Definition Problem of location Need for Plant location Steps in Plant location Factors affecting Plant location Recent

trends in Plant location Merits & Demerits of Urban & Rural

Problem of Location: The problem of site selection of a factory can be solved in the following 3 stag es: Selection of the Region: Comparative advantages are analyzed from various op tions of natural regions & political boundaries in particular country. Selection of the Locality: Urban, Rural & Suburban areas are various alternatives in sele ction of locality. Selection of the Site: The type of development of land, cost of leveling etc, plant expansions & other infrastructure facilities like transpo rt, banking, power, communication, postal facilities etc. are considered.

Need for Plant Location: The location of plant can have a crucial effect on the profitability of a projec t, & the scope for future expansion. Need for plant location arises when: I. A n ew plant is to be established. II. Old plant undergoes expansion, decentralizati on & diversification to meet increased demands for its products. III. The existi ng factory is not in a position to obtain renewal of lease. IV. An undesirable l ocation is to be abandoned. V. The tendency of shifting the market, depletion of raw materials, changes in transportation facilities, new processes requiring a different location are observed in the factory. VI. A new branch or branches are to be opened for increasing the volume of production or distribution or both.

Steps in Plant Location by Bethel, Atwater & Smith: Factors affecting Plant Location Selection of Region Selection of Community

Selection of Plant site Selection of Region:Availability of Raw Materials: It is categorized into two: U biquities i.e., existing everywhere like clay, water etc. Localized materials i. e. minerals, coal, sugarcane etc. & it is subdivided into pure (cotton, raw silk ) & gross materials (iron-ore, limestone, sugarcane). Spriegel & Lansburgh quote d Nearness to the source of raw materials is of special importance when the mater ial is bulky in relation to its value & when the volume & weight are greatly red uced during its processing. For e.g.: Textile mills in Maharashtra, Sugar factori es in U.P, Marble mftg in Jabalpur, Sandal Wood products in Mysore, fishcanning & salt pans near coast, Export of Alphansos from Ratnagiri.

Nearness to fuel & power: It is a decisive factor in plant location. It is necessary to ensure that the phase, voltage, frequency, rates, regularity, sp ecial discounts allowed are suitable to factory. Transport: Getting raw material s to place of manufacture, transporting finished goods to place of consumption & carrying employees to the factory & sales representatives to the consumers are functions of transport. James Lundy quoted ideal plant from the point of view of transportation is one which is centrally located & directly connected by water, rail, road & air. Cost, dependability, time required to transport finished goods , prompt availability, shift in the market & speed are factors considered for ch oosing particular mode. For e.g.: TAPS uses road, water & own rail route.

Market: A place where particular products are sold. Nearness to market influence s: Reduced cost of transporting finished goods & promotional expenses. Enables t o study the consumers. Enables to render quick service & after-sales services. E xecute replacement orders without delay. Perishable nature of goods. Fragile nat ure of goods. Meteorological conditions & Topography: Kimball & Kimball quoted Th e effect of climate upon the efficiency in the case of working force required to work outdoors, as in case of quarries, constructional industries etc cannot be minimised. A cool climate develops the best of worker. For e.g.: Agro-industries.

Selection of Community: Labour: Kimball & Kimball wrote The need of adequate supply of labour is obvious, but a number of considerations such as cost of living & the character of labour available as to both skill & temperament should be taken into account. According to labour, factory may be located as follows: Semi-skilled/ Unskilled Rural are as. Skilled Urban areas. The need of management is to face less strikes or locko uts & to achieve lower labour cost per unit of production. A stable labour force , the right type of labour, reasonable wage rates, adequate number of employees, reliability of labour supply, proper attitude towards work are features that in fluence supply of labour.

Supplementary & Complementary factories: D. Jones described advantages of concen tration of industries: Helps to increase the variety of materials that suppliers offers. Improves the labour market for employer & employee. Helps banks to disc ount commercial papers readily. Attracts a variety of repair plants like foundri es, tool makers & machine shops. Serves to perfect the local markets. Division o f labour is possible. Banking & Credit institutions: Factory expansion needs fun ds to meet the requirements. Existence of banks will exert influence over locati on of plants. Local Taxes & Insurance: Factories must be located in a place wher e taxes, insurance costs are comparatively low. E.g.: fire cracker industry. Water supply: Water should be available in adequate quantity & proper quality. The factors in this connection are stability in its supply, mineral content of w ater, problems leading to water pollution, cost of transporting water if it is n ot readily available. Momentum of early start: Some of the facilities like banking, transport, commun ication, repair services, shops & hotels give momentum to growth of industries i n such an area. Historical factors: The existence of historical towns are respon sible for location of such industries. E.g.: Banaras, Lucknow, Kanjivaram, Kanpu r. Political stability: The political situation in potential locations should be considered while selecting a locality for establishing a factory. E.g.: Singur, liquor industries in Gujarat.

State assistance: Karnataka state provides assistances like feasibility study su bsidy; investment subsidy; concession on term loans, processing fee, working cap ital loan; stamp duty exemption; sales tax exemption to some extent; subsidy on electricity tariff; Technical guidance; raw materials; marketing facilities; all otment of land & sheds to entrepreneurs. Selection of exact plant site: Following factors must be considered while selecting plant site: Price of land Type of soil Waste disposal Expansion potential Availability of c ommercial services Communication Availability of amenities Health of the localit y Statutory consideration Flood & drought conditions Right & title of the land G ood scenery Attitude of local people Technology know-how Existence of religious & social institutions Selection of Most Economic Site: According to Kimball & Kimball, The most advantageous location is that at which t he cost of gathering material & fabricating it plus cost of distributing the fin ished product to the customer will be a minimum. Diagram of most profitable site: Recent trends in Plant Location: Seven most important trends with regard to plant location are: To locate plants away from cities. The development of industrial estates. Compet ition among states to develop industries. Trend towards decentralization. Pollut ion control. Location of industries leading to balanced regional development. Growth of mult inational firms, thereby transcending the geographical areas of the country. Merits of Urban & Rural Areas Urban Area Easier to sell building if later. Power & water easily available. Good market for s mall mftrs. Housing, banks, fire protection, railways & education available. Trans portation is easy & cheap. Rural Area Healthy & pleasant atmosphere. Cheapness of land allows freedom for most economic design for building. Lesser taxes & restriction. Housing can be provided by pvt. E nterprise or local authority. Road or rail connection can be arranged easily.Possi ble to find existing building to Cost of land is less & scope of future house fac tory. expansion is more. Workers find easy to change job & Less labour trouble & labour is cheap. area has good labour market. Repairing facility available with existing industries. Opportu nity to exchange knowledge from nearby industries. Demerits of Urban & Rural Areas Urban area Climate is not healthy due to congestion. Arranging equipment is not possible due to limited area. High taxes. Cost of land is high & scope of expansion is less. Mor e problems about labour & employee relations Cost of building factory will be hig h. Higher wages of labour due to high standard of living. Rural area Sufficient power & water may not be available. Enough facilities for expansion may

not be available. No recreational facilities. Transport & housing facilities may not be satisfactory. Government facilities may not be sufficient. Skilled workers are not easily available. Educational facilities may not be available.