Factors affecting Plant Location

Eight Factors Affecting Plant Location

  1. Selection of Region

The selection of a region or area in which plant is to be installed requires the consideration of the following:

(i) Availability of Raw Materials: Proximity of sources of raw materials is the obvious explanation of the location of majority of sugar mills in Uttar Pradesh. This means that the raw material should be available within the economical distance. Easy availability of supplies required for maintenance and operation of the plant should also be considered.

(ii) Proximity to Markets: Cost of distribution is an important item in the overhead expenses. So it will be advantageous to be near to the center of demand for finished products. Importance of this is fully realized if the material required for the manufacturing of products are not bulk and fright charges are small.

(iii) Transport Facilities: Since freight charges of raw materials and finished goods enter into the cost of production, therefore transportation facilities are becoming the governing factor in economic location of the plant. Depending upon the volume of the raw materials and finished products, a suitable method of transportation like rail, road, water transportation (through river, canals or sea) and air transport is selected and accordingly plant location is decided. Important consideration should be that the cost of transportation should remain fairly small in comparison to the total cost of production.

(iv) Availability of Power, Fuel or Gas: Because of the wide spread use of electrical power the availability of fuel or gas has not remained a deciding factor in most of the cases for plant location. The location of thermal power plants (like Bokaro Thermal Plant) and steel plants near coal fields are for cutting down cost of the fuel transportation. The reliability of continuous supply of these facilities is an important factor.

(v) Water Supply: Water is required for processing as in chemical, sugar and paper industries and is also used for drinking and sanitary purposes. Investigation for quality and probable source of supply is important, since the cost of treating water is substantial so the chemical properties like hardness, alkalinity and acidity.

(vi) Disposal Facility for Waste Products: Thorough study should be made regarding disposal of water like effluents, solids, chemicals and other waste products likely to be produced during the production process.

(vii) Availability of Labour: Potential supply of requisite type of labour governs plant location to major extent. Some industries need highly skilled labour while other need unskilled and intelligent labour. But the former type is difficult in rural areas in comparison with industrially developed location.

  1. Township Selection

The factors to be considered regarding township selection are:

(i) Availability of men power of requisite skill

(ii) Competitive wage rates of workers

(iii) Other enterprises which are complementary or supplementary regarding raw materials, other input, labour and skill required.

(iv) Moderate taxes and the absence of restricting laws.

(v) Favourable cooperative and friendly attitude towards the industry.

(vi) Favourable living conditions and standards keeping in view the availability of medical and educational facilities, housing, fire service, recreational facilities, cost of living etc.

  1. Question of Urban and Rural Area

Question of urban and rural area should be decided in view of the following:

Advantages of Rural Area:

(i) The initial cost of land, erection cost of building and plant is less in rural area as compared to urban or city area.

(ii) Acquisition for additional area for extension work expansion of plant is possible without much difficulty whereas urban area being congested; the additional land is not easily available.

(iii) Rural areas are free form labour trouble which is most common in towns and cities.

(iv) Over crowding of working class population in cities is avoided.

Advantages of Urban Area:

(i) Better modes of transportation for collection and distribution of materials and finished products.

(ii) Availability to requisite type of labour for special and specific jobs is there.

(iii) Utilities like water, power, fuels etc. are easily available.

(iv) Industries do not need to construct colonies to provide residential facilities to their workers since houses are available on rental basis whereas in rural areas, houses have to be build for workers.

  1. Location of a Factory in a Big City

Generally factories are located in big cities for obvious reasons of skilled labour, market proximity for both raw materials and end products.

Its advantages and disadvantages are mentioned below:

(i) Existence of educational and recreational facilities is advantageous for children and dependents of workers.

(ii) Facilities for technical/ industrial education and training for children of workers are available.

(iii) Evening classes facilities are available.

(iv) Discussion opportunities and facilities for exchange of thoughts are available for interested people in societies and clubs.

(v) All types of skilled man power is available.

(vi) Repair, maintenance and service facilities for various utilities are available in abundance.

(vii) Banking facilities regarding finance (loan etc.) for industry in case of necessity are available.

(ix) Big markets for sale of products available.

(x) Better transport facilities for movement of raw materials, finished products and workers are available.

  1. Location of an Industry in Small Town

There are some industries which are located in the rural areas or small towns specifically for the want of raw material and cheap labour.

Its advantages and disadvantages are mentioned below:

(i) Less labour trouble and co-ordinal employee-employer relation.

(ii) Suitable land for current and future requirements easily available.

(iii) Local bye laws do not impose problem in working of the unit.

(iv) No resistance from existing industries.

(v) Possibility of tax exemptions exist.

(vi) Not much congestion.

(vii) Lower rents in comparison to big cities and urban areas.

(viii) Lower wage rates for labour/ employees / workers.

(ix) Less fire risks.

(x) Noise not much problem.

  1. Site Selection

The third step is to select the exact plant site with the following considerations:

(i) The cheap availability of land for current and future requirements, soil characteristics sub soil water, availability or possibility of economic drainage and waste disposal system are desirable parameters.

(ii) The site should be easily accessible to various modes of transport as required so that apart from input materials, employees can also reach the site conveniently.

(iii) The site should be free from zonal restrictions like from railways or civil aviation restrictions.

  1. Current Trends in Pant Location

(I) Location in Proximity of Cities: First tendency is to locate the industries or enterprises in the proximity of cities rather than in rural or urban areas. These sub-urban sites offer today practically all advantages, facilities and services available in cities and towns with the added advantage of land required for future expansion on cheap rates.

(II) Planned Industrial Centers: While industrial towns may be planned and developed by big industrial houses or govt., the late trend is to develop areas as industrial estates and sell these to people interested in starting their units at various places. Noida and Faridabad are the examples of this type of development.

(III) Competition for Development of Industries: In order to generate the employment opportunities the state and central govt. offer concessions to attract industrialists to set up industries in their states or territories.

  1. The Design of Factory Plant Building

After a plant location has been decided upon, management’s next problem deals with the design of building. A building is designed and built to protect the property and employees of an organization. This basic fact is mostly overlooked in planning the requirement for building structures.

For those plants where employees, materials and infrastructure facilities require protection, the problems involved in designing and constructing effective and economical structures are many.

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