1. Why are plant location decisions important? Name and discuss the factors which need to be considered to arrive at the ideal location of a plant? “Plant location decisions” are important because they have direct bearing on factors like financial, employment and distribution patterns. In the long run, relocation of plant may even benefit the organization. But the relocation of the plant involves stoppage of the production and also cost for shifting the facilities to a new location. In addition to these things, it will introduce some inconvenience in the normal functioning of the business. Hence at the time of starting any industry, one should generate several alternate sites for locating the plant. After a critical analysis, the best site is to be selected for commissioning the plant. Location of warehouses and other facilities are also having direct bearing on the operational performance of organizations.
Due to the events which are quite common in any business venture: Establishment of a new venture; expansion of existing business; significant change in existing demand, supply and marketing locations; significant change in the cost structure; and government policies, an organization will be keen in additional or alternate sites for its production activities. So, the plant location becomes a key decision which in turn influences plant layout and facilities needed. Also, it influences capital investment and operating costs.
The factors which influence plant location can be classified into: (1) General factors and (2) Specific factors
General factors: Availability of land for present and future needs and cost of land and land development and building. Availability of inputs such as labor and raw materials. Closeness to the market places. Stability of demand.
. Availability of housing and recreational facilities. standard of living and income level. Security. language and cultural differences which can present operating. Fuel cost. Availability of infrastructure facilities like power. Availability of necessary modes of transportation like road. subsidy and tax structure. The company can set up joint ventures with any leading local giants that will solve many operating problems. policy and duties. rail. desiring to set up plant should consider the following aspects in addition to the normal factors.
Specific factors:A multinational company. The economic stability of the country and the concern of the country towards outside investments are to be regarded. financial institutions and banks. Demographic factors like population. Government support. Disposal of waste and effluent and their impact on the environment. grant. academic institutions. Analysis must be based on factors like wage rate. Units of measurement are also very important in international business. control and even policy problems. airport and water ways. trained man power. water. The success of operation of the factory depends on the cultural factors. culture of society.
Availability of communication facilities.
It also determines the maintaining of raw materials & finished goods at proper levels. keeps the plant free from production bottleneck. machines equipments. parts and components at the right time. Thus effective planning and control makes all preparations to manufacture goods within specified time and cost. equipment and manpower in the required quality and quantity and at the specified time. ensures production of goods in the required quantities of the specified quality at the predetermined time. takes off material. ensures most economical use of plant & equipment by scheduling best machine utilization. Control balances production & inventories apart from the determinative phase of planning.” Discuss
Planning is the determinative phase of production management. Control also maintains raw material inventories at levels that neither tie-up excessive amounts of working capital nor lead to shortages that interrupt production. Production planning translates sales forecasts into master production schedules. Also.
. provides information for production management & distribution of goods. It “figures out” what is to be done. At the same time. machines. “Effective planning and control guarantees better utilization of machines and labor. makes available materials. issues relevant orders to production personals to implement the production plan. It is important to carry out manpower planning to maintain operational & managerial staff possessing requisite skills & expertise. tools.2. makes available supply of materials. Production control supervises the execution of production schedules so that work flows through the manufacturing departments on time & without interruptions. personnel & equipment requirements & prepares detailed area or department schedules. finished goods inventories are regulated so that they neither become excessive nor fall so low that they fail to meet demands & so cause back orders to accumulate. it prepares alternative plans of action as a means of meeting emergencies. maintains spare capacity to deal with rush orders and maintains cordial industrial relations. The choices of manufacturing methods depend on available production facilities & utilization of plant.
quantity and quality”. inspections. Facilitate the manufacturing process. Provide for employee convenience. Facilitate the organizational structure. delays and storages. processes. transportations. Imperative tools and techniques helpful in the layout analysis are as follows:
1. safety and comfort.
. space requirements.
TOOLS AND TECHNIQUES FOR LAYOUT ANALYSIS Layout involves the relative positioning of transformed resources within operations and functions and the allocation of tasks to the resources. Utilize existing space most effectively. According to Riggs. routing.3. The expansion of good layout is reliant upon the quality and quantity of data on various factors influencing the layout. What do you mean by plant layout? What are various tools and techniques for layout analysis? “Plant layout” is a floor plan of the physical facilities which are used in production. Minimize overall production time. The chart also provides information on distance and time. Process Chart Two well known process charts are: Operation Process Chart is the graphic representation of the major activities and entry point of materials. which together dictate the flow of transformed resources through the operation or function. The objectives of plant layout are: Minimize investment in equipment. Maintain flexibility of arrangement and operation. different activities and their relationships. material flow. Flow Process Chart sets out the flow and activities of a component/man through a series of operations. “the overall objective of plant layout is to design a physical arrangement that most economically meets the required output. Minimize materials-handling cost. Data needs to be collected regarding various materials. The chart depicts the major operations and inspections performed on the materials.
study the activity relationships between departments/ work centers. fitting etc. identify extent of backtracking. Templates offer myriad benefits:
. Travel Chart Travel chart presents the quantitative data on material flow by recording distance and frequency of movements between different pairs of departments.2. Templates Templates are the two dimensional cutouts of card board (or colored paper). They are to scale and are placed on the scaled plan of the building drawn on a board. Efforts are made in layout design to place those departments close to each other which have high degree of material interaction and thereby minimize the materials handling. Templates show the plan of the various activities machine tools.
Diagrams are of two types: Flow diagrams are the scale plans on which the movements of an object (men/material) are traced by lines.
3. study the extent of traffic over the different routes of the plant. work benches.
5. cross traffic and obstacles encountered during movement of materials. REL Chart REL chart known as “Relationship Chart”. Travel charts are prepared in process type of layouts and are useful to determine the degree of closeness desired between different departments in terms of material interaction. or on a cross hatched surface or on a graph paper. storage racks. exhibits the relationship between pairs of departments in terms of degree of closeness desired. String diagrams are the scale plans on which the movements of an object (men/material) are indicated by a string. Diagrams Diagrams are handy to: study different layout alternatives and thereby select the most optimum layout.
nevertheless. have few limitations: Overhead facilities can not be visualized. Three dimensional models have numerous advantages: Non-technical persons find it easy to comprehend.
6. Scale Models Three dimensional models are the scale models of the facilities resembling the actual in length. They can be conveniently moved on the graph paper providing the flexibility to evaluate various feasible arrangements of facilities. Non-technical person find it difficult to comprehend the arrangement. Overhead facilities can be shown.
Templates. Typical examples of the uses of three dimensional models are layout plans of chemical factories. refineries etc. bottlenecks and backtrackings can be better visualized with templates. models too can be shifted easily and quickly.
. They are usually made of wood or plastic. Like templates. They are less laborious and save lot of time which otherwise is spent making drawings for each alternate plant layout arrangement. Services such as lighting. safety features can be easily incorporated. ventilation. width and height.
The fixed cost of making 3. The higher value looses and the decision maker can go ahead with the less costly solution. Cost concerns 2. When a manager is supposed to make a make-or-buy decision. Need of direct control over the product 4. Volume too small to get a supplier attracted 9. Political and environment reasons 12. His decision will be based on the values of these four numbers: 1. Desire to expand the manufacturing focus 3.Assignment B
1. To maintain a backup source 11. They are „Cost to Buy‟ and „Cost to Make‟. Lack of competent suppliers 8. Per-unit direct cost when making 4. there are four numbers he needs to be aware of. Intellectual property concerns 5. Reduction of logistic costs (shipping etc. The volume 2. Quality control concerns 6. Supplier unreliability 7. Per-unit cost when buying Now there are two formulas that use the above numbers. Organizational pride
Cost to Buy (CTB) = Volume x Per-unit cost when buying Cost to Make (CTM) = Fixed costs + (Per-unit direct cost x volume)
There are numeral reasons a manager would consider when it comes to making inhouse: 1. What are various aspects which a manager should consider before making a decision to make or buy the product? A company is often faced with the decision as to whether it should manufacture a component or buy it outside.
Lack of technical experience Supplier‟s expertise on the technical areas and the domain Cost considerations Need of small volume Insufficient capacity to produce in-house Brand preferences Strategic partnerships
. 2. 6. 5. 7. 4. 3.Following are some of the reasons he may consider when it comes to buying the product from a supplier: 1.
preventative maintenance is maintenance which is carried out to prevent an item failing or wearing out by providing systematic inspection.g. This is a time-based maintenance strategy where on a predetermined periodic basis. repairs are made and the equipment is then put back on-line.” What are they? How do they differ from each other? What activities are considered under each of them? „Preventive maintenance‟ is an important aspect of making sure a plant runs efficiently. to bring it back to working order. Thus under this equipment maintenance strategy. fire alarms.
Dissimilar to preventive maintenance that is based on time intervals corrective maintenance concentrates on the monitoring and correction of root causes to equipment failures. Broadly speaking. replacing. detection and prevention of incipient failure while corrective maintenance can be defined as the maintenance which is required when an item has failed or worn out. disaster recovery services. It includes alerts. the process can be very expensive as typically 95% of the time everything was alright. “Two basic aspects of the function of plant of plant maintenance are: preventive maintenance and corrective maintenance. Paradoxically. Based on visual inspection. electricity supply and gas supply. lift. Nevertheless. This strategy is also designed to extend the useful age of the equipment to reach the wear-out stage by adaptation a high mastery level of operating precision. Corrective maintenance offers a support function for isolated problems. Many of these items are also subject to a statutory requirement for inspection and preventive maintenance. opened up and inspected. some preventive maintenance is necessary as some regulation such as DOSH regulation require that annual/bi-annual boiler inspection to be conducted. Corrective maintenance is carried out on all items where the consequences of failure or
. equipment is taken off-line. and any failures managed within a reasonable timeframe. Although this is a well-intended strategy. overhauling or remanufacturing an item is done at fixed intervals regardless of its condition at the time. Preventative maintenance is carried out only on those items where a failure would have expensive or unacceptable consequences e. „Corrective maintenance‟ concentrates on the monitoring and correction of root causes to equipment failures.2.
This can prevent equipment from breaking down.
. corrective maintenance activity may consist of repair. Conversely. which identifies the failure in time for corrective maintenance to be planned and scheduled. restoration or replacement of equipment. This activity will be the result of a regular inspection.wearing out are not significant and the cost of this maintenance is not greater than preventative maintenance.
One common preventative measure is the periodic checking of machinery to see if it is operating correctly. then performed during a routine maintenance shutdown. or help to anticipate a possible problem that would otherwise cost the plant money because of a work stoppage.
it is about much more than just assuring product or service quality. In a TQM effort. „Total Quality Management‟ (TQM) is a management approach to long– term success through customer satisfaction. 100% customer satisfaction 2. it is cheaper to stop products defects than trying to find them The ultimate aim is no (zero) defects . TQM is often associated with the phrase – “doing the right things right. The TQM philosophy believes that each department should treat other departments as its customers. Like most quality management concepts. all members of an organization participate in improving processes. first time”. External customers: consume final goods and services offered by the company 2. Internal customers: the employees of the organization. services and the culture in which they work. Zero defects. TQM is a business philosophy . products. TQM is a popular “quality management” concept. The main principles that trigger TQM are below: Prevention Zero defects Prevention is better than cure. In the long run.or exceptionally low defect levels if a product or service is complicated
.with two key objectives: 1.a way of doing business. It describes ways to managing people and business processes to ensure complete customer satisfaction at every stage. TQM divides customers into two categories: 1. Explain the concept of Total Quality Management. Broadly speaking. At its core. TQM recognizes that all businesses require „processes‟ that enable customer requirements to be met. TQM focuses on the ways in which these processes can be managed .3. However. TQM views „quality‟ entirely from the point of view of „the customer‟.
workforce views are invaluable.
. the employees facing the customer.many attempts to introduce TQM fail! One of the reasons for the challenge of introducing TQM is that it has significant implications for the whole business.particularly those that have not traditionally concerned themselves too much with understanding customer needs and business processes.e. the production department. In a culture of continuous improvement. TQM also focuses the business on the activities of the business that are closest to the customer . middle managers may feel that their authority is being challenged. including marketing. For example. In fact . it requires that management give employees a say in the production processes that they are involved in. finance and human resources Businesses should always be looking for ways to improve processes to help quality Those involved in production and operations have a vital role to play in spotting improvement opportunities for quality and in identifying quality problems
Continuous improvement Employee involvement
TQM is not an easy concept to introduce into businesses .g. The problem is .Getting things right Better not to produce at all than produce something defective first time Quality everyone involves Quality is not just the concern of the production or operations department . For example. The key to success is to identify the management culture before attempting to install TQM and to take steps to change towards the management style required for it.many businesses have barriers to involvement. So „empowerment‟ is a crucial part of TQM. This can cause resentment amongst departments that previously considered themselves “above” the shop floor. Since culture is not the first thing that managers think about. this step has often been missed or ignored with resultant failure of a TQM strategy.it involves everyone.
link roads. They also include infrastructural facilities.
Community factors: These involve accommodation. civil amenities and means of communication are important. Access to market: small businesses in retail or wholesale or services should be located within the vicinity of densely populated areas. suitability of the land etc. It also includes attitude of the community. Consequently the important features which the plant needs to take into consideration are: Availability and nearness to the sources of raw material. supporting industries and services. the taxation and also the work attitude of the workers.1 for Blue Powder's plant? Which ones are more important and which ones should not be weighted heavily? Discuss and defend your answer. How would you weight the factors that you developed in No. legislation. The production processes at Blue Powder in each location require about 300 production workers and 200 engineering and management personnel. large amounts of water and other basic utilities. water. and availability of skilled workers. airports or sea ports. What major factors should be considered in choosing one of the three location alternatives? Regional factors: These factors include proximity of the plant to the market and also to the sources of the raw materials.CASE STUDY 1. education. public utilities. nearness to railway stations. Availability of Infrastructural facilities such as developed industrial sheds or sites.
2. Transport costs-in obtaining raw material and also distribution or marketing finished products to the ultimate users. entertainment and transport facilities.
. and fire and explosion-tolerant areas. transportation facilities. large expanses of land. especially for small scale businesses. availability of electricity. large volumes of materials to be shipped in and out of the plant.
and recommend a course of action for Blue Powder. miscellaneous expenses. subsidies and liberalization. It is the place of maximum net advantage or which gives lowest unit cost of production and distribution. For achieving this objective. An ideal location is one where the cost of the product is kept to minimum. Strategic considerations of safety and security should be given due importance. the least risk and the maximum social gain. Each individual plant is a case in itself. If at all changed only at considerable loss. banking transport. The businessman should try to make an attempt for optimum or ideal location. Plant location refers to the choice of region and the selection of a particular site for setting up a business or factory. Analyze the factors listed in No. tax relief. Positive includes cheap overhead facilities like electricity. Residence of small business entrepreneurs want to set up nearby their homelands
The factors which should not be weighted heavily are: Natural or climatic conditions.
. small-scale entrepreneur can make use of locational analysis for this purpose. Locations with links: to develop industrial areas or business centers result in savings and cost reductions in transport overheads.1. Negative incentives are in form of restrictions for setting up industries in urban areas for reasons of pollution control and decentralization of industries. It is a strategic decision that cannot be changed once taken.
Availability of skilled and non-skilled labor and technically qualified and trained managers. But the choice is made only after considering cost and benefits of different alternative sites. Every entrepreneur is faced with the problem of deciding the best site for location of his plant or factory. with a large market share. Banking and financial institutions are located nearby. the location should be selected as per its own requirements and circumstances. Government influences: Both positive and negative incentives to motivate an Entrepreneur to choose a particular location are made available.
In some cases. location. He would also see the feasibility of accessing the trade area from alternative sites. From the discussion above. (e) Site economics: Alternative sites are evaluated in terms of establishment costs and operational costs under this. It consists the following: (a) Demographic Analysis: It involves study of population in the area in terms of total population. 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. the traffic analysis aims at judging the alternative sites in terms of pedestrian and vehicular traffic passing a site. Therefore.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. size and quality of competition in a given trade area. an appropriate location is essential to the efficient and economical working of a plant. Costs of establishment is basically cost incurred for permanent physical facilities but operational costs are incurred for running business on day to day basis. (b) Trade Area Analysis: It is an analysis of the geographic area that provides continued clientele to the firm. age composition. educational level. A firm may fail due to bad location or its growth and efficiency may be restricted. (d) Traffic analysis: To have a rough idea about the number of potential customers passing by the proposed site during the working hours of the shop. they are also called as running costs. (c) Competitive Analysis: It helps to judge the nature.
. you will find that location may contribute to even 10% of cost of manufacturing and marketing. per capita income. occupational structure etc.
1) (a)Yes 2) (c) Suitability of land 3) (c) Improve quality 4) (b) No 5) (b) No 6) (d) All of above 7) (d) All of above 8) (a) Yes 9) (a) Yes 10) (a) Yes 11) (a) Yes 12) (b) No 13) (b) Two 14) (c) Both a and b 15) (a) Yes 16) (d) All of the above 17) (a) Factory 18) (a)Product cost 19) (a) Yes 20) (d)All of above 21) (c )Both of above 22) (d) All of above 23) (c) Project scheduling 24) (d) Jobbing production 25) (a) Yes 26) (c) Both a and b 27) (b) Optional functions 28) (d) All of above 29) (a) Current machine 30) (d) All of above 31) (c) Cash discount 32) (c) Purchase 33) (d) All of the above 34) (b) Capacity decisions 35) (a) Yes 36) (c) Quality control 37) (b) Assurance function 38) (a) Entry method 39) (a) Yes 40) (a) Yes