Need for selection of location, Location theories, Steps in location, Methods in plant location, Assess yourself

1. Production and Operations
Management
Plant Location
Learnito Study Series for Business Students
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2. Contents
• Meaning and Introduction
• Need for selection of location
• Location theories
• Steps in location
• Methods in plant location
• Assess yourself
• Case study

3. Meaning & Introduction
• Plant location may be understood as a
function of determining where the plant
should be located for maximum operating
economy and effectiveness.
• Selection of a place for locating a plant is
major challenge for any entrepreneur while
launching a new enterprise.

4. Need for Selection
• Plant location assumes importance under
the following conditions;
- When there is new business
- Existing business needs to change place
- Markets and Volumes of production increase
- Lease expiry and other land related issues
- Socio-economic reasons such as supply of
labor, shifting of markets and more.

5. Location Theories
• Albert Weber in 1909, classified the
factors in location as two namely, Primary
factors and secondary factors.
• Primary factors are those that involves
materials and labor.
• Secondary factors include Banking, Credit,
Insurance, Communication and other
infrastructure.

6. Steps in Plant Location
• Step 1: MAKING A COUNTRY DECISION
– Political stability and import quota
– Currency and Exchange rates
– Cultural and Economic peculiarities
– Natural environment

7. Steps in Plant Location
• Step 2 : SELECTION OF REGION
– Availability of raw materials
– Nearness to the markets
– Availability of power
– Transport facilities
– Suitability of climate
– Government policies

8. Steps in Plant Location
• Step 3 : COMMUNITY SELECTION
– Availability of Labor
– Provision of civic amenities for workers
– Existence of complementary and competitive
industries
– Presence of Finance and research facilities
– Availability of fire fighting facilities
– Local taxes and restrictions
– Momentum of an early start
– Personal factors

9. Steps in Plant Location
• Step 4 : SITE SELECTION
– Presence of right type of soil size.
– Appealing topography
– Provisions for waste disposal

10. Methods in Plant Location
• Factor Rating method: is a method where there are factors
on a scale of 1 to 5 is provided and decision is based on the
maximum scale choices.
• Point Rating method: one to hundred points are given for
the rating to happen between various factors. Maximum
points indicate the choice of a particular location.
• Location Break even analysis: An economic comparison of
locations can be made identifying fixed and variable costs,
while plotting the Break Even Analysis

11. Assess Yourself
• Have you understood the essential principles
behind locating a plant.
• Do you have an idea of present government
policies, and comment whether they are
favorable for business.
• How will the “ Make in India” initiative by the
government change the way business are run in
our country.

12. Production and Operations
Management
Plant Location
Learnito Study Series for Business Students
Find notes, QnA and case studies at www.learnito.com/catalog