This document discusses various methods for selecting an optimal location for a new plant. It describes point rating, factor rating, break-even analysis, qualitative, and center of gravity methods. The point rating method assigns points to different location factors like fuel, transportation, water, labor, etc and chooses the location with the highest total points. The factor rating method rates each location based on factors weighted by importance. The break-even analysis examines costs and revenues at different output levels. The qualitative method weighs economic and non-economic criteria. The center of gravity method places existing locations on a grid and calculates the centroid location based on distances and shipment volumes.

2. • Soubhik Ray
• Shreya Khatke
• Akshat Singh
• Ankit Kumar Dudani
• Chirag Patil
• Farhan Sheikh
• Ayusman Sahu

3. INTRODUCTION
 A good site location is an important activity that helps in reducing cost of
production & distribution to a large extent this helps in evaluating the
competitive strength & the profit margin of the business.
 Location of business involves large & relatively permanent investment. Hence
while selecting a site it is necessary to consider all the technical , commercial,
& financial aspects & then select a site that may provide maximum profit.

4. INTRODUCTION(conti…)
 If the location of business is not done properly , all the money spent on factory
on buildings, machinery , etc, will go waste and the owner will suffer huge loss.
 Therefore the site of the location should be selected very carefully as it decides
the fate of the business

5. NEED OF A PLANT LOCATION
• When the business is newly started.
• Expansion of existing plant.
• The increased volume of business and extent of the market size.
• Changes in the cost and availability of materials.

6. NEED OF A PLANT LOCATION (Conti…)
• Availability of transportation.
• A lease expires and landlord does not renew the lease.

7. LOCATION THEORIES
• Albert Weber in 1909, Classified the Factor in location as two factors :
Primary
Secondary

8. STEPS INVOLVED IN SELECTING A LOCATION
Step 1: Making a Country Decision
Political Stability.
Currency And Exchange Rate.
Cultural & Economical Peculiarities.
Step 2: Selection Of Region
Availability of Raw Material , power.
Transport Facilities.
Government Policies & Suitability of climate.
Step 3: Community Selection
Availability of labour , Water.
Complimentary / Competing Industries.
Civic Amenities for worker.
Step 4: Site Selection
Presence Of right type of soil.
Provision For water disposal.
Well Connected by Road , Rail & Water.
PLANT LOCATION

9. PLANT LOCATION
METHODS

10. POINT RATING METHOD
• In this method points are assigned to each factor.
• The site with the highest total number of points is considered superior to other sites.
• It’s the easiest method and is highly recommended.

11. HOW POINTS ARE ASSIGNED:
Here we see that Location B has an advantage over Location A
Factors Points to be
assigned
Location
A B
FUEL 300 200 250
TRANSPORTATION 200 150 150
WATER SUPPLY 100 100 100
LABOUR 250 220 200
POLLUTION
REGULATIONS
30 20 20
SITE 50 40 30
LIVING 150 100 125
TOTAL 1080 830 875

12. FACTOR RATING METHOD
Factor rating method involves giving rating to each factor based on its importance.
• Steps Involved :
 Identify and list down all the relevant factors for the location decision.
 Establish the relative importance of each factor in the final decision.
 Rate the performance of each candidate location using a rating mechanism.
 Compute a total score for each location based on its performance against each
factor and rank them in the decreasing order of the score.

14. BREAK-EVEN ANALYSIS METHOD
• The Break-even analysis helps in finding out the relationship of costs and
revenues to output.
• It enables the financial manager to study the general effect of the level of output
upon income and expenses and, therefore, upon profits.
• This analysis is usually presented on a break-even chart. It helps in understanding
the behavior of profits in relation to output.
• Such an understanding, among other things, is significant in planning the financial
structure of a company.

15. GRAPHICAL REPRESENTATION OF BREAK-
EVEN ANALYSIS

16. QUALITATIVE METHOD
• If economic criteria are not sufficiently influential to decide the location alternative, a
system of weighing the criteria might be useful in making a plant location decision. This is
called Qualitative factor analysis method.

18. CENTER OF GRAVITY METHOD
• Place existing locations on a coordinate grid.
a)Grid origin and scale is arbitrary
b)Maintain relative distances
• Calculate X and Y coordinates for ‘center of gravity’
a)Assumes cost is directly proportional to distance and volume shipped

19. ILLUSTRATION
A department store has branches in four locations : A, B, C & D.
Department Store has a Ware House at D and plans to seek the central
location of the new house ware.
Previously, it has been determined in advance the coordinates of 0.0. Store
locations in A (30.120); D (130, 130), C (90, 110) and B (60.40).
Total demand for containers every month for A (2000); D (1000), C (1000) and
B (2000). Location A has coordinates d (1, x) = 30, d (1, y) = 120, and W1 =
2000.
By using equations Center of gravity is obtained the desired central location.

21. THANK YOU