PLANT / FACILITY LOCATION

CHARACTERISTICS OF FACILITY LOCATION

• Decisions are Strategic, Long Term and

Non Repetitive in Nature
• Affected by
– External factors such as Economic, Political
and Social conditions
– Internal conditions such as Technology Used,
Capacity, Financial position, Raw Materials,
Energy and Workforce Required
• Affects the Effectiveness and Efficiency of
Productive System
CHARACTERISTICS OF FACILITY LOCATION

• These decisions have effects in

– Selling of the Product
– Manufacturing of the Product
• Such decisions are very important
especially for manufacturing sector [For
Retail & Services it may be little less
strategic]
• Cost of changing this decision is very high,
and impact is over long period of time
FACTORS EFFECTING CHOICE OF PLANT
LOCATION
• Proximity to Raw Material (Eg Steel, Textile, Sugar mills)
– Raw Material available on
• Only one place
• Coming from few places
• Everywhere
[IMPORTANCE DECREASES WITH INCREASE IN
AVAILABILITY]
• Closer to Market Segment
• Climatic Conditions (Eg Textiles in Ahmedabad because
of humidity)
• Power Availability (Supply, Qlty, etc)
• Tax Sops
REASONS FOR LOCATION PROBLEMS

• Creation of New Facility

• Relocation of Existing Facility due to change
in cost or availability of inputs
• Expansion of Present Capacity
• Relocation of Associated Industries
• Changes in Geographical Distribution of
Demand
• Changes in Social, Legal or Political factors
LOCATION DECISIONS

• Legal Decisions are taken at Different Levels:

– Which country
– Which Region / Zone
– Which City
– Which Area
– Which Plot
• Identify factors important for me
• Identify alternatives
• Evaluate alternatives to choose the best
LOCATION DECISION STAGES

• Regional Decisions – Country, State, etc

• Local Decision – City, District
• Site Decision – Particular Plot
LOCATION DECISION STAGES
(REGIONAL DECISIONS)

• Market Proximity
• Raw Material Proximity
• Availability of Utilities
• Labour Supply and Unionization
LOCATION DECISION STAGES
(LOCAL DECISIONS)

• Taxes
• Economic Incentives
• Attractiveness of the Community
• Compatible Industry
• Transportation Network
• Government Policy and Attitude
• Environmental Regulations
LOCATION DECISION STAGES
(SITE DECISIONS)

• Space for Expansion

• Proximity to other Industries
Eg: Thermal Power Plant

• Factors:
– Pollution
– Proximity to Raw Material
– Transportation of Coal
– Transmission of Electricity
– Away from City
Eg: Semi-conductor Manufacturing
• Factors:
– Skilled Labour
– Climatic Conditions: Low humidity, dust free
– Power Supply Quality: Un-interrupted power
Eg: Restaurant
• Factors:
– Market proximity: Foot – falls
– Parking Space
– Connectivity
EVALUATION TECHNIQUES

• Linear Scoring Rule (Decision Matrix)

• Break Even Analysis
• Mathematical Model - LPP, IP, Branch and
Bound, Transportation(Location and
Distribution), Simulation
• Bridgeman’s Dimensional Analysis
• Brown and Gibson Multi Attribute Plant
Location Model
SINGLE FACILITY LOCATION

• In single facility location – Decision on

location is based upon other existing
facilities
Eg: Location of blood bank in Delhi.
Decision is based upon existing hospitals
SINGLE FACILITY LOCATION

• MECHANICAL ANALOGUE
(VARIGNON FRAME)

• MEDIAN MODEL

• CENTRE OF GRAVITY MODEL

SINGLE FACILITY LOCATION

Existing facility

New facility
R’s – Location of factories
M’s – Location of markets
w’s – weights
P – point where the weights balance,
is the location of new facility Rm

R2
m
P Mn
R1 2 m+n
M2

M1
1 m+2
Single Facility Location
m+1 Centre of Gravity Model

In the absence of friction, the
common knot P of (m+n)
strings comes to equilibrium
at least Cost location
[Here we draw an analogy
between
Min. Potential Energy - Min.
Travel Cost ]
Assumptions:
 R1,R2, ……Rm Locations
of Raw Material Sources
 M1,M2 …Mn location of
markets
 Euclidean (Straight line
travel)
 Each weight (there are
m+n in all)
= No. of annual trips
between P and that pt X
Cost per unit distance
LOCATING FACILITIES GLOBALLY

• Cost advantage
• Scale economics
• Diversification and risk reduction
• Government policies and foreign cultural
preference
• Information and technology exchange
LOCATION OF SERVICE FACILITIES
(2 Categories)
• FIXED SERVICE: Consumption is taking place at
the site of service facility (Consumer comes to the
facility)
Eg: Bank, hospitals, theatre, etc

• DELIVERED SERVICE: Consumption on

consumers’ site ie where they are demanded
Eg: Fire Brigade, Sanitation, Police, Ambulance
LOCATION OF SERVICE FACILITIES

• Multiple Objectives are to be considered in

Location Decision
• Total Access Cost represents Objective
function for the Fixed Services
• Total Delivery Cost represents Objective
function for Delivered services
• The cost can be expressed in money, time,
distance etc.
LOCATION OF SERVICE FACILITIES

• Emergency services like fire, police and ambulance

require rapid response.
• Waiting Line Situations because of random nature of
the timing & frequency of calls for service and
varying times for response and service.
• Extremely large and expensive capacity in order to
meet response standards imposed for peak demand.
• Mobile locations with two way communication
• Redeployed in Transit instead of always returning to
home base
HIERARCHY OF LOCATION PROBLEMS

Location of ‘Plant’

Plant Layout ( Location of ‘Depts’)

Physical Arrangements of M/cs

Work Place Layout ( Location of ‘tools’

or ‘raw materials’)
THANK YOU