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FACILITY LOCATION

The concept of plant location has now been generalized into that of facility location, since the facility could include a production operation or service system. Facility location decisions are strategic, long term and non-repetitive in nature. This term can be referred to banks, hospitals, blood banks, fire stations, police stations, warehousing , godown, depot, recreation centre, central repair workshop.

WHEN DOES A LOCATION DECISION ARISE?


New facility. Expansion is not possible in existing site. The growing volume of business It could happen that the original advantages of the plant have been outweighed due to new developments. New economic, social, legal or political factors could suggest a change of location of the existing plant When a company thinks of reducing manufacturing costs.

STEPS IN LOCATION SELECTION

Within the country or outside Selection of the region

Selection of the locality or community


Selection of exact site

DOMESTIC OR INTERNATIONAL
LOCATION
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few years ago this factor was not considered much But now because of advent of Globalization, this option is also viable The choice of particular country depends upon : Political stability, Export and import quotas, Currency and exchange rates, Cultural and economic peculiarities Natural and physical conditions

SELECTION OF REGION
1.

Nearness to the Markets : A reduction in transportation cost Ability to adjust the production program to suit the likes and dislikes of the consumers. To render prompt service to the customer, after sales service

Used by industries like : Producing perishable or bulky products Servicing units Distilled water concerns
2.

Availability of Raw Materials and supplies: Reduced cost of transportation Regular and proper supply of materials uninterrupted by transportation breakdowns Savings in cost of storage of materials

Examples : Location of paper mill at Dandeli, Sugar industry (Bihar and Uttar Pradesh) Jindal Steel Works , Hospet Hindalco Industries

3.

Transport Facilities : Bringing raw material and men to the place. Carrying the finished products to the market A place should be well by road, rail and water transport In extreme cases , transport may follow industry
Availability of power : Coal, electricity, oil and natural gas are the sources of power Coal is essential in case of iron and steel industry so the factory has to be located near the coal fields. (Jamshedpur)

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Suitability of climate : Certain industries particular type of climate ( use natural climate rather than create an artificial one) Ex : humid climate for cotton textiles and jute (Ahmedabad, Mumbai , Kolkatta) Flowers are grown in Bangalore Extreme climate conditions adversely effect the labor efficiency and so do not attract industries

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Government Policy : For balanced regional development , backward regions have been selected SEZ, Competition between states : States offer investment subsidies and sales tax exemptions to new units which prove beneficial to small and medium sized plants

SELECTION OF LOCALITY OR COMMUNITY


1.

Availability of Labour : Adequacy of labour supply Glass industry at Firozabad Tata Marcopolo requires 70 people to manufacture one bus, highly labour intensive Attitude of workers , union activities and industrial disputes drive away the existing factories and discourage new industrialist from locating new factories. Kolkatta, Chennai

2. Civic Amenities for workers : Recreation facility : clubs, theatres, parks Basic Facility : hospitals, schools, colleges
3.

Existence of complementary and Competing industries Increases variety of materials that can be offered by suppliers. The concentration of similar industries at one place improves the labor market both for the employer and the employee. Problems relating to the procurement of raw materials, labor troubles and government restriction can be effectively tackled if the competing units work together. Availability of water and Firefighting facilities : Fertilizer units, rayon manufacturing units, paper manufacturing plants, screen printing units require lot of water.

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Local Taxes and Restrictions : Industrialist prefer an area where such taxes and restrictions are the least irksome.

SELECTION OF SITE
1.

Soil : For agro-based industries, a fertile soil is necessary for ensuring a strategic plant location Size : The area of the land should accommodate the existing manufacturing facilities, but offer scope for future expansion as well

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Topography : A hilly, rocky terrain is unsuitable for plant location because a great deal of expenditure has to be incurred to level it. Such places do not attract population It is difficult and uneconomical to provide infrastructure facilities in such areas. Disposal of waste : There should be enough vacant land for the dumping of solid waste. For liquid waste , satisfactory sewer connections or river or sea should be available Ex Gemini Breweries in Bangalore

VILLAGE, SUBURBAN OR CITY SITE


1. Rural Site : Cheaper rates Taxes are negligible, Spacious layout Low wages for unskilled and high wages for skilled because they have to be mobilised Lack of civic amenities for employees, Lack of transport facilities

2.

Suburban site : They are less costly Transport facilities are available, Labor can be drawn by nearby city or villages

Urban Site : Advantages : Transport facilities available Labor plentiful Municipal services for water, sewage disposal , public health and education are available All type of technical and commercial institution and universities for the training of the staff and worker are available Banking , repair and related services are available Facilities for outsourcing a portion of work are available A large local market is available High advertising value is available
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Disadvantages : The cost of land is exorbitant Taxes are high Cost of labor is high Because of limited space , factory buildings are awkwardly shaped, ill-lighted and ill ventilated. Several restrictions have been imposed in regards to smoke and disposal of effluent Small plants city location is better option.