The document discusses facility location and plant layout. It provides information on various factors to consider for optimal facility location such as proximity to markets, transportation, and labor costs. It also describes different models for evaluating potential facility locations, including factor rating, weighted factor rating, load-distance, and break even analysis methods. Additionally, it covers objectives, principles and types of plant layouts including process, product, combination and fixed position layouts. The key factors and models discussed can help companies evaluate and select the best location and layout design for their facilities.

1. FACILITY LOCATION AND
LAYOUT
Prepared by , Guided By,
Piyush bhatt Madhuri mam
Swati parmar
Dipak mer
Submitted to,
Department Of Business Administration,
MK Bhavnagar University,
Bhavnagar.

2. PLANT LOCATION
 Every entrepreneur is faced with the problem of deciding
the best site for location of his plant or factory.
 Plant location refers to the choice of region and the
selection of a particular site for setting up a business or
factory.
 An ideal location is one where the cost of the product is
kept to minimum, with a large market share, the least risk
and the maximum social gain.

3. Reason for firm should look for additional
or alternate location
 To establish new venture
 Expansion of existing business
 Changes in demand and supply
 Company policy on diversification and change of working
condition
 Changing in government policy

4. Alternate options open for
management
 Make or Buy decision
Sub-contract instead of expansion
Expand existing organization
Dispose of the existing plant and build new one

5. Location analysis
 Demographic Analysis
Trade Area Analysis
Competitive Analysis
Traffic analysis
Site economics

6. Cost Site- A (Rs) Site- B (Rs)
Cost of
establishments:
Land and
Buildings
350000 250000
Transport
facilities
20000 30000
Cost of
operations:
Taxes 10000 8000
Labour 100000 70000
Water, power
and fuel
10000 80000
Total 490000 438000
Two sites A and B are evaluated in terms of above mentioned
two costs as follows:

7. Factors influencing plant
location/facility location
1. General locational factors, which include controllable and
uncontrollable factors for all type of organisations.
2. Specific locational factors specifically required for
manufacturing and service organisations.

8. General Locational Factors
1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. Capital
 Controllable factors

9.  Uncontrollable factors
1. Government policy
2. Climate conditions
3. Supporting industries and services
4. Community and labour attitudes

10. Specific Locational Factors for
Service Organisation
1. Favorable labor climate
2. Proximity to markets
3. Quality of life
4. Proximity to suppliers and resources
5. Utilities, taxes, and real estate costs

11. LOCATION MODELS
Various models are available which help to identify the ideal
location. Some of the popular models are:
1. Factor rating method
2. Weighted factor rating method
3. Load-distance method
4. Centre of gravity method
5. Break even analysis

12. 1. Factor rating method
The process of selecting a new facility location involves a
series of following steps:
1. Identify the important location factors.
2. Rate each factor according to its relative importance,
i.e., higher the ratings is indicative of prominent factor.
3. Assign each location according to the merits of the
location for each factor.

13. 4. Calculate the rating for each location by multiplying
factor assigned to each location with basic factors
considered.
5. Find the sum of product calculated for each factor
and select best location having highest total score.

14. ILLUSTRATION 1: Let us assume that a new medical
facility, Health-care, is to be
located in Delhi. The location factors, factor rating and scores
for two potential sites are
shown in the following table. Which is the best location based
on factor rating method?
Sl. No. Location factor Factor
rating
Rating
Location
1
Location
2
1 Facility utilization 8 3 5
2 Total patient per month 5 4 3
3 Employee preferences 5 5 3

15. Sl. No. Location
factor
Factor rating
(1)
Location 1 Location 2
Rating Total Rating Total
1 Facility
utilization
8 3 24 5 40
2 Total patient per
month
5 4 20 3 15
3 Employee
preferences
5 5 25 3 15
Total 69 Total 70
SOLUTION:

16. 2. Weighted Factor Rating Method
 In this method to merge quantitative and qualitative
factors, factors are assigned weights based on relative
importance and weight age score for each site using a
preference matrix is calculated. The site with the highest
weighted score is selected as the best choice.

17. ILLUSTRATION 2: Let us assume that a new medical
facility, Health-care, is to be
located in Delhi. The location factors, weights, and scores
(1 = poor, 5 = excellent) for
two potential sites are shown in the following table. What is
the weighted score for these
sites? Which is the best location?
Sr No. Location factor Weight Scores
L-1 L-2
1 Facility utilization 25 3 5
2 Total patient per month 25 4 3
3 Average time per emergency trip 25 3 3
4 Land and construction costs 15 1 2
5 Employee preferences 10 5 3

18.  The weighted score for this particular site is calculated
by multiplying each factor’s weight by its score and adding
the results:
Weighed score location 1 = 25 × 3 + 25 × 4 + 25 × 3 + 15 × 1 +
10 × 5
= 75 + 100 + 75 + 15 + 50 = 315
Weighed score location 2 = 25 × 5 + 25 × 3 + 25 × 3 + 15 × 2 +
10 × 3
= 125 + 75 + 75 + 30 + 30 = 335
Location 2 is the best site based on total weighted scores.
SOLUTION:

19. 3. Load-distance Method
 The load-distance method is a mathematical model used
to evaluate locations based on proximity factors. The
objective is to select a location that minimizes the total
weighted loads moving into and out of the facility. The
distance between two points is expressed by assigning the
points to grid coordinates on a map. An alternative approach
is to use time rather than distance.

20.  Centre of gravity is based primarily on cost
considerations. This method can be used to assist
managers in balancing cost and service objectives. The
centre of gravity method takes into account the locations of
plants and markets, the volume of goods moved, and
transportation costs in arriving at the best location for a
single intermediate warehouse.
4 Centre of Gravity

21. 5. Break Even Analysis
 Break even analysis implies that at some point in the
operations, total revenue equals total cost. Break even
analysis is concerned with finding the point at which revenues
and costs agree exactly.

23. PLANT LAYOUT

24. Point to consider
1. Meaning
2. Objectives of Plant Layout
3. Principles of Plant Layout
4. Classification of layout

25. 1.Meaning of plant lay-out
 According to Moore “Plant layout is a plan of
an optimum arrangement of facilities including
 Personnel
 operating equipment
 storage space
 material handling equipment and
 all other supporting services along with the
design of best structure to contain all these
facilities”.

26. 2. Objectives of Plant Layout
1.Streamline the flow of materials through the plant.
2. Facilitate the manufacturing process.
3. Maintain high turnover of in-process inventory.
4. Minimize materials handling and cost.
5. Effective utilization of men, equipment and space.
6. Make effective utilization of cubic space.
7. Flexibility of manufacturing operations and arrangements.
8. Provide for employee convenience, safety and comfort.
9. Minimize investment in equipment.
10. Minimize overall production time.
11. Maintain flexibility of arrangement and operation.
12. Facilitate the organizational structure.

27. 3. Principles of Plant Layout
1. Principle of integration
2. Principle of minimum distance
3. Principle of cubic space utilization
4. Principle of flow
5. Principle of maximum flexibility
6. Principle of safety, security and satisfaction
7. Principle of minimum handling

28. 4.Classification of layout
 Layouts can be classified into the following
five categories:
1. Process layout
2. Product layout
3. Combination layout
4. Fixed position layout

29. 1. Process Layout
Model of process Layout

30. Advantages of process Layout
 Flexibility
 better utilization of production facility
 Lower investment
 Increase knowledge of supervisors

31. Limitation of process Layout
 Reduce material handling efficiency
 Increase in cost
 Decrease productivity

32. 2. Product Layout
Model of product Lay-out

33. Advantages of product Layout
 In-process inventory is less
 Decrease handling cost
 Mechanized handling systems
 Unskilled workers can learn and manage the
production.
 Manufacturing cycle is short due to
uninterrupted flow of materials.

34. Limitation of product Layout
 Stop entire production
 Difficult to change product design
 Required high investment
 Lack of flexibility

35. 3. Combination Layout
combination
type of layout for manufacturing different sized gears

36. 4. Fixed Position Layout
Fixed type of position Layout

37. Advantages of Fixed position Layout
 interest and pride in doing the job
 enlargement and upgrades the skills
 Flexibility
 Layout capital investment is lower.