PLANT LOCATION: PLANT LOCATION: FACTORS & QUANTITATIVE TECHNIQUESFACTORS & QUANTITATIVE TECHNIQUES

Presented ByPresented By

Hardeep Kaur ChauhanHardeep Kaur Chauhan

Pankaj GoyalPankaj Goyal

IMPORTANCE OF PLANT IMPORTANCE OF PLANT LOCATIONLOCATION

Determines operating and capital costs. Determines operating and capital costs. Determines the nature of investment costs to Determines the nature of investment costs to

be incurred and also the level of many be incurred and also the level of many operating costs. operating costs.

Implies a new allocation of capacity to Implies a new allocation of capacity to respective market area.respective market area.

Fixes some of the physical factors of the Fixes some of the physical factors of the overall plant design e.g. heating and overall plant design e.g. heating and ventilation requirements etc.ventilation requirements etc.

NATURE OF PLANT LOCATIONNATURE OF PLANT LOCATION

Plant RelocationPlant Relocation

Shift in the structure of the market or Shift in the structure of the market or movement of the markets.movement of the markets.

Changes in the nature and costs of Changes in the nature and costs of transportationtransportation

Changes in the costs and availability of Changes in the costs and availability of materialsmaterials

Changes in the pricing policy of the enterpriseChanges in the pricing policy of the enterprise

CONTD….CONTD….

Undesirable labor situationUndesirable labor situation

Demolition, compulsory purchase of premises or Demolition, compulsory purchase of premises or national legislation.national legislation.

In availability of labor, rise in labor costs, change in In 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 and Relocation of various associated industries and plantsplants

Scientific discoveries and developments, new fields Scientific discoveries and developments, new fields of technology. Increasing competition etc.of technology. Increasing competition etc.

ALTERNATIVES FOR ALTERNATIVES FOR RELOCATIONRELOCATION

Not to expand the plant and to allow the Not to expand the plant and to allow the growth in business to be enjoyed by other growth in business to be enjoyed by other competitors in the field.competitors in the field.

Instead of expanding the physical facilities Instead of expanding the physical facilities the sub-contracting policy may be expanded the 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

CONTD…

The existing plant may be retained but The existing plant may be retained but other facilities may be developed at other other facilities may be developed at other placesplaces

Abandon the existing plant and relocate all Abandon the existing plant and relocate all facilities elsewhere.facilities elsewhere.

LOCALISATIONLOCALISATION

Disadvantages

Localization leads to accumulation of too many workers at Localization 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 unequal It leads to an unbalanced development and unequal distribution of wealthdistribution of wealth

It is unsafe in the case of war and due to other safety It is unsafe in the case of war and due to other safety reasonsreasons

Local population becomes economically dependent on the Local population becomes economically dependent on the industries of that area and may face financial difficulty industries of that area and may face financial difficulty when the industries in the area fail in their performance when 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.

DELOCALIZATIONDELOCALIZATION

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 to land 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 better Many times decentralization leads to better

coordination, improved supply of labor and raw coordination, 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

FACTORS RESPONSIBLE FOR FACTORS RESPONSIBLE FOR PLANT LOCATION CHOICESPLANT LOCATION CHOICES

Availability of raw materialAvailability of raw material

Nearness to the potential marketNearness to the potential market

Location should be near to the source of Location should be near to the source of

operating requirements operating requirements

Supply of labourSupply of labour

Transport and communication facilitiesTransport and communication facilities

Integration with other group of Integration with other group of companiescompanies

Suitability of land and climate Suitability of land and climate

Availability of housing, other amenities Availability of housing, other amenities and servicesand services

Local building and planning regulationsLocal building and planning regulations

Safety requirementsSafety requirements

Other consideration for the choice of Other consideration for the choice of location can be:location can be:

Availability of raw material in future Availability of raw material in future Market expansion due to increase in Market expansion due to increase in

local population or due to changes in local population or due to changes in habits and tastes of consumers. habits and tastes of consumers.

LOCATION ANALYSISLOCATION ANALYSIS

Measures for the selection of the locationMeasures for the selection of the location

Involving quantitative factorsInvolving quantitative factors

Comparative cost analysis Comparative cost analysis

Break-even and dimensional analysisBreak-even and dimensional analysis

Comparison of quantitative factorsComparison of quantitative factors

ANALYSIS BASED ON QUANTITATIVE ANALYSIS BASED ON QUANTITATIVE FACTORSFACTORS

Comparative Cost ChartComparative Cost Chart

Least Cost Centre AnalysisLeast Cost Centre Analysis

The transportation costs associated with various The transportation costs associated with various

location alternatives are considered. location alternatives are considered.

Limitations are:Limitations are:

Choice of plant location is assumed to be Choice of plant location is assumed to be

entirely dependent upon the minimization of the entirely dependent upon the minimization of the

operational costs.operational costs.

Operational costs are assumed to be linearly Operational costs are assumed to be linearly

related to the distances involved.related to the distances involved.

Break-even ChartBreak-even Chart

Dimensional AnalysisDimensional Analysis

Contd…Contd…

COMPARISON OF COMPARISON OF QUALITATIVE FACTORSQUALITATIVE FACTORS

COMPARATIVE CHARTCOMPARATIVE CHART

Ranking and Weight methodRanking and Weight method

Step (I)Step (I)

Examine the various factors and assign to these some Examine the various factors and assign to these some weights representing the significance of the factors to the weights representing the significance of the factors to the situation being studied. It is convenient to isolate the least situation being studied. It is convenient to isolate the least significant factors and give it a weight one. All other factors significant factors and give it a weight one. All other factors are then expressed as a multiple of this factor and are then expressed as a multiple of this factor and appropriate weight are assigned. Evidently extreme appropriate 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.

Contd…Contd…

Step (III) Step (III)

Each ranking is then multiplied by the corresponding Each ranking is then multiplied by the corresponding weight and the scores so obtained are totaled over factors weight and the scores so obtained are totaled over factors for each location. The location having maximum total is for 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 of It is observed that a location selected on the basis of quantitative factors may not tally with the choice based on quantitative factors may not tally with the choice based on comparison of qualitative factors. In case both the choices comparison of qualitative factors. In case both the choices agree then the final selection is made otherwise the agree then the final selection is made otherwise the management may make a subjective choice. Generally cost management may make a subjective choice. Generally cost criterion is given preference.criterion is given preference.

Selection of SiteSelection of Site

Should be well connected with rail, road, and river Should be well connected with rail, road, and river transportstransports

Should have efficient sewage system for the disposal Should 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 the Should 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 as Should 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.

Advantages & DisadvantagesAdvantages & Disadvantages

THANK YOUTHANK YOU