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Chapter II

Plant Location and Layout

Plant Location: Plant location decisions concern both manufacturing and

assembly units (for example, fertiliser, plants, steel plants, cement
factories, textile sugar mills, automobile factories etc.) as well as service
organisations (for example, banks, hospitals, hotels, retail supermarket etc.).
Plant location decisions being strategic, long-term and non-respective
require detailed analysis of long-term consequences because:

i. Poor location of the plant can be constant source of higher cost,

different transportation and marketing, frequent disturbances of
production, dissatisfied employees and customers, etc.

ii. Once a plant is set up at a particular location, it is comparatively

immobile and can be shifted and relocated only at a considerable cost
and interruption of production.

iii. The investment in land and buildings is quite large in case of bigger
firms and economics of one location against another needs to be
evaluated carefully to ensure fair return on such investment.

When Does a Locational Decision arise?:

Locational decisions generally arise when:

i. A new manufacturing, or, service unit, is to be set-up.

ii. Existing plant operations are difficult to be expanded, due to poor
selection of the earlier site.
iii. The growth of the business makes it advisable to establish additional
facilities in new territories.
iv. There is emergence of new social, political, or, economic conditions,
which suggest a change in the location of the existing plant.
v. The product developments have outweighed the advantages of the
existing plant.
vi. To strategically enter new markets.
b. Factors Governing Plant Location:

Plant location studies are conducted in 3 phases:

i. General territory selection,
ii. Community selection, and
iii. Site selection,

and the locational factors may be grouped under three heads:

a. Regional factors.
b. Community factors.
c. Site factors.
a) Regional factors decide the overall area (or, region) within the
country. Such factors are: proximity to markets, proximity to raw
materials, availability of utilities.
b) Community factors influence selection of the plant location within the
region. Such factors are: availability of labour, industrial and labour
attitudes, social structure, service facilities, etc.
c) Site factors favour specific site within the community. Such factors
are availability and cost of land, suitability of land etc.

Factors Influencing the plant location:

Location Factors Territory Community Site

Selection Selection Selection
1. Proximity to markets X
2. Proximity to raw materials X
3. Infrastructural facilities X x
4. Transportation facilities X x
5. Labour & Wages X x
6. Legislation & Taxation X x
7. Climatic Condition X x
8. Industrial and labour attitudes X x
9. Safety requirements X x
10.Community facilities x
11.Community attitudes x
12.Supporting industries and services x
13.Waste disposal x x
14.Availability and cost of land x x
15.Suitability of Land x x
Related Numerical:

Problem 1: A medium scale industrial unit wants to select one of the three
locations, for putting up its factory. The data or both tangible and
intangible factors collected by them are given below:

Item Site ( Millions)

(a) Total investment 250 315 250
(b) Total Sales 340 390 350
(c) Expenses on Raw Materials 85 100 120
(d) Expenses on distribution 50 50 80
(e) Expenses on utilities 50 40 25
(f) Salaries and wages 25 30 25
(g) Community facilities Poor Good Bad
(h) Community attitudes Indifferen Good Indifferent
Suggest the most suitable site and justify your selection.

Plant Layout /Facilities Layout.

Plant layout is the placing of right equipment coupled with right method in
the right place to permit the processing of a product in the most effective
manner through the shortest possible distance and through the shortest
possible time.

Since a layout once made can be changed/ modified only at

considerable cost, time and disruption of production, plant layout decisions
are strategic decisions. A good layout results in comforts, convenience,
appearance, safety, efficiency and profits while a poor layout causes
congestion, disruption in material flow, unnecessary material handling more
scrap and rework, higher throughput time, wasted movements and

When Does a Layout Decision arise?

Layout decision arises because of one, or more of the following

i. Decision to put-up new plant.
ii. Relay-out of facilities to meet changes in demand, like adding
more machines.
iii. Introduction of new product.
iv. Withdrawal of absolute facilities.
v. Change in product design.
vi. Adoption of new safety standards.
vii. Overcoming the deficiencies of the existing layout.

Principles of a Good Layout:

It may not be possible to define a good layout in a few words, but there are
criteria, which can be used to judge whether, or, not the layout is good.
Some of them are as follows:

a. Overall Integration of factors: A good layout is one that integrates

men, materials, machines and supporting activities in a way that the best
mix is obtained.

b. Minimum Movement: A good layout is one that permits the minimum

movement of men, materials and equipments between operations.

c. Uni-directional flow: A good layout is one that makes the materials

move only in the forward direction, towards the stage of completion,
without any backtracking.

d. Effective Use of available space: A good layout is one that makes

effective used of available space both horizontal and vertical.

e. Maximum visibility: A good layout is one that makes men, machines

and materials readily observable at all times.

f. Maximum accessibility: A good layout is one that makes all servicing

and maintenance points readily accessible.

g. Minimum handling: A good layout is one that reduces the material

handling activity at its minimum.

h. Inherent Safety: A good layout is one that makes the plant safer for
the workmen.
i. Safe and improved environments: A good layout is one that makes the
work centres and the areas around them satisfying to the workers and

j. Maximum Feasibility: A good layout is one that can be altered later

without much cost.

k. Maximum security: A good layout is the one that safeguards the

plant and machinery against fire, theft etc.

Types of Layout: Layouts are basically of 5 types:

1. Process, or, Functional Layout.

2. Product, or, Line Layout.
3. Mixed, or, Combination Layout.
4. Project Layout.
5. Cellular, or Group Technology Layout.

Process, or, Functional Layout: Process layout also called, “layout by

function“ is generally associated with batch production. The factory is
divided into process units (or, departments) and within these process units
(or, departments); all similar facilities are grouped together. A simple sketch
of a process layout is shown in Fig. 2 as below.

Fig.2: Process, or, Functional Layout:

Product C
Turning Product B Machining Grinding
Product A Centres Centres Machines

Product A
Gear Cutting Debarring Processes

Spot Welding Blackodising
Treatment Product C
Product B

Product type of layout is suitable when:

i. There are many products to be produced in batches.

ii. There is wide variation in the reprocessing times of individual


Advantages of process Layout:

1) Lower capital investment due to lower cost of general-purpose


2) Greater flexibility in regard to allocation of work to equipment and


3) Breakdown of equipment, absenteeism of workmen and/or non-

availability of materials do not dislocate the manufacturing activity on
the shop floor.

4) Workers attain greater skills since they have to attend to one type of
machines and operation.

5) Imbalance of work in one section does not affect the working of the
other sections.

6) New jobs with varying work contents and different operations

sequences can be taken up without any difficulty.

7) Variety of jobs make the work interesting to the workmen.


1) For the volume of production, space requirements are higher.

2) Materials handling cannot be mechanised, which adds to enter cost for

material movement.

3) Work-in-progress inventory is higher.

4) Routing and scheduling is difficult since different jobs have different
operations sequence.

5) Inspection requires to be done after each operation as material

passes from one department to the next department. This causes
delays and increases cost.

6) Set-up costs are higher because of frequent changes of jobs.

Product, or, Line Layout:- Product layout is also called “layout by sequence”.
The layout of plant is such that material flows unidirectionally and at a
steady rate. Special purpose machineries and equipments with built-in
control systems are used here. The equipments, if necessary, are duplicated
to avoid backtracking and to ensure that material always flow in the forward
direction towards their stage of completion.

Fig. 3 shows the sketch of a typical product layout.

Turning Machining Machining

Centre Centre Centre

Gear Cutting
Machine Grinding Grinding

Deburring Deburring Pressing

Grinding Blackodising Welding


Fig.3: Product, or Line Layout.

Suitability: Product type of layout is suitable when:

a. The products are standardised and are required to be produced

in large quantities.

b. The products have reasonably stable demand.

c. The processing times of individual operations are more, or less


d. Uninterrupted supply of materials can be maintained.

Typical examples of product layout are:

- Assembly line of automobiles, refrigerators, TVs, consumer electronic

products, washing machines and consumer durable products etc.