This action might not be possible to undo. Are you sure you want to continue?
Purpose: The main function is to determine where the plant should be located for maximum operating economy and effectiveness
Need for selection of location :
a)When the business is newly started; b)The existing business unit has outgrown its original facilities and expansion is not possible; hence a new location has to be found; c)The volume of business or the extent of market necessitates the establishment of branches; d)A lease expires and the landlord does not renew the lease e)Other social or economic reasons; for instance, inadequate labour supply, shifting of the market etc.
Primary – Material and Labour Agglomerating factor Secondary – Banking Credit, Insurance, Communication, Rents. Degglomerating factors
New Location offers added advantage
Factors affecting the selection of location:
1. 2.Improvements in transportation and communication facilities and speed of services 3.Reduction in wage differentials between regions 4.Mobility of workers and management. 5.Improvements in construction methods and designs for plant buildings which make them less expensive to build.
5. 6.Vigorous policy by the Government to remove regional imbalances in industrial development, thus making all regions almost equal in attraction. 7.Improvements in processing and machine designs that reduce the relative number of employees required for a given output. 8.Availability of air-conditioning equipment to counteract adverse climatic conditions for employees and processes. 9.Expansion of markets for almost all goods and services so that more enterprises are needed to meet the demands.
Errors in selection of Location
1.Lack of thorough investigation and consideration of factors involved. 2.Personal likes and prejudices of key executives or owners overriding impartially established facts. 3.Reluctance of key executives to move from traditional established home ground to new and better locations.
4.Moving to congested areas already or about to be over industrialised. 5.Preference for acquiring an existing structure (usually at an imagined bargain) that is improperly located or not designed for the most efficient production. 6.Choice of community with low cultural and educational standards, so that key administrative and technical personnel eventually accept employment elsewhere.
Steps in Location
a)Within the country or outside b)Selection of the region c)Selection of the locality or community d)Selection of the exact site
b) Selection of Region
1.Availability of raw material a.Weight Losing Materials b.Non Weight Losing Materials 2.Nearness to market 3.Availability of power 4.Transport facilities 5.Suitability of climate
6.Government policies a.Licensing Policy b.Freight rate policy c.Establishing a unit in the public sector in a remote area and developing it to attract other industries d.Institutional finance and government subsidies 8.Competition between states
c) Selection of the locality or community
1. 2.Availability of labour 3.Existence of complementary and competing industries a.An industrial unit in collaboration with other similar units, can secure materials on better terms than it can do it by itself. The concentration of such similar establishments helps to increase the variety of materials that can be offered by suppliers b.The concentration of similar industries at one place improves the labour market for both
c.In specialised canters, banks become familiar and granting of loans become easy d.A group of plants will attract variety of ancillary plants such as foundries, machine shops, tool makers etc.. e.The reputation built by the existing units will be shared by the new units in the same area
3.Civic amenities for workers 4.Finance and Research facilities 5.Availability of water and fire fighting 6.Local Taxes and Restrictions 7.Momentum of an early start a)Transport facilities are developed as railways and other agencies find it economical to serve b)Facilities for repairs and maintenance begin to be provided by specialist firms c)Banking facilities become available d)Labour possessing various skills are attracted e)Above facilities will automatically attract more industries 8.Personal Factors
d) Selection of the exact site
1.Soil, Size and Topography 2.Disposal of waste 3.Mid of good environment
Relative importance of location factors
1.Village Site 2.Sub-Urban site 3.City Site
Village Site Advantages
1.Land is available at cheaper rates 2.The rates and taxes are negligible 3.Spacious lay-out available and open spaces are possible 4.Advantages of single-storey buildings are available 5.Low wages for unskilled workers but high wages for skilled workers because they have to be mobilised from elsewhere 6.Fewer labour troubles 7.Avoidance of danger from fire and other hazards resulting from the operations of neighboring units 8.Avoidance of undesirable neighbors 9.Absence of restrictions on smoke and disposal of waste.
Village Site Disadvantages
A village site raises such problems as: 1.Lack of supply of skilled workers 2.Lack of civic amenities for employees 3.Lack of transport facilities
Sub-Urban Site Advantages
1.Suburban sites offer a compromise between the city and the village and have the tags of both. 2.They are less costly. 3.All the rail and road transport facilities are available 4.labour can be drawn from the nearby city or villages 5.quarters for workers are provided by the local authorities or by private entrepreneurs 6.facilities as parks, schools and clubs can easily be provided, for land is available at fairly cheap rates.
City Site Advantages
1.Transport facilities are no problem; 2.Labour is available in plenty 3.Municipal services for water, sewage disposal, public health and education are available 4.All type of technical and commercial institutions and universities for the training of the staff and workers are available 5.Banking, repair and related services are available 6.Facilities for contracting put a portion of the work are available. 7.A large local market is available 8.High advertising value is available
City Site Disadvantages
1.The cost of land is exorbitant 2.House taxes, water taxes, sanitation taxes and other similar taxes and rates are fairly high; 3.Labour unions are many and labour unrest is frequent. 4.The cost of labour is high 5.Because of limited space, factory buildings are awkwardly shaped, ill-lighted and ill-ventilated 6.Several restrictions have been imposed in regard to smoke and the disposal of effluents.
1. Factor Rating Method. 2. Point Rating Method. 3. Break-even Analysis. 4. Quantitative Factor Analysis
Factor Rating Method.
Advantages 1.Simple 2.Enables bringing diverse locational considerations in to the evaluation process 3.Foster consistency of judgment about location alternatives
1. 2.List the most relevant factors in the location decision. 3.Rate each factor (say from 1 very low and to 5 for every high) according to its relative importance, i.e., a factor rating is given to each factor, based on its importance, the higher the ratings the more important is the factor. 4.Rate each locations (say 1 for very low and 10 for very high) according to its merits on each factor . 5.Compute the product ratings by multiplying the factor rating by the location rating of the each factor. 6.Compute the sum of the product ratings for each location
Factor ratings and location ratings for location alternatives
Factor Factor Rating 1. Tax advantage 4 2. Suitability of labour 3 skill 3. Proximity to customers 3 4. Proximity to suppliers 5 5. Adequacy of water 1 6. Receptivity of 5 community educational 4 7. Quality of system to rail and air 3 8. Access transportationof climate 2 9. Suitability 10. Availability of power 2
Location Rating Product of rating Locatio Location Location Location nA B A B 8 6 32 24 2 3 6 9 6 5 18 15 2 4 10 20 3 3 3 3 4 3 20 15 1 2 4 8 10 8 30 24 7 9 14 18 6 4 12 8 Total score 149 144
Point rating method
•Assigning points to the various sites based on the importance given by the organization . •At first maximum points for each factor is decided site. •Thus the site with the highest point is considered to be the superior of all the sites. •One disadvantage of this method is both tangible and intangible costs are rated at the same time and then points are decided for each
Points assigned to alternative locations
Factors rated Maximum possible points Future availability of fuel 300 Transportation flexibility 200 and growth water supply 100 Adequacy of Labour availability 250 Pollution regulations 30 Site topography 50 Living conditions 150 Total
Points assigned to locations A Location B Location 200 250 150 150 100 100 220 200 20 20 40 30 100 125 830 875
Locational Break-Even Analysis
a)Determine all relevant costs that vary with each location b)Categorize the costs for each location into annual fixed costs(FC) and variable cost per unit(VC) and calculate the total cost(TC) for the desired volume of production per annum, for each location. c)Plot the total costs associated with each location on a single chart or graph of annual cost versus annual production volume d)Select the location with the lowest total annual cost(TC) at the expected production volume per annum(Q)
Qualitative Factor analysis Method
a)Develop a list of relevant factors b)Assign a weight to each factor to indicate its relative importance(Weights may total up to 1.0) c)Assign a common scale to each factor say 0 to 100 and designate any minimum point to be scored by any location a) d)Score each potential location according to the designated scale and multiply the scores by the weights to arrive at the weighted scores a) e)Total the points for each location, and choose the location with the maximum points
XYZ company is evaluating four locations for a new plant and has weighted the relevant scores as given below. Scores have been assigned with values indicative of preferred conditions. Using these scores, develop a qualitative factor comparison for the four locations
Relevant Factor Production cost Raw material supply Labour availability Cost of Living Environment Markets Total score Assigned weight for locations Scores A B C D 0.35 50 40 60 30 0.25 70 80 80 60 0.20 60 70 60 50 0.05 80 70 40 80 0.05 50 60 70 90 0.10 70 90 80 50 1.00
Factor Production cost Raw material supply Labour availability Cost of Living Environment Markets Total score Weighted Score for locations A B C D 17.5 14.0 21.0 10.5 17.5 20.0 20.0 15.0 12.0 14.0 12.0 10.0 4.0 3.5 2.0 4.0 2.5 3.0 3.5 4.5 7.0 9.0 8.0 5.0 60.5 63.5 66.5 49.0
Defined By : Knowles and Thomson 1“Planning and Arranging “ machineries, equipment and services for the first time in completely new plants” 2 3The improvements in layouts already in use in order to introduce new methods and improvements in manufacturing procedures.
Objectives of Good Layout
1. 2. 3. 4. 5. 6. 7. 8. Provide enough production capacity Reduce material handling costs Reduce congestion that impedes the movement of people or material Reduce hazards to personnel Utilize labour efficiently Increase employee morale Reduce accidents Utilize available space efficiently and effectively
9. 10. 11. 12. 13. 14. 15.
Provide for volume and product flexibility Provide ease of supervision Facilitate co-ordination and face-to-face communication where appropriate Provide for employee safety and health Allow ease of maintenance Allow high machine/equipment utilization Improve productivity.
Factors Influencing Layout
1.Materials 2.Product 3.Worker 4.Machinery 5.Type of industry 6.Location 7.Managerial Policies
Principles of Layout
1.Principle of Minimum Travel 2.Principle of Sequence 3.Principle of Usage 4.Principle of Compactness 5.Principle of Safety and Satisfaction 6.Principle of Flexibility 7.Principle of Minimum Investment 8.
Types of Layouts
1.Process Layout or Functional Layout or Job shop Layout 2.Product Layout or Line processing Layout or Flow-line Layout 3.Fixed position Layout or Static Layout 4.Cellular Manufacturing or Group Technology Layout 5.Combination or Hybrid Layout
• Grouping of like machines together in one department. • Grouping is based on operational characteristics. Eg : All drilling machines are grouped in drilling department
Process Layout or Functional Layout or Jobshop Layout
• Materials travel in criss –cross paths. • Some times they are taken to separate buildings for heating and brought back for grinding. • These machines are called as general purpose machines. While grouping of machines following points to be noted : • The distance between departments needs to be as short as possible with a view to avoiding long-distance movement of materials.
• Though like machines are grouped in one department, the departments themselves should be located in accordance with the principle of sequence of operations. For example, in a steel plant, the operations are melting, casting, rolling and twisting. These different departments may be arranged in that order to avoid crossovers and back-tracking of materials. • Convenience for inspection. • Convenience for supervision. Process layout may be advantageously used in light and heavy engineering industries, made-to-order furniture industries and the like.
1.Reduced investment on machines as they are general purpose machines. 2. Greater flexibility in the production. 3.Better and more efficient supervision is possible through specialization. 4.There is greater scope for expansion as the capacities of different lines can be easily increased. 5.This type of layout results in better utilization of men and machines. 6.It is easier to handle breakdown of equipment by transferring work to another machine or station. 7. There is full utilization of equipment. 8. The investment on equipment would be comparatively lower. 9. There is greater incentive to the individual worker to increase his performance.
1.There is difficulty in the movement of materials. 2.Mechanical devices for handling materials cannot be conveniently used. 3. This type of layout requires more floor space 4. There is difficulty in production control. 5. Production time is more as work-in-progress has to travel from place to place in search of machines. 6. There is accumulation of work-in-progress at different places.
• Straight line layout or layout for serialized manufacture. • Machines are arranged according to the sequence of operations. • Raw materials are fed into first machine and the final product is the output of the last machine. • Partially finished goods travel automatically from one machine to the other. • Output of one machine is the input to the other machine
Eg : Sugarcane , paper mill.
Line Layout or Product Layout
While grouping of machines following points to be noted :
1All the machine tools or other items of equipment must be placed at the point demanded by the sequence of operations (ii) There should be no points where one line crosses another line; 3Materials may be fed where they are required for assembly, but, not necessarily all at one point 4All the operations, including assembly, testing and packing should be included in the line.
1. There is mechanisation of materials handling and consequently reduction in materials handling cost. 2. This type of layout avoids production bottlenecks. 3. There is economy in manufacturing time. 4. The layout facilitates better production control. 5. It requires less floor area per unit of production. 6. Work-in-progress is reduced and investment there on minimized. 7. Early detection of mistakes or badly produced items is possible. 8. There is greater incentive to a group of workers to raise their level of performance
1. Product layout is known for its inflexibility. 2. This type of layout is also expensive. 3. There is difficulty of supervision. 4. Expansion is also difficult. 5. Any breakdown of equipment along the production line can disrupt the whole system.
Relative Merits, of Product and Process Layouts Product Layout 1 Mechanizations of materials handling and consequent 2 reduction in materials handling Avoidance of bottlenecks. 3 cost. Economy in manufacturing time. Process Layout Reduction in the investment on machines as they are general purpose machines. Greater flexibility in Better and more efficient production. supervision possible through specialization.
Product Layout 4 Better production control. 5 Less floor area required per unit of production. 6 Minimum investment in workin-progress.
Process Layout Better scope for expansion. Better utilization of men and machines. Easier to handle breakdowns of equipment 7 Early detection of mistakes or by transferring of the to Full utilisation work plant. another machine or station. badly produced items. 8 Greater incentive to a group of Greater incentive to workers to raise their individual workers to raise performance. the level of their performance.
Circumstances when product and process layouts are used
Product Layout 1. One or few standard products. 2. Large volume of production of 3. Minimum inspection required each item over a considerable period during of timethe sequence of operations. Process Layout Many types or kinds of products, or emphasis on special orders. Relatively low volume of Many inspections required during production of individual items. a sequence of operations.
4. Materials and products permit bulk Materials or products too bulky or continuous handling by mechanical to permit bulk or continuous means. handling by mechanical means. 5. Little or no occasion to use the Frequent need for using the same same machine or work station for machine or work station for two more than one operation. (minimum or more different operations. number offsets required)
Fixed Position Layout
Movement of men and machines to the product Tools , machinery and men move because they are found be cheaper Eg: Ships, boilers, aircrafts and generators
Raw Material Machine and equipment Labour
Best example is constructing building in which layout is fixed men , wood, steel, sand, bricks move.
• Men and machines can be used for a wide variety of operations producing different products. • The investment on layout is very small • The worker identifies himself with the product and takes pride in it when the work is complete. • The high cost of and difficulty in transporting a bulky product are avoided.
Cellular Manufacturing (CM) Layout • Machines are grouped into cells and the cell functions like a product layout or process layout • Each cell produce single part
Cell #1 Part D Part X Part Y
Part A Part B
Product or Material Flow
• Lower work –in-- progress inventories • Reduced materials handling costs • Shorter flow times in production • Simplified production planning (materials and labour) • Increased operator responsibilities • Improved visual control • Fewer tooling changes • Over all performance increases by reducing production cost • Improving on time delivery • Quality also tends to improve.
Disadvantages • Reduced manufacturing flexibility • Potentially increased machine down time • Duplicate pieces of equipment may be needed so that the parts need not be transported between cells.
• Combination of process layout or fixed layout and product layout • Least cost providing combination is preferred
Product layout F.P. G.C. G.C. H.T . H.T . G.G.
Raw material Raw material
Finished Product (Gears)
F.P. = Forging Press H.T. = Heat Treatment Furnace G.C. = Gear Cutting Machine G.G. = Gear Grinding Machine
Arrangements of Facilities
• Location of receiving and shipping departments • Storage • Inspection a. Purchase items at various points in the plant ( i.e.) raw materials ,parts and suppliers. b. Inspection of work- in –progress c. Inspection of finished goods • Maintenance. • Employee Facilities.
Importance of Layout
• • • • • • • • • • • Economics in handling Effective use of available area Minimization of production delays Improved quality controls Minimum equipment investment Avoidance of bottlenecks Better production control Better supervision Improved utilization of labour Improved employee morale Avoidance of unnecessary and costly changes
Changes in the layout
• Expansion • Technological advancements • Improvements in the layout
Expansions are done for the following ways • Increase in the output of the existing product • Introduction of a new product in the same line • Diversification of the lines of the activity.
• Replace of labour by machines • Development in fuel and energy • Development in process • Development in materials • Improvements in product design • Advancement in information technology
Improving the layout
• The evils of a poor layout are a hidden cost not revealed even by the best accounting method • Even if the limitations are revealed , the management may be unwilling to initiate remedial steps because there is a built in adjustability to any circumstance in all human beings and the management is no exceptions.
Management has to rectify the following defects a)Materials and work-in-process move at a lower rate than expected, with back-tracking’s and cross-overs. b)Materials handling costs are high. c)Aisles and individual work places are congested. d)Service departments are given inadequate space and are inconveniently located. e)Materials in process are frequently damaged. f)Frequent accidents happen to workers. g)There are delays in production schedule. h)There are no plans for future expansion. i)There is increased cost of production and reduced operational efficiency.
• The process of preparing a layout, is an art as well as a science , in-spite of the advances made in the use of layouts • Final layout is consummation of many trials , errors and compromises. • Step by step process is available.
a)Analyse the product & decide the expected volume of production b)Analyse is study of the parts to be manufactured or purchase, at what stage they are to be (added) assembled c)Volume is decided by market & management policies d)Then we decided upon the equipments, which are all the equipments to be used e)Now the machine will decide the no of workers required f)Indirect labours are important like janitors, material handlers, maintenance g)Once the layout is decided then construction begins
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.