Plant Location and Site Selection for New start up especially for Textile Firm. This Slide is also use full for Students as well as for new business starter.

1. Management in Textile Production

2. Unit I – Plant Layout
Plant location and site selection;
Factors affecting location;
Plant lay-out;
Different type of layouts;
Layout plan for spinning, weaving and process
house.

3. Plant Location
Raw material
Transportation cost depends on:
- weight;
- distance to be travelled.
Transportation cost should be minimum
Plant Market
Transportation
cost
Transportation
cost

4. Plant Location
Production facilities: Selection of region, area and site
1. Easy and regular supply in raw material;
2. Plant layout should be effective;
3. Proper utilization of production facilities;
4. Minimizing cost of production.
Why to choose location ?
1. For new plant;
2. Expansion of existing plant;
3. Market has increased (need to open branches);
4. Expiring of lease;
5. Economic of political reasons;
6. Other reasons (e.g. raw material quality changes with time).

5. Plant Location
Weber’s Deductive Theory
How plant location is decided ?
Two factors:
1. Primary factors or regional factors – raw materials, labour;
2. Secondary factors – deglomerating, agglomerating, split-in
location;
Market: place where buyer and seller meets.

6. Plant Location
Primary factors/regional factors:
1. Raw material
a. Ubiquitous – available anywhere (brick, clay, water);
(Plant near market)
b. Localised raw material – available only at specific sites, e.g.
iron ores, minerals.
(Plant near raw material)
- gross raw material (weight loosing raw material): plant near
raw material site;
- pure raw material (non-weight loosing raw material): plant
near market site

7. Plant Location
Location Material Index (LMI)
LMI = weight of localised raw material / weight of finished goods;
LMI > 1  near raw material;
LMI ≤ 1 near market.
2. Labour (depends upon)
- cost of transportation;
- labour cost.
For requirement of specialised labour, we have to shift our plant.
Raw material  Plant  Market
Labour
Labour coefficient = labour cost / localised raw material

8. Plant Location
Secondary factors
a. Agglomerating  concentration of similar plants in the area.
Factors for concentration of plants in a area:
1. Availability of skilled labour;
2. Availability of spare parts (to reduce breakdown time).
b. Deglomerating factors – decentralization of plants in different areas.
- Unhealthy competition (when labour leaves one shift and joins other due to
wages and salary);
- Traffic congestion;
- Housing problem;
- Taxes;
- Land cost.

9. Plant Location
c. split-in location: split the unit in different locations.
Stage I – raw material is weight loosing;
Stage II – raw material is non-weight loosing.
One stage is near the raw material place and other is near to
market.
e.g. paper industry (wood, pulp- paper)
Stage I – where pulp is created (near raw material zone);
Stage II – pulp into paper (near market).

10. Plant Location
Agglomerating – manufacturing unit;
Deglomerating – trading and marketing unit.
Factors for deciding location of plant
Critical appraisal:
1. Minimize the transportation cost:
- weight of material;
- distance travelled;
- region where we are locating.
2. Labour cost
- fixed labour centres;
- regular supply of labours.
Capital cost and manufacturing cost not discussed.

11. Plant Location
Steps in selecting plant location:
1. Deciding on domestic or international location
- stability of government;
- government policies;
- currency/exchange rate;
- export-import policies of the country;
- cultural and economic peculiarities.
2. Selecting the region
- availability of raw material
a. weight loosing or non-weight loosing;
b. transportation cost;
c. storage cost.
- nearest to market: after sale services;
- availability of power;
- transportation facilities;

12. Plant Location
2. Selecting the region (contd.)
- banking and finance facilities;
- climate;
- government policies.
3. Selection of locality:
- availability of labour. E.g. sarees – Kanjvaram, carpet – Mirzapur,
Locks –Aligarh, Pashmina – Kashmir, etc.
- civic amenities for workers;
- existence of complementary and competing industry;
- finance and research facilities;
- water and fire fighting facilities;
- local taxes and restrictions;
- personal policies of owner.

13. Plant Location
4. Selection of site:
- soil topography (plain, hilly) and its size
(of land);
- disposal of waste;
- beautification.

14. Plant LocationCase study:
Sl. No. Factors Location – 1 Location -2
1. Cost of land 1,00,000 90,000
2. Building 12,00,000 13,00,000
3. Water 5,000 6,000
4. Power 15,000 17,000
5. Labour 1,40,000 1,20,000
6. Freight –
Incoming
Outgoing
1,20,000
1,60,000
1,10,000
1,50,000
7. Fuel 40,000 35,000
8. Raw materials
and other
supplies
1,40,000 1,30,000
9. Taxes 4,000 2,000

15. Sl. No. Factors Location – 1 Location -2
10. Community
facilities
good Excellent
11. Housing
facilities
Very good Good
12. Cost of living High Normal
13. Size of
community
Small medium
14. Community
attitude
Good encouraging
Total 19, 24,000 19, 60,000
Plant Location
Note: Location 1 is cheaper than Location 2, but difference is not significant, so by
considering other community facilities, Location 2 is more appropriate.

16. Thank you!