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Published by Avinash Gupta

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Published by: Avinash Gupta on Nov 22, 2010
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MB0044-Production and Operation Management
Q1. Take an example of any product or service industry and explain the factorsconsidered while taking the decision on plant location.Facility Planning Process
Planning is the most important function of management. It is important especially, whenwe have to deal with lands, buildings, and machineries. Lands, buildings and machineriesare costly and once fixed cannot be moved easily. Planning, therefore, requires a lot of thought, data gathering, and estimates for the future. These considerations are vital for thesuccess of any firm. Now to deeply understand the importance of planning in operationsmanagement, we consider the planning into two parts.1. Planning the location of the plant2. Planning the manufacturing facility layouts
Planning the location of the plant
You will now study about planning for the location of a plant. You will also study thevarious factors that affect the economics of competing locations and helps in choosingthe most optimal location.Factors influencing Plant Location can be broadly divided into two types namely: generalfactors and special factors (See Figure Factors influencing plant location). 
Figure: Factors influencing plant location
Below are the factors influencing plant location:General factors
The general factors that influence the plant location are listed below (See Figure 5.2General factors influencing plant location).- 1 -
MB0044-Production and Operation Management
Availability of land:
Availability of land plays an important role in determining the plant location. Many-a-time, our plans, calculations and forecasts suggest a particular area as the best to start an organization. However, availability of land may be in question.In such cases, we will have to choose the second best location.
Availability of inputs:
While choosing a plant location, it is very important for theorganization to get the labour at the right time and raw materials at good qualities. The plant should be located:• Near to the raw material source when there is no loss of weight• At the market place when there is a loss of weight in the material• Close to the market when universally available, so as to minimize the transportationcost
Figure: General factors influencing plant location
3. Closeness to market places:
Organisations can choose to locate the plant near to thecustomers’ market or far from them, depending upon the product they produce. It isadvisable to locate the plant near to the market place, when:
The projection life of the product is low
The transportation cost is high
The products are delicate and susceptible to spoilage
After sales services are promptly required very often- 2 -
MB0044-Production and Operation Management
The advantages of locating the plant near to the market place are:
Consistent supply of goods to the customers
Reduction of the cost of transportation
4. Communication facilities:
Communication facility is also an important factor whichinfluences the location of a plant. Regions with good communication facilities viz. Postaland Tele communication links should be given priority for the selection of sites.
5. Infrastructure:
Infrastructure plays a prominent role in deciding the location. The basic infrastructure needed in any organisation is:
a. Power:
For example, industries which run day and night require continuous power supply. So they should be located near to the power stations and should ensurecontinuous power supply throughout the year.
b. Water:
For example, process industries such as, paper, chemical, and cement, requirescontinuous water supply in large amount. So, such process industries need to be locatednear to the water.
c. Waste disposal:
For example, for process industries such as, paper and sugarcaneindustries facility for disposal of waste is the key factor.
6. Transport:
Transport facility is a must for facility location and layout of location of the plant. Timely supply of raw materials to the company and supply of finished goods tothe customers is an important factor. The basic modes of transportation are by Air, Road,Rail, Water, and Pipeline. The choice of location should be made depending on these basic modes. Cost of transportation is also an important criterion for plant location.
7. Government support:
The factors that demand additional attention for plant locationare the policies of the state governments and local bodies concerning labour laws, building codes, and safety.
8. Housing and recreation:
Housing and recreation factors also influence the plantlocation. Locating a plant with the facilities of good schools, housing and recreation for employees will have a greater impact on the organization. These factor seems to beunimportant, but have a difference as they motivate the employees and hence the locationdecisions.
Special factors
The special factors that influence the plant location are:1. Economic stability – outside investments2. Cultural factors3. Wages4. Joint ventures – support of big time players- 3 -

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