This document discusses factors that affect decisions regarding the location of manufacturing plants. It outlines several key considerations: 1. Proximity to customers and markets to reduce transportation costs and better meet demand. 2. Proximity to raw materials, especially bulky materials, to reduce high shipping costs. 3. Good transportation infrastructure like roads, rail, airports for movement of goods and people. 4. Reliable power availability as interruptions increase costs and disruptions. 5. Basic amenities where the plant is located like water, sewage, security, and housing for employees. 6. Supportive government policies through tax breaks, development zones, and industry promotions. 7. Avoid

1. 6.9 DEFINITION OF LAYOUT PLANNING
We can define layout as, ‘The physical location of the various departments/units of a facilitywithin the
premises of the facility.’ The departments must be locatedbased on some consideration. The common
considerations are 1. Logical sequence of processingoperation
2. Direction of material flow and material handling.
3. Aesthetic considerations .
4. Government regulations .
5. Special requirements The entrance and exit gates are usuallycritical in the layoutplanningof facilities.
6.10 OBJECTIVES OF A PLANT LAYOUT
Plantlayout is the method to plan and arrange materials andfacilities so that a steady flow of
production is ensuredat minimumcost. A good plant layout always results in comfort and satisfaction of
workmen and this automaticallyincreases the production. A bad plant layout leads to accidents and
unnecessaryproblems.
A good plant layout is designedto achieve the followingobjectives:
1. Economic handlingof materials and finishedgoods
2. Fast and efficientqualityproduction
3. Enhancedutilizationof available space
4. Flexibilityin change of plant design and possibility of expansion at a later date
5. Improvement in work condition leadingto higher productivity
6. Unidirectional/systematic flowof production operation
7. Reduction in waitingtime
8. Reduction in manufacturingcost
6.11 ADVANTAGES OF A GOOD PLANT LAYOUT
A good plant layout results in better production and lower costs. The advantages of a good plant layout
are as follows:
1. Well-organizedworkspace:
A good plant layout means well-organizedworkspace with adequate facilities providedfor the machines
as well as for the workmen.
Proper arrangementof machineries andtools eliminates congestion. The materials requiredare stored
in their appropriate places so there is no confusion.
Workmen are also distributedto their respective departments and there is no confusion in work.
2. Better workingconditions:
A good plant layout results in labour satisfaction due to improved and clean workingconditions. It has
been well-documentedthat motivation level increases when lightingand other aesthetics are improved.
Safety of workmen is another important factor. A good plant layout ensures that the machine are
properlyplaced, with adequate space in between so that there is no congestion and no danger of the
workmen getting injured. This provides safety to the workmen and creates a good environmentfor work.

2. 3. Minimization of material handlingcosts:
A good plant layout minimizes material handlingcosts. The machineryand equipmentare placedin
such a manner that there is no difficultyin transferringmaterials between workstations.The provision of
adequate material handlingsystems will ensure that there is minimal labour cost, labour fatigue, etc., and
labour can be utilizedin productive jobs.
4. Minimization in damage and spoilage of material:
In a good plant layout, materials are handledproperlywhich results in good qualityof production. There
is minimumdamage and spoilage of materials.Minimizingwaste also leads to increase in profits for a
company.
5. Flexibilityin changingproduction conditions:
A good layout provides adequate space for future expansions,layingadditional workstations,etc. The
advantage is that in future if the market conditions change, the firm can easily put up new machinery,
etc. without havingto dismantle the existing ones and with minimum hindrance to the daily schedule or
work.
6.12 TYPES OF LAYOUT
There are four basic types of layout.
LAYOUT
1. Product
2. Process
3. Project or Cellular Fixedposition
6.14 METHODOLOGY OF LAYOUT PLANNING
6.14.1 Line or ProductLayout
This is easier to plan since the machines have to be arrangedor laidout as per the sequence of
operations involvedin convertingthe raw material into finishedgoods. The problem in line layout is not
of how to sequence or relativelyposition the work areas,but how to group the work elements in such a
manner that there is very little idle time between the wor centres.
plant LOCATION
6.4 FACTORS AFFECTING LOCATION DECISION
In this section, you will learn about the various factors that affect decisions regardingchoice of location.
These factors are explainedin the followingsections.
6.4.1 Proximityto Customers (Markets)
When the plant is located near the customers/markets,the cost of transportation is low. This reduces the
product cost. Most small ancillary units are located near big automotive factories.The OEMs (Original
EquipmentManufacturers) are the institutional customers of small parts, components,or sub- assemblies
from these ancillaryunits.The Maruti Joint Venture Complex at Gurgaon near the Maruti Suzuki car
factory is a good example of how proximity to the customer reduces the transportation cost of auto
ancillaryunits, which supply parts, components, sub-assemblies,etc. for making the Maruti car. Proximity
to markets also allows companies to meet sudden spurt in demand, thus providing an advantage over
competitors who are located at far-off places.That is why we find hospitals,schools, post offices,banks,
insurance companies,etc. located in high population zones so that they are able to serve a large number
of customers.

3. 6.4.2 Proximityto Raw Materials
Why are the integratedsteel plants of SAIL located in Bihar, West Bengal and Orissa? This is because of
the large presence of iron ore, coal, dolomite and limestone mines in these regions, which are the basic
raw materials for steel making. Proximityto the source of raw materials is an important considerationfor
facilitylocation, especiallyif the raw materials are bulky, and huge shippingcosts will be incurredin
transportingthem. Where it becomes absolutelynecessaryto transport them, it is found that cost of the
material is equal to the shippingcost thus making the raw materials very costly at the point where they
are used.
6.4.3 Good Transportation Facilities
Good transportation facilities arenecessaryfor movement of goods and people. Regions near metro
cities have these facilities,as they have a good network of rail, air, water, and road transportation.
6.4.4 Availabilityof Power
Uninterruptedpower supply is a basic requirementof most industries.Companies have to set up their
own DG sets or have captive power plants if they are located in areas with power problems. This
increases the cost of the product, besides additional problems of runningthe DG sets, captive power
plants, etc.
6.4.5 Basic Amenities
The location site should have certain basic facilities like sewage system, piped water supply, security, etc.,
that are managedby the local municipality. Roads up to the factory premises are always desirable. If
these basic amenities are provided, it will be easier for the employees and they will be willingto work in
that factory. Availabilityof housingfacilities,schools,colleges,banks, post office, hospitals,etc. are
added advantages for locatinga facilityin an area.
6.4.6 Government Policies
Relaxedtaxation policies, excise duty exemption and various other promotional efforts attract industrial
activities in a region. PondicherryandDaman and Diu are declared‘no sales tax regions’ and we find that
many companies have their offices/warehouses locatedthere. Many state governments promote
industrial activities in their regions by creatingIndustry DevelopmentZones, Special Economic Zones,
etc. The governments of Karnataka, Andhra Pradesh, Tamil Nadu and UP have createdsoftware
development parks, where facilities such as high-speedInternet, servers,etc. are providedto software
companies at subsidizedrates. Agriculture gets maximum subsidies from the central as well as many
state governments. Various processingplants of agricultural andhorticultural products locatedin these
states can avail of these advantages.Before locatinga facilityat a particular site, the government policies
of that region must be considered.
6.4.7 Environmental andCommunity Considerations
Many state governments have strict environmentalpolicies,which have to be followedby the industries
operatingthere. States such as Uttaranchaldo not give permission to such industries which release toxic
effluents.Opposition from the community regardingthe construction of a plant in their region can
disrupt the whole project. The Sardar Sarovar Dam project is an example where opposition from the
locals has interruptedthe construction of the dam over the Narmada.. In the Chipko Movement, started
by S.L Bahuguna, the locals embraceda tree each, and did not allow the officials to cut the trees and
thereby eliminate the forest. After the Union Carbide factory disaster in Bhopal some decades ago, every
new factory faces close scrutinyon the environmental frontin the area.