2.

4 FACi Li TY LOCATi ON

plant location may be understood as the function of determining where the plant should be roeaied for
maximum operating economy and effectiveness. the selection of a place for locating a plant is one of the
problems, perhaps the most important, which is faced by an entrepreneur while launching a new enterprise.
a selection on pure economic considerations will ensure an easy and regular supply of raw materials, labour
force, efficient plant layout, proper utilisation of production capacity and reduced cost of production. an
ideal location may not, by itself, guarantee success; but it certainly contributes to the smooth and efficient
working of an organisation. A bad location, on the other hand, is a severe handicap for any enterprise and
it finally bankrupts it. It is, therefore, very essential that utmost care should be exercised in the initial stages to
select a proper place. once a mistake is made in locating a plant it becomes extremely difficult and costly
to correct it. Steps in Location Selection

to be systematic, in choosing a plant location, the entrepreneur would do well to proceed step by step, the
steps beinfc

1. Within the country or outside;

2. selection of the region;

3. selectior of the locality or community;

4. selection of the exact site.

1. Deciding on Domestic or international Location

The first step in plant location is to decide whether the facility should be located domestically or
internationally. a few years ago, this factor would have received little consideration. But with increasing
internationalisation of business, the issue of home or foreign country’ is gaining greater relevance. if the
management decides on foreign location, the next logical step would be to decide upon a particular
country for location. this is necessary because, countries across the world are vying with each other to attract
foreign investments. the choice of a particular country depends on such factors as political stability, export
and import auotas, currency and exchange rates, cultural and economic peculiarities, and natural or
physical conditions.

2. Selection of Region the selection of a particular region out of the many natural regions of a country is
the second step in plant location.

The following factors influence such selection:

(i) Availability of Raw Materials

As a manufacturing unit is engaged in the conversion of raw materials into finished products, it is very essential
that it should be located in a place where the supply of raw materials is assured at minimum transport cost.
the sugar industry, the paper industry, the iron and steel industry, the industries engaged in the solvent
extraction of oil from rice bran, the china clay washery, factories manufacturing low tension porcelain
insulators, and the like should be located near the sources of their raw materials. the heavy concentration of
the sugar industry in Bihar and Uttar pradesh is due to the fact that these two states are the leading producers
of sugarcane in the country. nearness to raw materials offers such advantages as:

(a) reduced cost of transportation;

(a) regular and proper supply of materials uninterrupted by transportation breakdowns; and
(c) savings in the cost of storage of materials.

(ii) Nearness to the Market

since goods are produced for sale, it is very essential that the factory should be located near their market. a
reduction in the cost of transporting finished goods to the market; the ability to adjust the production
programme to suit the likes and dislikes of consumers; the ability to render prompt service to the consumers,
provide after-sale services, and execute replacement orders without delay - these are some of the
advantages that accrue to the entrepreneur if he/she establishes his/her factory near his market.

(iii) Availability of Power

power is essential to move the wheels of an industry. coal, electricity, oil and natural gas are the sources of
power. Where coal is the source of power, as in the case of the iron and steel industry, the factory has to be
located near the coal fields. Examples of such industries are: the iron and steel industry in Germany, in
Pennsylvania in the U.S.A. and in Jamshedpur in india. (iv) Transport Facilities

While making a study of a location, an entrepreneur considers the question of the availability of transport
facilities. Transport facilities are essential for bringing raw materials and men to the factory and for carrying
the finished products from the factory to the market. a place which is well connected rail, road and water
transport is ideal for a plant location. it may be said that industry follows transportation. in other words, places
with well-developed means of transport attract industries^ln extreme cases, transport may follow industries.
For instance, if a public sector unit is started in a remote place, the government will naturally provide transport
facilities to cater to the requirements of the unit. But, generally speaking a place with existing transport
facilities is perfect for locating a plant.

(v) Suitability of Climate

the climate has its own importance in the location of a plant because of two reasons. First, there are certain
industries which, because of the nature of their production, require particular climatic conditions; for
example, humid climate for cotton textiles and jute. such industries have to be located in places where
humid climatic conditions are available. this explains why the cotton textile industry is concentrated in
mumbai and the jute textile industry in Kolkota.

(vi) government Policy

The influence of Government policies and programmes on plant location is apparent in every country,
particularly in planned economies like ours. in the name of balanced regional development, many
backward regions in india have been selected for the location of new industries, which would generate the
regions economy and on a larger canvas, the national economy.

The Government of India has been influencing plant location in a number of ways. Some of these are:

Licensing policy;
Freight rate
policy;

establishing a unit in the public sector in a remote area and developing it to attract other industries;
Institutional finance and government subsidies.

3. Selection of Community

selecting a particular locality or community in a region is the third step in plant location. the selection of a
locality in a particular region is influenced by the following factors:

(i) Availability of Labour

Despite the talk of mechanisation and automation, the importance of labour on the industrial side has not
been completely lost. Labour is an important factor in the production of goods. an adequacy of labour
supply at reasonable wages is very essential for the smooth and successful working of an organisation.

(ii) Civic Amenities for Workers

Besides good working conditions inside the factory, the employees require certain facilities outside it.
recreation facilities, such as clubs, theatres and parks, must be provided for the employees. they require
schools for their children. a place which abounds in all these facilities will naturally be preferred to another
place which lacks them.

(iii) Existence of Complementary and Competing Industries

the existence of complementary industries is favourable to the location of industries because an industrial
unit, in association with other units, can get the following benefits:

• 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.

(iv) Availability of Water and Fire-fighting Facilities

some industries require a plentiful supply of water for their working. some of these are: fertilizer units, rayon
manufacturing units, absorbent cotton manufacturing units, leather tanneries, bleaching, dyeing and screen
printing units. these factories must be located in places where water is available in abundance. Water may
be obtained from the local authority, from the canal, from a river or a lake, or by sinking a boreweli. in any
case, the supply of water should be considered with respect to its regularity, cost and purity.

4. Selection of the Site

the selection of an exact site in a chosen locality is the fourth step in plant location. the selection of the site
is influenced by the following considerations:

Soil, Size and Topography

For factories producing engineering goods, the fertility or otherwise of the soil may not be a factor influencing
plant location. But for agro-based industries, a fertile soil is necessary for ensuring a strategic plant location.

the area of the land should be such as to accommodate not only the existing manufacturing facilities, but
offer scope for future expansion programmes as well.
2.5 FACiLiTY LAYOuT

Plant Layout, also known as layout of facility refers to the configuration of departments, work-centres and
equipment and machinery with focus on the flow of materials or work through the production system.

plant layout or facility layout means planning for location of all machines, equipments, utilities, work stations,
customer service areas, material storage areas, tool servicing areas, tool cribs, aisles, rest rooms, lunch rooms,
coffee/tea bays, offices, and computer rooms and also planning for the patterns of flow of materials and
people around, into and within the buildings. Layout planning involves decisions about the physical
arrangement of economic activity centres within a facility. an economic activity centre can be anything
that consumes space, a person or group of people, a machine, a work station, a department, an aisle, a
store room and so on. the goal or layout planning is to allow workers and equipments to operate more
effectively. the questions to be addressed in layout planning are:

• How much space and capacity does each centre need?

• How should each center’s space be configured?

• What centres should the layout include?

• Where should each centre be located? the location of a centre has two dimensions:

• Absolute location or the particular space that the centre occupies within the facility.

• Relative location i.e., the placement of a centre relative to other centers.

The importance of layout decisions:

the need for layout planning arises both in the process of designing new plants and the redesigning existing
plants or facilities.

most common reasons for design of new layouts are:

(i) Layout is one of the key decisions that determine the long-run efficiency in operations.
(ii) Layout has many strategic implications because it establishes an organisation’s competitive priorities in
regard to capacity, processes, flexibility and cost as well as quality of work life, customer contact and
image (in case of service organisations).

(iii) an effective layout can help an organisation to achieve a strategic advantage that supports
differentiation, low cost, fast response or flexibility.

(iv) A well designed layout provides an economic layout that will meet the firm’s competitive requirements.

Need for redesign of layout arises because of the following reasons:

• Accidents, health hazards and low safety,

• Changes in environmental or legal requirements,

• Changes in processes, methods or equipments,

• Changes in product design/service design,

• Changes in volume of output or product-mix changes,

• Inefficient operations (high cost, bottleneck operations),

• Introduction of new products/services,

• Low employee morale.

good Plant layout- Objectives:

• Efficient utilisation of labour reduced idle time of labour and equipments,

• Higher flexibility (to change the layout easily),

• Higher utilisation of space, equipment and people (employees),

• Improved employee morale and safe working conditions,

• Improved flow of materials, information and people (employees),

• Improved production capacity,

• Reduced congestion or reduced bottleneck centers,

• Reduced health hazards and accidents,

• To allow ease of maintenance,

• To facilitate better coordination and face-to-face communication where needed,

• To improve productivity,

• To provide ease of supervision,

• To provide product flexibility and volume flexibility, • To utilise available space efficiently and
effectively.

Choices of Layout:

Layout choices can help greatly in communicating an organisation’s product plans and competitive
priorities. Layout has many practical and strategic implications. altering a layout can affect an organisation
and how well it meets its competitive priorities by:

• Facilitating the flow of materials and information,

• Improving communication,
• Improving employee morale,

• Increasing customer convenience and sales (in service organisations such as retail stores),

• Increasing the efficient utilisation of labour and equipment,

• Reducing hazards to employees.

The type of operations carried out in a firm determines the layout requirements.

some of the fundamental layout choices available to managers are:

• Whether to plan the layout for the current or future needs?

• Whether to select a single-story or multistory building design?

• What type of layout to choose?

• What performance criteria to emphasise?

Factors influencing layout choices:

Primarily the layout of a plant is influenced by the relationship among materials, machinery and men. Other
factors influencing layout are type of product, type of workers, the type of industry, management policies
etc. some of these factors are discussed in detailed below:

• Location: The size and type of the site selected for the plant, influences the type of buildings (single story
or multi story) which in turn influences the layout design. Also, the location of the plant determines the
mode of transportation from and into the plant (such as by goods trains, truck, or ships) and the layout
should provide facilities for mode of transport used. also, the layout should provide for storage of fuel,
raw materials, future expansion needs, power generation requirements etc.
• Machinery and Equipments: the type of product, the volume of production, type of processes and
management policy on technology, determines the type of machines and equipments to be installed

• Managerial Policies: regarding volume of production, provision for future expansion, extent of
automation, make-or-buy decisions, speed of delivery of goods to customers, purchasing and inventory
policies and personnel policies influence the plant layout design.

• Materials: plant layout includes provision for storage and handling of raw materials, supplies and
components used in production. the type of storage areas, racks, handling equipments such as cranes,
trolleys, conveyors or pipelines etc., used - all depend on the type of materials used - such as solid, liquid,
light, heavy, bulky, big, small etc.

• Product: the type of product i.e., whether the product is light or heavy, big or small, liquid or solid etc., it
influences the type of layout. For example, Ship building, Aircraft assembly, Locomotive assembly etc.,
requires a layout type different from that needed to produce refrigerators, cars, scooters, television sets,
soaps, detergents, soft drinks etc. the manufacturing process equipments and machines used and the
processing steps largely depend on the nature of the product and hence the layout design depends,
very much on the product.

Type of industry:
 Type of Industry Process

i is intermittent type of
industry c is continuous type
of industry

Whether the industry is classified under (a) Synthetic, (b) Analytical, (c) Conditioning and (d) Extraction
industries and again whether the industry has intermittent production or continuous production has a
relevance to the type of layout employed.

• Workers : the gender of employees (men or women), the position of employees while working (i.e.,
standing or sitting), employee facilities needed such as locker rooms, rest rooms, toilets, canteens,
coffee/tea bays etc., are to be considered while designing the plant layouts.

Plant Layout- Principles:

the layout selected in conformity with layout principles should be an ideal one. these principles are:-

• Principle of Minimum Travel: men and materials should travel the shortest distance between operations
so as to avoid waste of labour and time and minimise the cost of materials handling.

• Principle of Sequence: machinery and operations should be arranged in a sequential order. this principle
is best achieved in product layout, and efforts should be made to have it adopted in the process layout.

• Principle of Usage: every unit of available space should be effectively utilised. this principle should

• Principle of Compactness: There should be a harmonious fusion of all the relevant factors so that the final
layout looks well integrated and compact.
• Principle of Safety and Satisfaction: the layout should contain built in provisions for safety for the workmen.
it should also be planned on the basis of the comfort and convenience of the workmen so that they feel
satisfied.

• Principle of Flexibility: The layout should permit revisions with the least difficulty and at minimum cost.

• Principle of Minimum Investment: The layout should result in savings in fixed capital investment, not by
avoiding installation of the necessary facilities but by an intensive, use of available facilities.

Types of Layout:

a layout essentially refers to the arranging and grouping of machines which are meant to produce goods.
grouping is done on different lines. the choice of a particular line depends on several factors. the methods
of grouping or the types of layout are:

(i) Process layout or functional layout or job shop layout; (ii) Product layout or line processing layout or flow-
line layout; (iii) Fixed position layout or static layout; (iv) cellular manufacturing (cm) layout or group
technology layout and (v) combination layout or Hybrid layout.

Process Layout:
also called the functional layout, layout for job lot manufacture or batch production layout, the process
layout involves a grouping together of similar machines in one department. For example, machines
performing drilling operations are installed in the drilling department; machines performing turning operations
are grouped in the turning department; and so on. in this way, there would be an electroplating department,
a painting department, a machining departments and the like, where similar machines or equipments are
installed in the plants which follow the process layout. The process arrangement is signified by the grouping
together of like machines based upon their operational characteristics. For example, centre lathes will be
arranged in one department, turret lathes in a second department, and milling machines in a third
departments.

A quantity of raw material is issued to a machine which performs the first operation. This machine may be
situated anywhere in the factory. For the next operation, a different machine may be required, which may
be situated in another part of the factory. the material should be transported to the other machine for the
operation. thus, material would move long distances and along crisscrossing paths. at one stage, the material
may be taken to a separate building, say, for heat treatment, and then brought back for grinding. if
machines in one department are engaged, the partly finished product awaiting operations may be taken
to the store and later reissued for production. Partly finished goods would be waiting for processing in every
department, like commuters waiting for buses in a city.

machines in each department attend to any product that is taken to them. these machines are, therefore,
called general purpose machines. Work has to be allotted to each department in such a way that no
machine in any department is idle. in a batch production layout, machines are chosen to do as many
different jobs as possible, i.e., the emphasis is on general purpose machines. the work which needs to be
done is allocated to the machines according to loading schedules, with the objective of ensuring that each
machine is fully loaded. the process layout carries out the functional idea of taylor and from the historical
point of view, process layout precedes product layout. this type of layout is best suited for intermittent type
of production.

While grouping machines according to the process type, certain principles must be kept in mind. these are:

• 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.

• The distance between departments needs to be as short as possible with a view to avoiding longdistance
movement of materials.

• Though similar 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 smelting, casting; rolling etc. these different departments may be arranged in that order
to avoid crossovers and backtracking of materials.
Product Layout:

also called the straight-line layout or layout for serialised manufacture, the product layout involves the
arrangement of machines in one line depending upon the sequence of operations. Material is fed into the
first machine and finished products come out of the last machine. In between, partly finished goods move
from machine to machine, the output of one machine becoming the input for the next. in a sugar mill, sugar
cane, fed at one end of the mill comes out as sugar at the other end. similarly, in paper mill, bamboos are
fed into the machine at one end and paper comes out at the other end.

in product layout, if there are more than one, line of production, there are as many, lines of machines. the
emphasis here, therefore, is on special purpose machines in contrast to general purpose machines, which
are installed in the process layout. consequently, the investment on machines in a straight line layout is higher
than the investment on machines in a functional layout.

Lathe Drilling Grinding

Raw material in (Finished)
Comonent 1 Comonent 1

Cutting Lathe Drilling Plating

Comonent 2 Comonent 2
Product out

Cutting Lathe Gear cutting Grinding

Comonent 3 Comonent 3

Figure of Product Layout

the grouping of machines should be done, on product line, keeping in mind the following principles:

• All the machine tools or other types of equipment must be placed at the point demanded by the
sequence of operations.

• All the operations, including assembly, testing and packing should be, included in the line.

• Materials may be fed where they are required for assembly but not necessarily all at one point; and •
There should be no points where one line crosses another line;

the product layout may be advantageously followed in plants manufacturing standardised products on a
mass scale such as chemical, paper, sugar, rubber, refineries and cement industries.
Layout in the form of Fixed Position:

As the term itself implies, the fixed position layout involves the movement of men and machines to the
product which remains stationary. In this type of layout, the material or major component remains in a fixed
location, and tools, machinery and men as well as other pieces of material are brought to this location. the
movement of men and machines to the product is advisable because the cost of moving them would be
less than the cost of moving the product which is very bulky. also called static layout, this type is followed in
the manufacture, if bulky and heavy products, such as locomotives,
ships, boilers, air crafts and generators.

product (s hip) machine

s hip
men
a ssembly
t ools

material t ools t o be moved towards

the material

Mixed Layout or Combined Layout

The application of the principles of product layout, process layout or fixed location layout in their strict
meanings is difficult to come across. A combination of the product and process layouts, with an emphasis
on either, is noticed in most industrial establishments. plants are never laid out in either pure form. it is possible
to have both types of layout in an efficiently combined form if the products manufactured are somewhat
similar and not complex.

Component flow in combined layout

Layout of Service Facility:

the fundamental difference between service facility and manufacturing facility layouts is that many service
facilities exist to bring together customers and services. service facility layouts should provide for easy
entrance to these facilities from freeways and busy thoroughfares. Large, well organized and amply lighted
parking areas and well designed walkways to and from parking areas are some of the requirements of service
facility layouts.

Because of different degree of customer contact, two types of service facility layouts emerge, viz., those that
are almost totally designed around the customer receiving and servicing function (such as banks) and those
that are designed around the technologies, processing of physical materials and production efficiency (such
as hospitals).
Other facilities with reference to Plant Layout:

a plant layout involves, besides the grouping of machinery, an arrangement for other facilities as well. such
facilities include receiving and shipping points, inspection facilities, employee facilities and storage. not all
the facilities are required in every plant. the requirements depend on the nature of the product which is
manufactured in a particular plant. importance of layout: the importance of a layout can be described as
under:

• Avoidance of Bottlenecks: Bottlenecks refer to any, place in a production process where materials tend
to pile up or produced at rates of speed less rapid than the previous or subsequent operations.
Bottlenecks are caused by inadequate machine capacity, inadequate storage space or low speed on
the part of the operators. the results of bottlenecks are delays in production schedules, congestion,
accidents and wastage of floor area. All these may be overcome with an efficient layout.

• Avoidance of Unnecessary and Costly Changes: A planned layout avoids frequent changes which are
difficult and costly. The incorporation of flexibility elements in the layout would help in the avoidance of
revisions.

• Better Production Control: production control is concerned with the production of a product of the right
type at the right time and at reasonable cost. a good plant layout is a requisite of good production
control and provides the plant control officers with a systematic basis upon which to build organisation
and procedures.

• Better Supervision: A good plant layout ensures better supervision in two ways: (a) Determining the
number of workers to be handled by a supervisor and (b) enabling the supervisor to get a full view of the
entire plant at one glance. A good plant layout is, therefore, the first step in good supervision.

• Economies in Handling: nearly 30 per cent to 40 per cent of the manufacturing costs are accounted for
by materials handling. every effort should, therefore, be made to cut down en this cost. Long distance
movements should be avoided and specific handling operations must he eliminated.

• Effective Use of Available Area: every unit of the plant area is valuable, especially in urban areas. efforts
should be therefore, be made to make use of the available area by planning the layout properly.

• Improved Employee Morale: Employee morale is achieved when workers are cheerful and confident.
This state of mental condition is vital to the success of any organisation. morale depends on better
working conditions; better employee facilities; reduced number of accidents; and increased earnings.

• Improved Quality Control: timely execution of orders will be meaningful when the quality of the output is
not below expectations. to ensure quality, inspection should be conducted at different stages of
manufacture. an ideal layout provides for inspection to ensure better quality control.

• Improved Utilisation of Labour: A good plant layout is one of the factors in effective utilisation of labour.
it makes possible individual operations, the process and flow of materials handling in such a way that the
time of each worker is effectively spent on productive operations.

• Minimisation of Production Delays: repeat order and new customers will be the result of prompt execution
of orders. every management should try to keep to the delivery schedules.

• Minimum Equipment Investment: investment on equipment can be minimised by planned machine

balance and location, minimum handling distances, by the installation of general purpose machines and
by planned machine loading. a good plant layout provides all these advantages.

illustration 9.