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Prepared by ,
Guided By,
Piyush bhatt
Madhuri mam
Swati parmar
Dipak mer
Submitted to,
Department Of Business Administration,
MK Bhavnagar University,

 Every entrepreneur is faced with the problem of deciding
the best site for location of his plant or factory.
 Plant location refers to the choice of region and the
selection of a particular site for setting up a business or
 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.

Reason for firm should look for additional
or alternate location
 To establish new venture
 Expansion of existing business
 Changes in demand and supply
 Company policy on diversification and change of working
 Changing in government policy

Alternate options open for management  Make or Buy decision Sub-contract instead of expansion Expand existing organization Dispose of the existing plant and build new one .

Location analysis  Demographic Analysis Trade Area Analysis Competitive Analysis Traffic analysis Site economics .

power and fuel 10000 80000 Total 490000 438000 Cost of establishments: Cost of operations: .Two sites A and B are evaluated in terms of above mentioned two costs as follows: Cost Site.A (Rs) Site.B (Rs) Land and Buildings 350000 250000 Transport facilities 20000 30000 Taxes 10000 8000 Labour 100000 70000 Water.

which include controllable and uncontrollable factors for all type of organisations. 2. required for .Factors influencing plant location/facility location 1. General locational factors. Specific locational factors specifically manufacturing and service organisations.

General Locational Factors  Controllable factors 1. Supply of materials 3. Capital . Infrastructure availability 5. Labour and wages 6. Proximity to markets 2. Transportation facilities 4.

Climate conditions 3. Uncontrollable factors 1. Community and labour attitudes . Supporting industries and services 4. Government policy 2.

and real estate costs .Specific Locational Factors for Service Organisation 1. Favorable labor climate 2. Utilities. Quality of life 4. Proximity to markets 3. taxes. Proximity to suppliers and resources 5.

Break even analysis .LOCATION MODELS Various models are available which help to identify the ideal location. Weighted factor rating method 3. Some of the popular models are: 1. Factor rating method 2. Load-distance method 4. Centre of gravity method 5.

. Rate each factor according to its relative importance. 2. i. Identify the important location factors..e. 3.1. Assign each location according to the merits of the location for each factor. higher the ratings is indicative of prominent factor. Factor rating method The process of selecting a new facility location involves a series of following steps: 1.

. Find the sum of product calculated for each factor and select best location having highest total score. Calculate the rating for each location by multiplying factor assigned to each location with basic factors considered. 5.4.

is to be located in Delhi. Location factor Factor rating Rating Location 1 Location 2 1 Facility utilization 8 3 5 2 Total patient per month 5 4 3 3 Employee preferences 5 5 3 . factor rating and scores for two potential sites are shown in the following table. Which is the best location based on factor rating method? Sl. Health-care.ILLUSTRATION 1: Let us assume that a new medical facility. The location factors. No.

Location factor Factor rating (1) Location 1 Location 2 Rating Total Rating Total 1 Facility utilization 8 3 24 5 40 2 Total patient per month 5 4 20 3 15 3 Employee preferences 5 5 25 3 15 Total 69 Total 70 . No.SOLUTION: Sl.

The site with the highest weighted score is selected as the best choice.2. Weighted Factor Rating Method  In this method to merge quantitative and qualitative factors. . factors are assigned weights based on relative importance and weight age score for each site using a preference matrix is calculated.

weights.ILLUSTRATION 2: Let us assume that a new medical facility. and scores (1 = poor. Health-care. 5 = excellent) for two potential sites are shown in the following table. is to be located in Delhi. What is the weighted score for these sites? Which is the best location? Sr No. The location factors. Location factor Weight Scores L-1 L-2 1 Facility utilization 25 3 5 2 Total patient per month 25 4 3 3 Average time per emergency trip 25 3 3 4 Land and construction costs 15 1 2 5 Employee preferences 10 5 3 .

.SOLUTION:  The weighted score for this particular site is calculated by multiplying each factor’s weight by its score and adding the results: Weighed score location 1 = 25 × 3 + 25 × 4 + 25 × 3 + 15 × 1 + 10 × 5 = 75 + 100 + 75 + 15 + 50 = 315 Weighed score location 2 = 25 × 5 + 25 × 3 + 25 × 3 + 15 × 2 + 10 × 3 = 125 + 75 + 75 + 30 + 30 = 335 Location 2 is the best site based on total weighted scores.

An alternative approach is to use time rather than distance. The distance between two points is expressed by assigning the points to grid coordinates on a map.3. The objective is to select a location that minimizes the total weighted loads moving into and out of the facility. Load-distance Method  The load-distance method is a mathematical model used to evaluate locations based on proximity factors. .

and transportation costs in arriving at the best location for a single intermediate warehouse. This method can be used to assist managers in balancing cost and service objectives. .4 Centre of Gravity  Centre of gravity is based primarily on cost considerations. The centre of gravity method takes into account the locations of plants and markets. the volume of goods moved.

total revenue equals total cost. Break Even Analysis  Break even analysis implies that at some point in the operations. Break even analysis is concerned with finding the point at which revenues and costs agree exactly.5. .



4. 3. Meaning Objectives of Plant Layout Principles of Plant Layout Classification of layout . 4.Point to consider 1. 3. 1. 2. 2.

1. .Meaning of plant lay-out       According to Moore “Plant layout is a plan of an optimum arrangement of facilities including Personnel operating equipment storage space material handling equipment and all other supporting services along with the design of best structure to contain all these facilities”.

safety and comfort. 2. equipment and space. Facilitate the organizational structure. Provide for employee convenience.2.Streamline the flow of materials through the plant. 4. Minimize overall production time. Facilitate the manufacturing process. Maintain high turnover of in-process inventory. 5. Make effective utilization of cubic space. 8. 9. Flexibility of manufacturing operations and arrangements. 3. Maintain flexibility of arrangement and operation. 7. Minimize investment in equipment. 6. 10. Objectives of Plant Layout 1. Minimize materials handling and cost. 12. 11. Effective utilization of men. .

Principle of safety. Principle of minimum handling . Principles of Plant Layout 1. Principle of cubic space utilization 4. Principle of integration 2. security and satisfaction 7. Principle of flow 5.3. Principle of minimum distance 3. Principle of maximum flexibility 6.

Fixed position layout  .4.Classification of layout Layouts can be classified into the following five categories: 1. Combination layout 4. Process layout 2. Product layout 3.

Process Layout Model of process Layout .1.

Advantages of process Layout     Flexibility better utilization of production facility Lower investment Increase knowledge of supervisors .

Limitation of process Layout    Reduce material handling efficiency Increase in cost Decrease productivity .

Product Layout Model of product Lay-out .2.

Advantages of product Layout      In-process inventory is less Decrease handling cost Mechanized handling systems Unskilled workers can learn and manage the production. . Manufacturing cycle is short due to uninterrupted flow of materials.

Limitation of product Layout     Stop entire production Difficult to change product design Required high investment Lack of flexibility .

Combination Layout combination type of layout for manufacturing different sized gears .3.

Fixed Position Layout Fixed type of position Layout .4.

Advantages of Fixed position Layout     interest and pride in doing the job enlargement and upgrades the skills Flexibility Layout capital investment is lower. .