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Points to be discussed:
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 site
Definition:
The function of determining where the plant should be located for maximum operating economy & effectiveness - R.C. Davis That spot where, in consideration of the business as a whole, the total cost of production & delivering goods to all the consumers is the lowest.
Problem of Location:
The problem of site selection of a factory can be solved in the following 3 stages: Selection of the Region: Comparative advantages are analyzed from various options of natural regions & political boundaries in particular country. Selection of the Locality: Urban, Rural & Suburban areas are various alternatives in selection of locality. Selection of the Site: The type of development of land, cost of leveling etc, plant expansions & other infrastructure facilities like transport, banking, power, communication, postal facilities etc. are considered.
Selection of Region
Selection of Community
Selection of Region:
Availability of Raw Materials: It is categorized into two: Ubiquities 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 quoted Nearness to the source of raw materials is of special importance when the material is bulky in relation to its value & when the volume & weight are greatly reduced during its processing. For e.g.: Textile mills in Maharashtra, Sugar factories in U.P, Marble mftg in Jabalpur, Sandal Wood products in Mysore, fishcanning & salt pans near coast, Export of Alphansos from Ratnagiri.
Market: A place where particular products are sold. Nearness to market influences: Reduced cost of transporting finished goods & promotional expenses. Enables to study the consumers. Enables to render quick service & after-sales services. Execute replacement orders without delay. Perishable nature of goods. Fragile nature of goods. Meteorological conditions & Topography: Kimball & Kimball quoted The 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 areas. Skilled Urban areas. The need of management is to face less strikes or lockouts & 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 influence supply of labour.
Supplementary & Complementary factories: D. Jones described advantages of concentration of industries: Helps to increase the variety of materials that suppliers offers. Improves the labour market for employer & employee. Helps banks to discount commercial papers readily. Attracts a variety of repair plants like foundries, tool makers & machine shops. Serves to perfect the local markets. Division of labour is possible. Banking & Credit institutions: Factory expansion needs funds to meet the requirements. Existence of banks will exert influence over location of plants. Local Taxes & Insurance: Factories must be located in a place where 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 water, problems leading to water pollution, cost of transporting water if it is not readily available. Momentum of early start: Some of the facilities like banking, transport, communication, repair services, shops & hotels give momentum to growth of industries in such an area. Historical factors: The existence of historical towns are responsible for location of such industries. E.g.: Banaras, Lucknow, Kanjivaram, Kanpur. 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 subsidy; investment subsidy; concession on term loans, processing fee, working capital loan; stamp duty exemption; sales tax exemption to some extent; subsidy on electricity tariff; Technical guidance; raw materials; marketing facilities; allotment of land & sheds to entrepreneurs.
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. Enterprise or local authority. Road or rail connection can be arranged easily.
Possible to find existing building to Cost of land is less & scope of future house factory. 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. Opportunity to exchange knowledge from nearby industries.
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.