The Next Step Learning Solutions!!!

Delivering Value Education

FACTORS INFLUENCE THE

SELECTION OF
PLANT LOCATION

Mr. Irfan Bashir

Assistant Professor
The Next Step Learning Solutions!!!
Delivering Value Education

CONTENTS

• Definition
• Introduction
• Factor affecting plant location

• Conclusion

• References

1
DEFINITIO
N

• A plant is a place where men,

materials,
money, equipment, machinery, etc are
brought together for manufacturing
products.
• Plant location refers to the
establishment of an industry at a particular
place.
2
 INTRODUCTIO
N

Plant location refers to the choice of region and the selection of a particular
site for setting up a business or factory
 An ideal location is one where
 Cost of the product is kept to minimum
 With a large market share
 Least risk & maximum social gain
 It is the place of maximum net advantage or which gives lowest unit cost of
production and distribution.
3
FACTORS AFFECTING THE
PLANT
LOCATION

 Nearness to raw materials.

 Transport facilities
 Nearness to market
 Availability of labour
 Availability of fuel & power
 Availability of water

4
 Climatic condition
 Financial & other aids
 Land
 Community attitude
 Presence of related industries
 Existence of hospital, marketing centres, schools,
banks post offices, etc
 Local bye-laws, taxes, building ordinance, etc
 Housing facilities
 Facilities for expansion
 Security

5
NEARNESS TO RAW
MATERIALS

 It will reduce the cost of transportation of

raw materials from the vendors end to the
plant
 When the supplier of raw material is near
the facility, then the immediate supply of
the raw materials will be available

6
 TRANSPORT
FACILITIES

 Money is spent in transporting raw material as well as

finished goods
 Depending on the size of a raw materials and finished
goods
 A suitable method of transportation such a road, rail, water
or air is selected & accordingly plant location is decided
 The cost of transportation must be fairly small compared to
the total cost
7
NEARNESS TO
MARKET

 It reduces the cost of transportation as well

as the chances the finished products
getting damage to the goods while
transport
 Moreover a plant being near to the market
can catch a big share of the market & can
render quick service to the customers
8
AVAILABILITY OF
LABOUR

 The labour should be stable, with proper

attitude towards work and available at
reasonable rates.
 Should be managed in such a way that the
chances of boycotts, strikes or lockouts are
less and the facility is able to achieve low
labour cost per unit production.
9
AVAILABILITY OF FUEL &
POWER

• Because of the wide spread use of electric

power, in most cases fuel has not remained
a leading factor for plant location
• Electric power should be available
continuously, in proper quantity and at
reasonable rates.

10
AVAILABILITY OF
WATER

 Water is used for processing, drinking, and

sanitary purposes
 For a pharmaceutical industry, water should be
available in adequate quantity and should be of
proper quality
 Pharmaceutical industry should not be
located in an area known for its water
shortage
11
CLIMATIC
CONDITION

 Due to development of HVAC (heating,

ventilation & air conditioning), climate of a
region doesn’t present much of a problem.
However, usage of HVAC needs capital
 Facilities located in humid areas should consider
the relative humidity of the place & its effects on
the product. Thus regulating the relative humidity
is also important.
12
 FINANCIAL & OTHER
AIDS

 Some states gives aids in the form of loans, feed

money, subsides, machinery, etc to attract industrialists
 Special economic zone has economic law which is
different from typical country’s economic laws
 SEZ offer tax breaks to foreign investors
 SEZs are located within country’s national borders aims
to increase trade, increase investments, job creation &
effective administration
13
LAN
D

 Topography, area, shape of the site, cost,

drainage and other facilities as well as the
probability of floods and earthquake
influence the selection of site.

14
PRESENCE OF RELATED
INDUSTRIES

 Like packaging industry or a firm which

produces raw materials could be helpful to
the new industry which could get the raw
materials from the nearby firm.

15
EXISTENCE OF HOSPITALS,
MARKETING
CENTERS, SCHOOLS , BANKSETC

 For the future benefits of the staffs

and their family.

16
HOUSING
FACILITIES

 Accommodations are given to the

employees of higher rank,
thus there
should be housing facilities in the selected
site.

17
FACILITIES FOR
EXPANSION

 While selecting the land for a plant site, it

should be seen that there’s plenty of land
for future expansion of the industry

18
 LOCATION OF A FACTORY IN A
BIG

•CITY

 Generally factories are located in big cities for obvious

reasons of skilled labour, market for both raw material and
end products
 ADVANTAGES:
 All types of skilled man power is available
 Repair, maintenance and service facilities for various utilities
 Big markets
are available for sale of products available
in abundance 19
 CONTI
…

 Many similar industries /plants exist in nearby areas.

 Housing facilities for workers and employees .
 Police and fire protection facilities available in near by areas.
 DISADVANTAGES:
 Insurance and taxation rates are high
 Due to higher living standards, cost of consumer goods and wages
rates are high
 Cost of land is more if needed for expansion of the plant etc
 Possibilities of expansion are minimum due to scarcity of 20
land
LOCATION OF AN INDUSTRY IN
SMALL TOWN

 ADVANTAGES:  DISADVANTAGES:
 Less labour trouble  Lack of skilled labour
 Lower rents in  Lack of facilities for staffs
comparison to big cities  Police and fire protection less
and urban areas satisfactory
 Noise not much problems  Transportation & marketing
facilities not satisfactory as
required
21
 REFFERENC
ES

 O.P. Khanna’s, Industrial Engineering and Management

17th Edition Dhanpat Rai Publications, Edition: 2010
ISBN: 9788189928353, page no.
 Cvs Subrahmanyam Production &
Pharmaceutical Management, / Prakashan, 1st
Vallabh Publications edition, ISBN:
8185731403, page no.

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