Date: December 4, 2021

Name : BALIÑA, JAMAILA B.

Program : MBA – Major in Financial Management
Subject : BM208A – Production and Operations Management and Development
Professor : MR. JHUN L. VERIL, CMITAP, MBA

CHAPTER 2 – PLANT LOCATION AND LAYOUT

I. CHAPTER SUMMARY
This lesson deals with various aspects of plant location and layout. Plant location
refers to the choice of region and the selection of a particular site for setting up a
business or factory. Investment in analyzing the aspects of plant location and the
appropriate plant layout can help an entrepreneur achieve economic efficiencies in
business operations. These decisions lay the foundation of the business especially
those small entrepreneurs. The need for location selection may arise under any of the
following conditions: a. When a business is newly started; b. When the existing
business unit has outgrown its original facilities and expansion is not possible; hence
a new location has to be found; c. When the volume of business or the extent of market
necessitates the establishment of branches; d. When the lease expires and the
landlord does not renew the lease and; e. Other social or economic reasons. In
selecting the plant location from state/area to the specific site, various factors must be
considered. These factors are divided into general locational factors which include
controllable and uncontrollable factors for all type of organizations; specific factors
specifically required for manufacturing and service organization. The location planning
should help in reducing the transportation cost for the organization. This ultimately
helps in decreasing the cost of production and generating cost advantage for the
organization Location theories, models and locational economics is also explained in
this chapter.
After the selection the plant location, the next step is to choose an effective layout that
would best fit the organization. Plant layout is the method of allocating machines and
equipment, various production processes and other necessary services involved in
transformation process of a product with the available space of the factory so as to
perform various operations in the most efficient and convenient manner providing
output of high quality and minimum cost. Layouts can be classified into the following
five categories: Process layout; Product layout; Combination layout; Fixed position
layout; Group layout. The goals in designing the plant layout are to ensure a minimum
 amount of materials handling, to avoid bottlenecks, to minimize machine interference,
to ensure high employee morale and safety, and to ensure flexibility.

II. REACTIONS
The selection of location is a key-decision as large investment is made in building
plant and machinery. 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. Of all the pieces of the planning puzzle, facility location is the most
strategic and critical. Once you build a new manufacturing facility, you have made a
substantial investment of time, resources, and capital that can’t be changed for a long
time. Selecting the wrong location can be disastrous. After the site location decision
has been made, the next focus in production planning is the facility’s layout. The goal
is to determine the most efficient and effective design for the particular production
process. There are a lot of factors affecting the plant layout. In my opinion, the most
important consideration is that layout should be conducive to health and safety of
employees. Human resource is what makes an organization functional and profitable
thus their safety should be the priority in choosing the layout. Aside from that it should
ensure free and efficient flow of men and materials. Future expansion and
diversification may also be considered while planning factory layout.

III. REFLECTIONS
Every entrepreneur is faced with the problem of deciding the best site for location of
his plant or factory. It is very crucial decision that cannot be change once already
taken. I have learned that manufacturing organizations must arrange their facilities,
not only the departments within the factory but also the plant, stores and services so
as to achieve smooth flow of products. The adequacy of layout affects the efficiency
of subsequent operations. It is an important perquisite for efficient operations and also
has a great deal in common with many of the problems. Once a decision about location
of the plant has been taken, next important problem before the management is to plan
suitable layout for the plant. Efficiency and performance of good machines and sturdy
building depend to a great extent on the layout of a plant. A good layout results in
comfort convenience, safety efficiency, compactness and profits. A poor layout results
in congestion, waste, frustration and inefficiency. Development of a good layout
depends on a series of decisions already taken on location, capacity, facility,
manufacturing methods, and material handling.