3. What is plant location?
• Plant location refers to the choice of
region and the selection of a particular
site for setting up a business or
factory.
• But the choice is made only after
considering cost and benefits of
different alternative sites.
3
4. Contd..
• It is a strategic decision that cannot be
changed once taken.
• If at all changed only at considerable
loss, the location should be selected as
per its own requirements and
circumstances.
• Each individual plant is a case in itself.
Businessman should try to make an
attempt for optimum or ideal location. 4
5. What is an ideal location?
• 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.
• It is the place of maximum net
advantage or which gives lowest unit
cost of production and distribution.
5
6. Factors influencing the selection of location
Raw
Material
Competiti
Market
on
FACTORS
Environme Infrastruct
ntal ural
Factors Facilities
Laws &
Regulation Labour
s
6
7. SIGNIFICANCE
• From the discussion above, we have already
learnt that location of a plant is an important
entrepreneurial decision because it influences
the cost of production and distribution to a
great extent.
• In some cases, you will find that location may
contribute to even 10% of cost of manufacturing
and marketing. Therefore, an appropriate
location is essential to the efficient and
economical working of a plant. A firm may fail
due to bad location or its growth and efficiency
may be restricted.
7
8. Locational analysis
• Locational analysis is a dynamic
process where entrepreneur analyses
and compares the appropriateness or
otherwise of alternative sites with the
aim of selecting the best site for a
given enterprise.
8
9. LOCATIONAL ANALYSIS
Site Demographic
economics Analysis
Traffic Trade Area
analysis Analysis
Competitive
Analysis
9
10. Plant Layout
A plant layout can be defined as follows:
Plant layout refers to the arrangement of
physical facilities such as :
- machinery
- equipment
- furniture etc. within the factory building in
such a manner so as to have quickest flow of
material at the lowest cost and with the least
amount of handling in processing the product
from the receipt of material to the shipment of
the finished product.
10
11. “Plant layout ideally involves allocation
of space and arrangement of
equipment in such a manner that
overall operating costs are minimized.”
- J. L. Zundi
11
12. Plant Layout
Plant layout embraces the physical
arrangement of industrial facilities.
This arrangement (either installed or
planned) includes the space needed for-
• Operating equipment & personnel.
• Material movement.
• Storage.
• Indirect laborers.
• Supporting activities & services.
12
13.
14. Types of Layout
From the point of view of plant
layout, we can classify small business or
unit into three categories:
- Manufacturing units
- Traders
- Service Establishments
14
15. Manufacturing Units
Product or line layout
Process or functional
layout
Fixed position or
location layout
Combined or group
layout
15
16. Product or line layout
e.g. in a paper mill, bamboos are fed
into the machine at one end and paper
comes out at the other end. The raw
material moves very fast from one
workstation to other stations with a
minimum work in progress storage and
material handling.
16
17. Traders Units
Full service
layout
Self service
or modified Special
self service layouts
layout
Traders
Units
17
18. Services centers and
establishment
• Services establishments such as
hotels, restaurants, must give due
attention to client convenience, quality
of service, efficiency in delivering
services and pleasing office ambience.
18
19. Contd…
• In today‟s environment, the clients look
for ease in approaching different
departments of a service organization
and hence the layout should be designed
in a fashion, which allows clients quick
and convenient access to the facilities
offered by a service establishment.
19
20. FACTORS INFLUENCING LAYOUT
Factory
building
Plant Nature of
environment product
Factors
Human Production
needs process
Repairs and Type of
maintenance machinery
20
21. Product Design
• Backbone of any enterprise is its product/
service offerings.
• Key strategic decision in the evolutionary
stage.
• Image & profit earning capacity of an
enterprise depends upon it.
• Long term decision.
22. Stages in Product Design
Conception of Business Idea
Product Specification
Project Appraisal
Technical Financial Economic Market
Product Design
Technology Specification
Production
23. Lease Financing
A lease contract can be defined as a contract
whereby the owner of an asset (lessor) grants
to another party (lessee) the exclusive right
to use the asset usually for an agreed period
of time in return for the payment of rent.
24. Types of Lease Agreements
Lease
Agreements
Capital Operating Sale &
Lease lease Lease Back
25. Hire Purchase
HP is an agreement under which the owner
called „hire vendor‟ gives delivery of goods to
the buyer called „hire purchaser‟ who pays
the price in certain number of installments.
26. Hire Purchase
If the hire purchase transaction is financed by
the manufacturer or dealer,then two parties
are involved in the agreement.
Ex:
Hire Hire
Vendor Purchaser
27. Hire Purchase
If the hire purchase transaction is financed by
some financial institution, then there are
three parties involved in the agreement.
Ex:
Hire
Vendor
Financial
Institution
Hire
Purchas
er
28. ACTIVITY
Visit a restaurant that you can classify as being in
the small sector. Comment upon how has the
layout of facilities added to or detracted from the
ease of movement? Could you suggest some
alternative layout?
28
