FACILITY LOCATION AND

LAYOUT
Prepared by ,
Guided By,
Piyush bhatt
Madhuri mam
Swati parmar
Dipak mer
Submitted to,
Department Of Business Administration,
MK Bhavnagar University,
Bhavnagar.

PLANT LOCATION
Every entrepreneur is faced with the problem of deciding
the best site for location of his plant or factory.
Plant location refers to the choice of region and the
selection of a particular site for setting up a business or
factory.
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.

Reason for firm should look for additional

or alternate location
To establish new venture
Expansion of existing business
Changes in demand and supply
Company policy on diversification and change of working
condition
Changing in government policy

Alternate options open for

management
Make or Buy decision
Sub-contract instead of expansion
Expand existing organization
Dispose of the existing plant and build new one

Location analysis
Demographic Analysis
Trade Area Analysis
Competitive Analysis
Traffic analysis
Site economics

Two sites A and B are evaluated in terms of above mentioned

two costs as follows:
Cost

Site- A (Rs)

Site- B (Rs)

Land and
Buildings

350000

250000

Transport
facilities

20000

30000

Taxes

10000

8000

Labour

100000

70000

Water, power
and fuel

10000

80000

Total

490000

438000

Cost of
establishments:

Cost of
operations:

Factors influencing plant

location/facility location
1. General locational factors, which include controllable and
uncontrollable factors for all type of organisations.
2. Specific locational factors specifically
manufacturing and service organisations.

required

for

General Locational Factors

Controllable factors
1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. Capital

 Uncontrollable factors
1. Government policy
2. Climate conditions
3. Supporting industries and services
4. Community and labour attitudes

Specific Locational Factors for

Service Organisation
1. Favorable labor climate
2. Proximity to markets
3. Quality of life
4. Proximity to suppliers and resources
5. Utilities, taxes, and real estate costs

LOCATION MODELS
Various models are available which help to identify the ideal
location. Some of the popular models are:
1. Factor rating method
2. Weighted factor rating method
3. Load-distance method
4. Centre of gravity method
5. Break even analysis

1. Factor rating method

The process of selecting a new facility location involves a
series of following steps:
1. Identify the important location factors.
2. Rate each factor according to its relative importance,
i.e., higher the ratings is indicative of prominent factor.
3. Assign each location according to the merits of the
location for each factor.

4. Calculate the rating for each location by multiplying

factor assigned to each location with basic factors
considered.
5. Find the sum of product calculated for each factor
and select best location having highest total score.

ILLUSTRATION 1: 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?
Sl. No.

Location factor

Factor
rating

Rating
Location
1

Location
2

Facility utilization

Total patient per month

Employee preferences

SOLUTION:
Sl. No.

Location
factor

Factor rating
(1)

Location 1

Location 2

Rating

Total

Rating

Total

Facility
utilization

24

40

Total patient per

month

20

15

Employee
preferences

25

15

Total

69

Total

70

2. Weighted Factor Rating Method

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

ILLUSTRATION 2: 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?
Sr No.

Location factor

Weight

Scores
L-1

L-2

Facility utilization

25

Total patient per month

25

Average time per emergency trip

25

Land and construction costs

15

Employee preferences

10

SOLUTION:
The weighted score for this particular site is calculated
by multiplying each factors weight by its score and adding
the results:
Weighed score location 1 = 25 3 + 25 4 + 25 3 + 15 1 +
10 5
= 75 + 100 + 75 + 15 + 50 = 315
Weighed score location 2 = 25 5 + 25 3 + 25 3 + 15 2 +
10 3
= 125 + 75 + 75 + 30 + 30 = 335
Location 2 is the best site based on total weighted scores.

3. Load-distance Method
The load-distance method is a mathematical model used
to evaluate locations based on proximity factors. The
objective is to select a location that minimizes the total
weighted loads moving into and out of the facility. The
distance between two points is expressed by assigning the
points to grid coordinates on a map. An alternative approach
is to use time rather than distance.

4 Centre of Gravity
Centre of gravity is based primarily on cost
considerations. This method can be used to assist
managers in balancing cost and service objectives. The
centre of gravity method takes into account the locations of
plants and markets, the volume of goods moved, and
transportation costs in arriving at the best location for a
single intermediate warehouse.

5. Break Even 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.

PLANT LAYOUT

Point to consider
1.
1.
2.
2.
3.
3.
4.
4.

Meaning
Objectives of Plant Layout
Principles of Plant Layout
Classification of layout

1.Meaning of plant lay-out

According to Moore Plant layout is a plan of

an optimum arrangement of facilities including
Personnel
operating equipment
storage space
material handling equipment and
all other supporting services along with the
design of best structure to contain all these
facilities.

2. Objectives of Plant Layout

1.Streamline the flow of materials through the plant.
2. Facilitate the manufacturing process.
3. Maintain high turnover of in-process inventory.
4. Minimize materials handling and cost.
5. Effective utilization of men, equipment and space.
6. Make effective utilization of cubic space.
7. Flexibility of manufacturing operations and arrangements.
8. Provide for employee convenience, safety and comfort.
9. Minimize investment in equipment.
10. Minimize overall production time.
11. Maintain flexibility of arrangement and operation.
12. Facilitate the organizational structure.

3. Principles of Plant Layout

1. Principle of integration
2. Principle of minimum distance
3. Principle of cubic space utilization
4. Principle of flow
5. Principle of maximum flexibility
6. Principle of safety, security and satisfaction
7. Principle of minimum handling

4.Classification of layout
Layouts can be classified into the following
five categories:
1. Process layout
2. Product layout
3. Combination layout
4. Fixed position layout

1. Process Layout
Model of process Layout

Advantages of process
Layout

Flexibility
better utilization of production facility
Lower investment
Increase knowledge of supervisors

Limitation of process Layout

Reduce material handling efficiency

Increase in cost
Decrease productivity

2. Product Layout
Model of product Lay-out

Advantages of product
Layout

In-process inventory is less

Decrease handling cost
Mechanized handling systems
Unskilled workers can learn and manage the
production.
Manufacturing cycle is short due to
uninterrupted flow of materials.

Limitation of product Layout

Stop entire production

Difficult to change product design
Required high investment
Lack of flexibility

3. Combination Layout
combination
type of layout for manufacturing different sized gears

4. Fixed Position Layout

Fixed type of position Layout

Advantages of Fixed position Layout

interest and pride in doing the job

enlargement and upgrades the skills
Flexibility
Layout capital investment is lower.