potential market  Location should be near to the source ofLocation should be near to the source of operating requirementsoperating requirements  Supply of labourSupply of labour  Transport and communication facilitiesTransport and communication facilities
  16. 16.  Integration with other group ofIntegration with other group of companiescompanies  Suitability of land and climateSuitability of land and climate  Availability of housing, other amenitiesAvailability of housing, other amenities and servicesand services  Local building and planning regulationsLocal building and planning regulations  Safety requirementsSafety requirements
  17. 17.  Other consideration for the choice ofOther consideration for the choice of location can be:location can be:  Availability of raw material in futureAvailability of raw material in future  Market expansion due to increase inMarket expansion due to increase in local population or due to changes inlocal population or due to changes in habits and tastes of consumers.habits and tastes of consumers.
  18. 18. LOCATION ANALYSISLOCATION ANALYSIS
  19. 19. Measures for the selection of the locationMeasures for the selection of the location  Involving quantitative factorsInvolving quantitative factors  Comparative cost analysisComparative cost analysis  Break-even and dimensional analysisBreak-even and dimensional analysis  Comparison of quantitative factorsComparison of quantitative factors
  20. 20. ANALYSIS BASED ONANALYSIS BASED ON QUANTITATIVE FACTORSQUANTITATIVE FACTORS
  21. 21. Comparative Cost ChartComparative Cost Chart
  22. 22. Least Cost Centre AnalysisLeast Cost Centre Analysis The transportation costs associated with variousThe transportation costs associated with various location alternatives are considered.location alternatives are considered. Limitations are:Limitations are:  Choice of plant location is assumed to beChoice of plant location is assumed to be entirely dependent upon the minimization of theentirely dependent upon the minimization of the operational costs.operational costs.  Operational costs are assumed to be linearlyOperational costs are assumed to be linearly related to the distances involved.related to the distances involved.
  23. 23. Break-even ChartBreak-even Chart
  24. 24. Dimensional AnalysisDimensional Analysis
  25. 25. Contd…Contd…
  26. 26. COMPARISON OFCOMPARISON OF QUALITATIVE FACTORSQUALITATIVE FACTORS
  27. 27. COMPARATIVE CHARTCOMPARATIVE CHART
  28. 28. Ranking and Weight methodRanking and Weight method Step (I)Step (I) Examine the various factors and assign to these someExamine the various factors and assign to these some weights representing the significance of the factors to theweights representing the significance of the factors to the situation being studied. It is convenient to isolate the leastsituation being studied. It is convenient to isolate the least significant factors and give it a weight one. All othersignificant factors and give it a weight one. All other factors are then expressed as a multiple of this factor andfactors are then expressed as a multiple of this factor and appropriate weight are assigned. Evidently extremeappropriate weight are assigned. Evidently extreme accuracy cannot be expected in assignment of weightsaccuracy cannot be expected in assignment of weights Step (II)Step (II) Each location is examined and ranked for each factor.Each location is examined and ranked for each factor.
  29. 29. Contd…Contd… Step (III)Step (III) Each ranking is then multiplied by the correspondingEach ranking is then multiplied by the corresponding weight and the scores so obtained are totaled over factorsweight and the scores so obtained are totaled over factors for each location. The location having maximum total isfor each location. The location having maximum total is considered to be most suitable.considered to be most suitable. It is observed that a location selected on the basis ofIt is observed that a location selected on the basis of quantitative factors may not tally with the choice based onquantitative factors may not tally with the choice based on comparison of qualitative factors. In case both the choicescomparison of qualitative factors. In case both the choices agree then the final selection is made otherwise theagree then the final selection is made otherwise the management may make a subjective choice. Generally costmanagement may make a subjective choice. Generally cost criterion is given preference.criterion is given preference.
  30. 30. Selection of SiteSelection of Site  Should be well connected with rail, road, and riverShould be well connected with rail, road, and river transportstransports  Should have efficient sewage system for the disposalShould have efficient sewage system for the disposal of water and waste material.of water and waste material.  Should have good and peaceful surroundings.Should have good and peaceful surroundings.  Should have sub-soil which is capable of bearing theShould have sub-soil which is capable of bearing the load of the building, plant and equipment.load of the building, plant and equipment.  Should have sufficient land to meet the present asShould have sufficient land to meet the present as well as the future space requirements of the plant.well as the future space requirements of the plant.
  31. 31. Advantages & DisadvantagesAdvantages & Disadvantages
  32. 32. THANK YOUTHANK YOU

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