A Guide For The Plant Location

One recent and most talked about example of the problem related to “Plant Location.”:

Tata’s Nano Singur plant, has come under fire from farmers and villagers for forceful acquisition of agricultural land . This plant was established in Singur but due to opposition by a political party , they suspended work at Singur plant – in which they invested $350m and shifted their whole plant to Sanand, Gujrat.

Tata Motors, such a huge company, faced a problem regarding its plant location. It has a huge capital base and such a reputation that they can purchase any land anywhere so have you ever thought that why they first picked SINGUR for their factory and now Sanand? And why actually they faced the problem ?

So following is the explanation for the same.

Plant location is the location where an industry wants to start its operations. It is the selection of suitable location or site .Various types of industries needs to consider various factors in this respect. If the industry is engaged in “heavy manufacturing ” i.e. these are the industries which are relatively large and requires a lot of space. And as a result, they are expensive to construct. Important factors in the location decision for these plants are construction cost, modes of transportation , means of waste disposal and labour availability. And if it is a “light industry” i.e. the industry which is engaged in producing electronic equipment and components, parts etc .These type of industry doesn’t require large storage capacity, so for them proximity to customer is important. And if the industry is warehouse or distribution centre , then they just require huge space .in addition to all the defined factors.

So we can summarize their selection criteria in following ways

o Government regulations (Excise duties, taxes )

o Labour(availability , cost and unions)

o Proximity to customers

o Construction cost

o Availability of land

o Environmental regulations

o Climate

o Raw material availability

o Transportation cost

o Topography of land (i.e. basic characteristic of land)

In addition to all these factors, if companies tries to locate a industry beyond national borders, then they have to consider following factors also i.e.

o Government stability

o Political and Economic systems

o Exchange rates

o Culture

o Export and import regulations

o Available technology

But for the selection of one of the most favorable location for the plant, a search team is hired for site selection for different facilities and this evaluation process requires large amount of data and information relative to different location factors. Various location analysis techniques have been established for the selection of location. Following are the cost oriented location analysis techniques that can be used for identifying the plant site from the available set of sites

o Dimensional analysis : In this technique, relative merit of different cost are considered for identifying the facility location.

o Brown and Gibson model : This model considers critical, objective and subjective factors for the evaluation of sites.

o Factor rating method : This method is the most commonly used method. It involves factor rating and location rating .

o Point rating method :This method consider to give the rating to each factor on the basis of favourable , average and unfavourable .

o Break even analysis : It is a graphical representation that shows relationship between cost and revenue.

So, after taking all these factors in relation to various sites and by the application of various methods by the experts, a selection of a site is being done.

Selection of a site is not as simple as it seems to be.