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Saturday, October 20, 2012

MB0044 | Q3. What are the factors that influence the plant location?




Q3. What are the factors that influence the plant location?

Selection of proper location is very important for the success of any business. Plant location is considered as the function of determining where the plant should be located for maximum operating economy and effectiveness.

Factors influencing Plant Location can be broadly divided into two types namely: general factors and special factors

Figure: Factors influencing plant location

General factors
The general factors that influence the plant location are listed below –


1.    Availability of land:
Availability of land plays an important role in
determining the plant location. Many-a-time, our plans, calculations and forecasts suggest a particular area as the best to start an organization. However, availability of land may be in question. In such cases, we will have to choose the second best location.

2.    Availability of inputs:
While choosing a plant location, it is very important for the organization to get the labor at the right time and raw materials at good qualities. The plant should be located:
•    Near to the raw material source when there is no loss of weight.
•    At the market place when there is a loss of weight in the material.
•    Close to the market when universally available, so as to minimize the transportation cost.

3.    Closeness to market places:
Organizations can choose to locate the plant near to the customers’ market or far from them, depending upon the product they produce. It is advisable to locate the plant near to the market place, when:
•    The projection life of the product is low
•    The transportation cost is high
•    The products are delicate and susceptible to spoilage
•    After sales services are promptly required very often
•    The advantages of locating the plant near to the market place are:
(i)Consistent supply of goods to the customers
(ii)Reduction of the cost of transportation

4.    Communication facilities: Communication facility is also an important factor which influences the location of a plant. Regions with good communication facilities viz. Postal and Tele communication links should be given priority for the selection of sites.

5.    Infrastructure: Infrastructure plays a prominent role in deciding the location. The basic infrastructure needed in any organization is:

•    Power : For example, industries which run day and night require continuous power supply. So they should be located near to the power stations and should ensure continuous power supply throughout the year.
•    Water: For example, process industries such as, paper, chemical, and cement, requires continuous water supply in large amount. So, such process industries need to be located near to the water.
•    Waste disposal: For example, for process industries such as, paper and sugarcane industries facility for disposal of waste is the key factor.

6. Transport: Transport facility is a must for facility location and layout of location of the plant. Timely supply of raw materials to the company and supply of finished goods to the customers is an important factor. The basic modes of transportation are by Air, Road, Rail, Water, and Pipeline. The choice of location should be made depending on these basic modes. Cost of transportation is also an important criterion for plant location.

7. Government support: The factors that demand additional attention for plant location are the policies of the state governments and local bodies concerning labor laws, building codes, and safety.

8. Housing and recreation: Housing and recreation factors also influence the plant location. Locating a plant with the facilities of good schools, housing and recreation for employees will have a greater impact on the organization. These factor seems to be unimportant, but have a difference as they motivate the employees and hence the location decision.


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