Plant, Location,

and Layout

Presented by:
Alfonso Joel Gonzales
 i. Introduction and Meaning
Table of Contents ii. Need for selecting a Suitable Location
iii. Factors Influencing Plant/Facility Location
iv. Location Theories
v. Location Models
vi. Locational Economics
vii. Plant Layout
viii. Classification of Layout
ix. Design of Product Layout
x. Design of Process Layout
xi. Service Layout
xii. Organization of Physical Facilities 2
 i. Introduction and Meaning

• A plant is an industrial site filled with

machinery, where workers
manufacture items or operate
machines which process each item
into another.
• Plant location refers to the choice of
the region where men, materials,
money, machinery and equipment
are brought together for setting up a
business or factory.
• Plant layout is the arrangement of
machines, work areas and service
areas within a factory.
ADD A FOOTER 3
ii. Need for selecting a
Suitable Location
(What makes plant location important
for a business?)

According to Kumar and Karesh, the

need for selecting a suitable location
arises because of three situations.

1. When starting a new organization,

i.e., location choice for the first time
2. In case of existing organization
3. In case of Global Location.
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 Situation 1: When starting a new organization

(Why would a new organization need a good plant location?)

Factors to consider:

• Identification of region
• Choice of a site within a region
• Dimensional analysis

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 Situation 2: When expanding an existing organization

In this case, a manufacturing plant has to fit into a multi-plant operations strategy. That is,
additional plant location in the same premises and elsewhere under following circumstances:

• Plant manufacturing distinct products.

• Manufacturing plant supplying to specific market area.
• Plant divided on the basis of the process or stages in
manufacturing.
• Plants emphasizing flexibility.
• Relocation of the facilities (closing down the existing ones)
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 Situation 3: In Case of Global Location

In case of global locations there is scope for virtual proximity and

virtual factory.

• VIRTUAL PROXIMITY - refers to the level of emotional closeness

between individuals, as developed through the use of information and
communications technologies.

• VIRTUAL FACTORY – refers to an integrated model that includes variety

of software, tools, and methodologies in order to solve any real time
problem of manufacturing system.
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 REASONS FOR A GLOBAL/FOREIGN LOCATION
(Why would an organization need a good foreign/global plant location?)

Tangible Reasons Intangible Reasons

• The need for reaching the customer. • Customer-related Reasons

• The host country may offer substantial tax • Organizational Learning-related

advantages compared to the home Reasons
country.
• Other Strategic Reasons
• The costs of manufacturing and running
operations may be substantially less in that
foreign country.

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 FACTORS INFLUENCING PLANT
LOCATION/FACILITY LOCATION

The factors which influence the plant location or facility location on the basis of the nature of
the organization are divided into two groups.

A. B.
• General locational factors, which • Dominant factors are those derived
include controllable and uncontrollable from competitive priorities (cost, quality,
factors for all type of organizations. time, and flexibility) and have a
particularly strong impact on sales or
• Specific locational factors specifically costs.
required for manufacturing and service
organizations. • Secondary factors also are important,
but management may downplay or
even ignore some of them if other
factors are more important.
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 GENERAL LOCATIONAL FACTORS

General locational factors are divided into two categories: the controllable and uncontrollable
factors.

I. CONTROLLABLE FACTORS II. UNCONTROLLABLE FACTORS

• Proximity to markets • Government policy
• Supply of materials • Climate conditions
• Transportation facilities • Supporting industries and services
• Infrastructure availability • Community and labor attitudes
• Labor and wages • Community Infrastructure
• External economies
• Capital
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 SPECIFIC LOCATIONAL FACTORS

Factors dominating location decisions for new manufacturing plants can be broadly classified
in two groups. They are listed in the order of their importance as follows.

I. DOMINANT FACTORS II. SECONDARY FACTORS

• Favorable labor climate • Room for expansion
• Proximity to markets • Construction costs
• Quality of life • Accessibility to multiple modes of
• Proximity to suppliers and transportation
resources • Cost of shuffling people and
• Utilities, taxes, and real estate materials between plants
costs • Competition from other firms for the
workforce
• Community attitudes 11
 ALFRED WEBER’S THEORY OF
THE LOCATION OF INDUSTRIES

Alfred Weber (1868–1958), with the publication of Theory of the Location of

Industries in 1909, put forth the first developed general theory of industrial
location. According to his theory, the point for locating an industry that
minimizes costs of transportation and labor requires analysis of three
factors:
• Transport costs
• Labor costs
• Agglomeration economies

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 LOCATION MODELS

Various models are available which help to identify the ideal location. Some of the popular
models are:

• Factor rating method

• Weighted factor rating method
• Load-distance method
• Centre of gravity method
• Break even analysis
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 FACTOR-RATING METHOD

It is most widely used analytical technique. It is useful for service and industrial location.
Listed below are the six steps in this method:

• 1. List relevant factors.

• 2. Assign importance weight to each factor.
• 3. Develop scale for each factor (0-1, etc.)
• 4. Score each location using factor scale.
• 5. Multiply scores by weights for each factor & total.
• 6. Select location with maximum total score. 14
 SAMPLE PROBLEM FOR
FACTOR-RATING METHOD

Let us assume that a new medical facility, Health-care, is to be located in Delhi. The location
factors, factor rating and scores for two potential sites are shown in the following table.
Which is the best location based on factor rating method?

Rating
Sl. No. Location factor Factor rating
Location 1 Location 2

1 Facility utilization 8 3 5
2 Total patient per month 5 4 3
Average time per emergency
3 6 4 5
trip
4 Land and construction costs 3 1 2
5 Employee preferences 5 5 3
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 SOLUTION

Location 1 Location 2
Factor rating
Sl. No. Location factor (Rating) Total= (Rating) Total
(1) (2) = (1) x (2) (3) = (1) x (3)
1 Facility utilization 8 3 5
2 Total patient per 5 4 3
  month      
3 Average time per 6 4 5
  emergency trip      
4 Land and 3 1 2
  construction costs      
5 Employee 5 5 3
  preferences      
      Total Total

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 WEIGHTED FACTOR RATING METHOD

In this method to merge quantitative and qualitative factors, factors are assigned weights
based on relative importance and weightage score for each site using a preference matrix is
calculated. The site with the highest weighted score is selected as the best choice.

Let us assume that a new medical facility, Health-care, is to be located in Delhi. The location factors, weights, and
scores (1 = poor, 5 = excellent) for two potential sites are shown in the following table. What is the weighted score
for these sites? Which is the best location?

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SOLUTION

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 Load-distance Method

To calculate a load-distance for any potential location, we use either of the distance measures
and simply multiply the loads flowing to and from the facility by the distances travelled. These
loads may be expressed as tones or number of trips per week.

FORMULA

dAB = |XA – XB| + |YA – YB|

where dAB = distance between points A and B
XA = x-coordinate of point A
YA = y-coordinate of point A
XB = x-coordinate of point B
YB = y-coordinate of point B
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 SAMPLE PROBLEM
The new Health-care facility is targeted to serve seven census tracts in Delhi. The table given
below shows the coordinates for the centre of each census tract, along with the projected
populations, measured in thousands. Customers will travel from the seven census tract centres to
the new facility when they need health-care. Two locations being considered for the new facility are
at (5.5, 4.5) and (7, 2), which are the centres of census tracts C and F. Details of seven census tract
centres, co-ordinate distances along with the population for each centre are given below. If we use the
population as the loads and use rectilinear distance, which location is better in terms of its total
load- distance score?

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 SOLUTION
Calculate the load-distance score for each location. Using the coordinates from the above table.
Calculate the load-distance score for each tract.
Using the formula DAB = |XA – XB| + |YA – YB|

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 CENTER OF GRAVITY METHOD

Centre of gravity is based primarily on cost considerations. This method can be used to assist
managers in balancing cost and service objectives.

The first step in this procedure is to place the locations on a coordinate system.
The origin of the coordinate system and scale used are arbitrary, just as long as the
relative distances are correctly represented. This can be easily done by placing a grid
over an ordinary map. The centre of gravity is determined by the formula.

where Cx = x-coordinate of the centre of gravity

Cy = y-coordinate of the centre of gravity
Dix = x-coordinate of location i
Diy = y-coordinate of location I 22
 SAMPLE PROBLEM
The new Health-care facility is targeted to serve seven census tracts in Delhi. The table given below
shows the coordinates for the centre of each census tract, along with the projected populations,
measured in thousands. Customers will travel from the seven census tract centres to the new
facility when they need health- care. Two locations being considered for the new facility are at (5.5,
4.5) and (7, 2), which are the centres of census tracts C and F. Details of seven census tract
centres, coordinate distances along with the population for each centre are given below. Find the
target area’s centre of gravity for the Health-care medical facility.

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 SOLUTION
Calculate the load-distance score for each location. Using the coordinates from the above table.
Calculate the load-distance score for each tract.
Using the formula

Next we find Cx and Cy.

Cx = 453.5/68 = 6.67
Cy = 205.5/68 = 3.02
The centre of gravity is (6.67, 3.02). Using the centre of
gravity as starting point, managers now search in its vicinity
of the optimal location.
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 BREAKEVEN ANALYSIS

Break even analysis implies that at some point in the operations, total revenue equals total cost. Break
even analysis is concerned with finding the point at which revenues and costs agree exactly. It is
called ‘Break-even Point’.

FIXED COSTS ÷ (SALES PRICE PER UNIT – VARIABLE COSTS PER UNIT)

Fixed Costs - are ones that typically do not change, or change only slightly.

Sales Price per Unit- This is how much a company is going to charge consumers for just
one of the products that the calculation is being done for.

Variable Costs per Unit- are costs directly tied to the production of a product. 25
 SAMPLE PROBLEM
Potential locations X, Y and Z have the cost structures shown below. The ABC company
has a demand of 30,000 units of a new product. Three potential locations X, Y and Z
having following cost structures shown are available. Select which location is to be
selected and also identify the volume ranges where each location is suited?

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 SOLUTION
Using the formula:

FIXED COSTS ÷ CONTRIBUTION MARGIN OR

FIXED COSTS ÷ (SALES PRICE PER UNIT – VARIABLE COSTS PER UNIT)

-
-
-

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 LOCATIONAL ECONOMICS

An ideal location is one which results in lowest production cost and least distribution cost per
unit. These costs are influenced by a number of factors as discussed earlier. The various costs
which decide locational economy are those of land, building, equipment, labor, material, etc.
From the following data select the most advantageous location for setting a plant for making transistor radios.

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SOLUTION
Use the formula

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 PLANT LAYOUT AND ITS OBJECTIVES

Plant layout refers to the physical arrangement of production facilities. It is the configuration of
departments, work centers and equipment in the conversion process. It is a floor plan of the physical
facilities, which are used in production.

Objectives of Plant Layout

• Streamline the flow of materials through the • Flexibility of manufacturing operations and
plant. arrangements.
• Facilitate the manufacturing process. • Provide for employee convenience, safety
• Maintain high turnover of in-process and comfort.
inventory. • Minimize investment in equipment.
• Minimize materials handling and cost. • Minimize overall production time.
• Effective utilization of men, equipment and • Maintain flexibility of arrangement and
space. operation.
• Make effective utilization of cubic space. • Facilitate the organizational structure.

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 PRINCIPLES OF PLANT LAYOUT

• Principle of integration: A good layout is one that integrates men, materials, machines and supporting
services and others in order to get the optimum utilization of resources and maximum effectiveness.

• Principle of minimum distance: This principle is concerned with the minimum travel (or movement) of
man and materials.

• Principle of cubic space utilization: The good layout is one that utilize both horizontal and vertical space.

• Principle of flow: A good layout is one that makes the materials to move in forward direction towards the
completion stage.

• Principle of maximum flexibility: The good layout is one that can be altered without much cost and time.

• Principle of safety, security and satisfaction: A good layout is one that gives due consideration to
workers safety and satisfaction.

• Principle of minimum handling: A good layout is one that reduces the material handling to the minimum.
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 CLASSIFICATION OF LAYOUT

Layouts can be classified into the following five categories:

• Process layout - is recommended for batch production. All machines performing

similar type of operations are grouped at one location in the process layout.
• Product layout - machines and auxiliary services are located according to the
processing sequence of the product.
• Combination layout - A combination of process and product layouts combines
the advantages of both types of layouts.
• Fixed position layout - the material, or major components remain in a fixed
location and tools, machinery, men and other materials are brought to this
location.
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• Group layout - A grouping of equipment for performing a sequence of operations
on family of similar components or products has become all the important.
 PROCESS LAYOUT
Process layout is a design for the floor plan of a plant which aims to improve efficiency by arranging
equipment according to its function.

ADVANTAGES DISADVANTAGES

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 PRODUCT LAYOUT
A product layout refers to a production system where the work stations and equipment are located
along the line of production, as with assembly lines.

ADVANTAGES DISADVANTAGES

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 COMBINATION LAYOUT
A combination of process and product layouts combines the advantages of both types of layouts. A
combination layout is possible where an item is being made in different types and sizes.

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 FIXED POSITION LAYOUT
This is also called the project type of layout. In this type of layout, the material, or major components
remain in a fixed location and tools, machinery, men and other materials are brought to this location.

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 GROUP LAYOUT
This rings the efficiencies of a product layout to a process layout. Hybrid layouts combine
characteristics of both process and product layouts.

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ORGANIZATION OF PHYSICAL
FACILITIES

The following are the most important physical facilities to be organized:

• Factory building - required to provide protection for men, machines,
materials, products or even the company’s secrets.
• Lighting - is the foundation to the personnel’s vision, the most powerful of
our senses.
• Climatic conditions - means meteorological circumstances that would
prevent a complying installation of a manufactured home, including, but
not limited to, frost, extreme rains, or flooding.
• Ventilation - is the process by which 'clean' air (normally outdoor air) is
intentionally provided to a space and stale air is removed.
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• Work-related welfare facilities

 Factory Building
Factory building is like skin and bones of a living body for an organization. Design of the building and type
of the building are the two important factors to be considered in choosing an industrial building.

Design of the Building Type of the Building

The building should designed so as Industrial buildings may be grouped
to provide a number of facilities. Following under two types:
factors are considerations in the
designing of a factory building:
• Single-storey buildings
• Multi-storey buildings
• Flexibility
• Product and equipment
• Expansibility
• Employee facilities and service area: 39
 Lighting
It is estimated that 80 per cent of the information required in doing job is perceived visually. Good visibility
of the equipment, the product and the data involved in the work process is an essential factor in accelerating
production, reducing the number of defective products, cutting down waste and preventing visual fatigue and
headaches among the workers.
Importance of Lighting in a Factory Building

Aesthetics aspect
• It focuses on the emotional effect it has on occupants. Lie what do they want the occupants to
feel when they stay in the building.

Function aspect
• For occupant’s needs such as being able to see clearly. Using lighting in pathways to guide
users in the dark.
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Efficiency aspect
• Ensuring that necessary lighting is sufficient so that it is energy efficient.
 Climatic Conditions
Control of the climatic conditions at the workplace is paramount importance to the workers health
and comfort and to the maintenance of higher productivity.

* WORKING IN A HOT ENVIRONMENT

Hot working environments are found almost everywhere. Work premise in tropical countries may, on
account of general climatic conditions, be naturally hot. It should be noted that in such hot working
environments sweating is almost the only way in which the body can lose heat.

* WORKING IN A COLD ENVIRONMENT

Working in cold environments was once restricted to non-tropical or highly elevated regions.
Exposure to cold for short periods of time can produce serious effects, especially when workers are
exposed to temperatures below 10°C The loss of body heat is uncomfortable and quickly affects 41
work efficiency. Workers in cold climates and refrigerated premises should be well protected against
the cold.
 VENTILATION
Ventilation is the dynamic parameter that complements the concept of air space. For a given
number of workers, the smaller the work premises the more should be the ventilation.

Ventilation is especially required for commercial and industrial spaces to control indoor air quality
by diluting and displacing indoor pollutants. Here are some of the benefits of good ventilation in a
workplace.

• Controls impurities
• Air regulation
• Stops condensation
• Reduces temperatures
• Health benefits

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 WORK-RELATED WELFARE FACILITIES
Work-related welfare facilities offered at or through the workplace can be important factors.
Some facilities are very basic, but often ignored, such as drinking-water and toilets. Others may
seem less necessary, but usually have an importance to workers far greater than their cost to the
enterprise.

• Drinking water
• Sanitary facilities
• First-aid and medical facilities
• Rest facilities
• Feeding facilities
• Child-care facilities
• Recreational facilities 43
THANK YOU!

- Alfonso Joel V.
Gonzales