Lesson title: Designing an Operating Plan:

Plant Location and Layout

Lesson Objectives: At the end of the

learning session, I can:
• Enumerate the factors to consider in
choosing a strategic location and its
importance;
• Identify a strategic location and draw a
plant layout for the proposed small
business
SUPPLEMENTAL VIDEO LESSON
LINK:
https://youtu.be/OshyCwH3TJM
(PLANT LOCATION)
https://youtu.be/DrO5sS51Yk8
(PLANT LAY-OUT)
SOURCE: YOUTUBE
 PART - I

PLANT LOCATION
 Introduction
Plant Location is the geographic coordinates of
a plant or facility. It basically refers to the place of
existence or the address of the plant. Plant locations
decisions concern both manufacturing/assembly units as
well as service organisations. Ideal plant location is very
important for business houses to carry out their business
smoothly and profitably. Plant location decisions being
strategic, long term and non repetitive, requires detailed
analysis of long term consequences.
Location decisions of large projects often
involve economists, geographers, town planners,
accountants, lawyers, marketing experts, politicians,
executives, defense analysts, ecologists, etc. Therefore
such an important decision should be taken with care
and responsibility.
Reasons for making Locational Decisions

Locational decisions generally arise when:

• a new manufacturing or service unit is to be set up.

• existing plant operations are difficult to expand due to poor
selection of the site earlier
• the growth of business makes it advisable to establish
additional facilities in new territories
• there is emergence of new social, political or economic
condition suggesting a change in the location of the plant
• the product developments have outweighed the advantages
of the existing plant
• certain GOVT. policies relating to industry, decentralization,
dispersal to achieve overall development of the country, do
not permit expansion of existing plant
Factors influencing Plant Location Selection

Regional factors Community factors Site factors

• Proximity to • Industrial and • Supporting

Markets Labour attitudes industries and
• Proximity to Raw- • Safety services
materials requirements • Availability of land
• Infrastructural • Community facilities • Cost of land
facility • Community • Suitability of land
• Transportation attitudes
facility
• Labour and wages
• Legislation and
taxation
• Climatic condition
 Regional Factors

• Proximity to Markets
• Proximity to Raw-materials
• Infrastructural facility
• Transportation facility
• Labour and wages
• Legislation and taxation
• Climatic condition
 Community Factors

• Industrial and labour attitudes

• Safety requirements
• Community facilities
• Community attitudes
 Site Factors

• Supporting industries and services

• Availability of land
• Cost of land
• Suitability of land
Process of Selection of Plant Location
An ideal location is one where the cost of obtaining
materials and processing them into finished products, plus the
cost of distributing the finished product to the customers is
minimum.
One of the most commonly used approach is as follows:
Step 1 : Prepare a list of all relevant factors.
Step 2 : Estimate expenses on materials, transport, wages,
power, etc for each location based on the above factors.
Step 3 : Collect data on intangible factors like Community
facilities & Community attitudes.
Step 4 : Analyse the tangible data for each location and
calculate rate of return on investment.
Step 5 : Select provisionally a location based on financial data.
Step 6 : Carefully compare the data for different locations and
select the optimal location based on tangible and intangible
 Summary
Plant location decisions are thus
important, strategic, long-term and non-repetitive
decisions. Plant location depends on various
factors, some concerned with general territory
selection whereas some factors are relevant for
community selection and site selection. Location
decisions also take into account the merits and
demerits of Urban and Rural areas. Poor location of
the plant often involves higher cost of production,
difficult marketing and transportation, disturbances
in production and overall decline in Profitability.
 PART - II

PLANT LAYOUT
 Introduction
Plant layout is the disposition of various
facilities and services of the plant within the area of
the site selected previously. The work of the plant
layout begins with the location of the work centre.
Plant layout thus involves the determination of the
space requirement for the facilities and arranging
them in a manner that causes steady flow of
production with minimum overall cost.
Thus Plant Layout is the placing of right
equipment coupled with right method in the right place
to permit the processing of a product in the most
effective manner through the shortest possible
distance and through the shortest possible time.
 According to Moore,” plant layout is
the plan of or the act of planning an optimum
arrangement of facilities, including personnel,
operating equipment, storage space, material
handling equipment and all other supporting
services along with the design of the best
structure to contain these facilities”
 Reasons for Carrying out Analysis for
Plant Layout

• decision to build a new plant

• re-layout of facilities to meet changes in demand
(addition of machines)
• introduction of new product
• withdrawal of obsolete facilities
• changes in production design
• adoption of new safety standards
• overcoming the deficiencies of the existing layout
 Objectives of a Good Plant Layout

• Minimize handling of materials, WIP and finished

goods
• Minimisation of production delays
• Lesser WIP and minimum manufacturing Cycle Time
• Efficient utilization of available space
• Easy supervision and better production control
• Greater flexibility for changes in production design
and for future expansion
• Better work conditions and environment
 Principles of a Good Plant Layout
It is not possible to define a good layout in a few
words. There are certain criteria which can be used to judge
whether or not the layout is efficient. Some good principles
of an efficient Layout are listed below:

1) Overall Integration of Factors

A good layout is the one that integrates men,
materials, machines and supporting activities in such
a way that the best compromise is achieved.
2) Minimum Movement
A good layout is the one that permits the
minimum movement between the operations.
3) Unidirectional Flow
A good layout is the one that makes
materials move only in the forward direction,
towards stage of completion, without any
backracking.
4) Maximum Visibility
A good layout is the one that always
makes men machines and materials readily
observable at all time.
5) Maximum Accessibility
A good layout is the one that makes all
services and maintenance points readily
accessible.
6) Minimum Handling
A good layout is the one that reduces
the material handling activity to its minimum
7) Safe and improved environments
A good layout is the one that makes the
work centers and areas around them safe and
satisfying to the workmen.
8) Maximum Flexibility
A good layout is the one that can be
easily altered after setup without much cost.
9) Effective use of Available Space
A good layout is the one that makes
optimum use of available space both horizontal
and vertical. This involves arrangement of
different units in the layout, in such a way that
each pattern ensures forward movement of
material.
Diagram showing different flow patterns of
facilities for Maximum Utilisation of Space
 Types of Plant Layout

TYPES OF
PLANT LAYOUT

Process or
Product or Line Project or Fixed
Functional
Layout Position Layout
Layout
 Process or Functional Layout
Process layout also called as “layout
by function” is generally associated with batch
production. The factory is divided into process
units or departments, and within these process
units, similar facilities are grouped together.

Process type of layout is suitable when:

• the products are non-standard.
• there are wide variations in the processing times
of individual operations.
 Product or Line Layout
Product layout is also called “layout by sequence.”
The layout of plant, shape, and size of its buildings, location of
services and storage yards, position of material handling
equipment is such that material flows in a unidirectional
manner and at a steady rate. Special purpose machinery and
equipment with built in-controls to measure output and input are
employed. the equipment if necessary are duplicated, to avoid
back-tracking and ensure that materials always keep moving in
the forward direction towards the state of completion.

Product layout is suitable when:

• products are standard and produced in large volumes.
• products have reasonably stable demand.
• the processing times of individual operations is more or less
equal.
• uninterrupted supply of materials can be maintained.
 Project or Fixed Position Layout
Project type of industries such as manufacturers
of aero planes, ships, locomotives, large turbines, heavy
machinery, pressure vessels and others which involves heavy
materials and sub-assemblies have this type of layout. The
heavy materials and sub-assemblies, under this type of layout
remain fixed at one place. Men machines and tools are
brought to the location to complete the job. Minor components
or sub-assemblies may also be brought to the site itself for
assembly.

Fixed position layout is suitable when:

• one or few pieces of an identical product are to be
manufactured.
• assembly consists of a large number of heavy parts, the cost
of transportation of which is very high.
 Summary

Plant layout is the process of

placing of the right kind of equipment, coupled
with the right method at the right place, so as to
permit the processing of the products through
the shortest possible distance and in the
shortest possible time. Three basic types of
plant layouts have been identified as process
layout, product layout and fixed position layout.
The factors to be considered in designing a plant
layout including material, machinery, man,
movement, waiting, facilities, building and
change.
 THANK YOU
References: Production (Operations) Management – Prof L C Jhamb
www.wikipedia.com