DAWOOD COLLEGE OF ENGINEERING AND TECHNOLOGY KARACHI

Department: Industrial Engineering and Management

MUHAMMAD EHSAN (08-Dcet-314)

Production Planning and Control Assignment No # 2

Submitted To: Engr. Imran Khan Shaikh Date # 12-10-2010

Production Planning and Control

PLANT LOCATION:
Every entrepreneur is faced with the problem of deciding the best site for location of his plant or factory. What is plant location? Plant location refers to the choice of region and the selection of a particular site for setting up a business or factory. But the choice is made only after considering cost and benefits of different alternative sites. It is a strategic decision that cannot be changed once taken. If at all changed only at considerable loss, the location should be selected as per its own requirements and circumstances. Each individual plant is a case in itself. Businessman should try to make an attempt for optimum or ideal location. What is an ideal location? An ideal location is one where the cost of the product is kept to minimum, with a large market share, the least risk and the maximum social gain. It is the place of maximum net advantage or which gives lowest unit cost of production and distribution. For achieving this objective, smallscale entrepreneur can make use of locational analysis for this purpose.

LOCATIONAL ANALYSIS:
Locational analysis is a dynamic process where entrepreneur analyses and compares the appropriateness or otherwise of alternative sites with the aim of selecting the best site for a given enterprise. It consists the following: Demographic Analysis: It involves study of population in the area in terms of total population (in no.), age composition, per capita income, educational level, occupational structure etc. Trade Area Analysis: It is an analysis of the geographic area that provides continued clientele to the firm. He would also see the feasibility of accessing the trade area from alternative sites. Competitive Analysis: It helps to judge the nature, location, size and quality of competition in a given trade area. Traffic analysis: To have a rough idea about the number of potential customers passing by the proposed site during the working hours of the shop, the traffic analysis aims at judging the alternative sites in terms of pedestrian and vehicular traffic passing a site. Site economics: Alternative sites are evaluated in terms of establishment costs and operational costs under this. Costs of establishment is basically cost incurred for permanent physical facilities but operational costs are incurred for running business on day to day basis, they are also called as running costs. M Ehsan
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Production Planning and Control

SELECTION CRITERIA:
The important considerations for selecting a suitable location are given as follows: Natural or climatic conditions. Availability and nearness to the sources of raw material. Transport costs-in obtaining raw material and also distribution or marketing finished products to the ultimate users. Access to market: small businesses in retail or wholesale or services should be located within the vicinity of densely populated areas. Availability of Infrastructural facilities such as developed industrial sheds or sites, link roads, nearness to railway stations, airports or sea ports, availability of electricity, water, public utilities, civil amenities and means of communication are important, especially for small scale businesses. Availability of skilled and non-skilled labour and technically qualified and trained managers. Banking and financial institutions are located nearby. Locations with links: to develop industrial areas or business centers result in savings and cost reductions in transport overheads, miscellaneous expenses. Strategic considerations of safety and security should be given due importance. Government influences: Both positive and negative incentives to motivate an entrepreneur to choose a particular location are made available. Positive includes cheap overhead facilities like electricity, banking transport, tax relief, subsidies and liberalization. Negative incentives are in form of restrictions for setting up industries in urban areas for reasons of pollution control and decentralization of industries. Residence of small business entrepreneurs want to set up nearby their homelands. One study of locational considerations from small-scale units revealed that the native place or homelands of the entrepreneur was the most important factor. Heavy preference to homeland suggests that small-scale enterprise is not freely mobile. Low preference for Government incentives suggests that concessions and incentives cannot compensate for poor infrastructure.

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Factors Affecting Plant Location:

The task of finding a perfect or ideal location for a plant is very much difficult, and it has been observed that hardly any location can be ideal or perfect. But still following are some of the factors, which should be kept in mind while selection for a plant: 1) Raw Material Availability: Raw material should be easily available near to a selected location, as it will reduce the cost of transporting raw materials. 2) Nearness to Markets: it will reduce the cost of transporting the finished goods to the market but also decrease the chances of finished product being damaged or spoiled in the way. Moreover a plant being near to the market can catch a big share of the market and can also provide quick service to the customers. 3) Transportation Cost and Facilities: A lot of many is spent both in transporting raw materials and finished goods, therefore it should also be kept in mind that the transportation cost should be fairly minimum and also be available easily. 4) Labor Availability, Cost and Unions: Labor should be easily available of right kind, and adequate size with proper attitude towards work. 5) Fuel and Power Availability: Fuel (Coal, Oil, etc) and Power (Electricity) are the main factors for the running of a plant; therefore it should be available easily and nearer to plant. It is essential that the electricity should be remain available continuously 24/7, in proper quantity and at reasonable rates. 6) Availability of Water: After Fuel and Power the next important thing is the availability of water resources, as water is used for many purposes i-e for processing in paper and chemical industries and also for domestic use like drinking and sanitary purposes. 7) Climate Conditions: With the development in the field of heating, ventilating and airconditioning, climate of the region does not have much problem. But still it is of much importance to select a location having normal climatic conditions because it is very much difficult and in some cases almost impossible to control the climatic conditions (i-e heat, ventilation, etc) in all part of the plant. 8) Financial and Other Aids: In some state local government provide various facilities (ie provide loans, feed money in business, machinery, relaxation in tax policy, excise duties, etc) to attract industrialists. It is also important to have knowledge about government regulations and if are available should be made use of the facilities. 9) Availability of Land: The characteristics of the land at the proposed plant site should be examined carefully. The cost of the land is important, as well as local building costs and living conditions. Future changes may make it desirable or necessary to expand the plant facilities. The land should be ideally flat, well drained and have load-bearing characteristics

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10) Topography of Land (i.e. basic characteristic of land): It is very much important to have knowledge about the area, shape of the site, drainage, earthquakes, floods etc of the land being selected for the plant. One can get this sort of knowledge form the past history of the area. 11) Community Attitude: Success of an industry mainly depend on the attitude of the local people that whether the people there are educated or not, and or willing to do work or not, and the most important of them all is whether the society has any extremist factor or not. 12) Construction Cost: It is also very important to have close view about the construction cost before setting-up an industry. 13) Environmental Regulations: Also try to have knowledge about the environmental regulations like the local policy regarding the environmental pollution, etc. 14) Local Community Consideration: The proposed plant must fit in with and be acceptable to the local community. Full consideration must be given to the safe location of the plant so that it does not impose a significant additional risk to the community. In addition to all these factors, if a company tries to locate an industry beyond national borders, then they have to consider following factors as well:

1) Culture 3) Exchange rates 5) Available technology

2) Government stability 4) Export and import regulations 6) Political and Economic systems

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