Plant location decisions are strategic, long term and non-repetitive in nature. Without sound and careful location planning in the beginning itself, the new plant may pose continuous operating disadvantages. Location decisions are affected by many factors, both internal and external to the organization’s operations Internal factors include the technology used, the capacity, the financial position, and the work force required. External factors include the economic, political and social conditions in the various localities.

1. Plant Location Models
• Process and Plant Design
School of Bio-engineering and Food Technology,
Shoolini University, Solan
• Prepared by: Abhishek (abhishek199thakur@gmail.com)

2. Plant Location
 Plant location decisions are strategic, long term and non-repetitive in nature.
 Without sound and careful location planning in the beginning itself, the new plant may pose
continuous operating disadvantages.
 Location decisions are affected by many factors, both internal and external to the organization’s
operations
 Internal factors include the technology used, the capacity, the financial position, and the work force
required.
 External factors include the economic, political and social conditions in the various localities.

3. Subjective, Qualitative and Semi-Quantitative Models
for Site selection
Three subjective techniques used for facility location are:
Industry Precedence: The basic assumption is that if a location was best for similar firms in the past, it
must be the best for the new one now.
Preferential Factor: Dictated by a personal factor.
 It depends on the individual whims or preferences e.g. if one belongs to a particular state, he / she may
like to locate his / her unit only in that state.
Dominant Factor: Mining or petroleum drilling operations must be located where the mineral resource is
available. The decision in this case is simply whether to locate or not at the source

4. 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

5. 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.
Factor rating method

6. Equal Weights Method
• Assign equal weights to all factors and evaluate each location along the factor
scale.
• For example, a manufacturer of fabricated foods selected three factors by which to
rate four sites.
• Each site was assigned a rating of 0 to 10 points for each factor.
• The sum of the assigned factor points constituted the site rating by which it could
be compared to other site.

7. Variable Weights Method
• The above method could be utilized on account of giving equal weight age to all the factors.
• Assigning variable weights to each of the factors and evaluating each location site along the factor
scale.
• Factor Fl might be assigned 300 points, factor F2 100 points and factor F3 50 points.
• The points scored, out of the maximum assigned to each of the factors, for each possible location
site could be obtained and again the site rating could be derived as follows:
•
Looking at the above Table, it can be seen that site S2 has the highest site rating of 370. Hence,
this site would be chosen.

8. Weight -cum-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.
• Procedure:
• One can assign variable weights to each factor.
• A common scale for each factor then rates the locations.
• The location point assignment for the factor is then obtained by multiplying the location rating for each factor by
the factor weight.
• For example, rating weights of one to five could be assigned to the three factors F1 (human resource), F2
(community facilities) and F3 (power availability and reliability), as 5, 3, 2 respectively. Now for each of the factors,
sites SI, S2, S3 or S4 could receive 0 to 10 points as follows and the site rating could be obtained.
The sample calculation should hopefully suffice to obtain the site rating. Hence, site S3 with the highest rating of 83 is
chosen.

9. Composite Measure Method
• Develop a list of all relevant factors
• Assign a scale to each factor and designate some minimum
• Weigh the factors relative to each other in light of importance towards achievement of system
goals.
• Score each potential location according to the designated scale and multiply the scores by the
weights.
• Total the points each location and either
(a) use them in conjunction with a separate economic analysis,
(b) include an economic factors in the list of factors and choose the location on the basis of
maximum points.

10. Example
• There are three potential sites and five relevant factors like transportation costs per week, labor
costs per week, raw material supply, maintenance facilities and community attitude. The costs are
in rupees whereas for the last three factors, points are assigned on 0-100 scale. The data collected is
shown in the following Table.
The location analyst has pre-established weights for various factors. This includes a standard of 1.0 for each Rs.10 a week
of economic advantage. Other weights applicable are 2.0 on raw material supply, 0.5 on maintenance facilities and 2.5 on
community attitudes. Also the organization prescribes a minimum acceptable score of 30 for maintenance facilities.

11. Locational 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.
• It aid in deciding which location would be optimal.
• The location of a food factory in a South Delhi site will result in certain annual fixed costs, variable
costs and revenue. The 0 figures would be different for a South Mumbai site. The fixed costs,
variable costs and price per unit for both sites are given below in the Table.
Let us assume that the expected sales volume as estimated by a market research team is 95 tonnes.

12. Continue…
• The break-even point is defined to be the point or volume where the total costs
equal total revenue. Thus for each site Sl and S2, the break-even point can be
determined by using a simple formula as follows:

13. Continue…
• Let us see what would be the profit or loss for the two sites at the expected volume
of 95 tonnes.

14. Location Factor Rating
Procedures
1. Identify factors that are important in the location
decision
2. Prioritize the factor by its importance. Each
factor is weighted from 0 to 1.00
3. Subjective score (0 to 100) is assigned to each
site for each factor
4. Sum up the weighted score.
5. The site with highest score is the most attractive
Location Factors Weight Site 1 Site 2 Site 3
Labor pool & climate 0.30 80 65 95
Proximity to supplies 0.20 100 91 75
Wage rates 0.15 60 95 80
Community environment 0.15 75 80 80
Scores (0 to 100)
Location Factors Site 1 Site 2 Site 3
Labor pool & climate 24.00 19.50 28.50
Proximity to supplies 20.00 18.20 15.00
Wage rates 9.00 14.25 12.00
Community environment 11.25 12.00 12.00
64.25 63.95 67.50
Scores (0 to 100)
1
2 3
4
5

15. Center-of-Gravity Technique
• Used for locating single facility that considers existing facilities, the distances between them, and the
volumes of goods to be shipped between them.
• Involves formulas used to compute the coordinates of the two-dimensional point that meets the distance
and volume criteria stated above.
• The coordinates for the location of the new facility are computed as follows:








 n
i
i
n
i
ii
n
i
i
n
i
ii
W
Wy
y
W
Wx
x
1
1
1
1
,
x, y = Coordinates of the new facility
at center of gravity
xi, yi = coordinate of existing facility I
Wi = Annual weight shipped from
facility i

16. Load-Distance Technique
• 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.
• Various locations are evaluated using a load-distance value.
• For a single potential location, a load-distance value (ld) is computed as follows:
• Select the location with lowest ld value
   22
1
yyxxd
dlLD
iii
n
i
ii

 
x, y = coordinates of the new facility
xi, yi = coordinate of existing facility
LD = the load-distance value
li = the load expressed as weight, number of trips, or unit
di = the distance between the new and existing facility