Methods Of plant Location

A very Useful document to clear out the concepts of Plant Location Methods in Operations Management.

1. Methods of Plant Location

2. Group-8 MEMBERS Soubhik Ray Shreya Khatke Akshat Singh Ankit Kumar Dudani Chirag Patil Farhan Sheikh Ayusman Sahu

3. INTRODUCTION A good site location is an important activity that helps in reducing cost of production & distribution to a large extent this helps in evaluating the competitive strength & the profit margin of the business. Location of business involves large & relatively permanent investment. Hence while selecting a site it is necessary to consider all the technical , commercial, & financial aspects & then select a site that may provide maximum profit.

4. INTRODUCTION( conti …) If the location of business is not done properly , all the money spent on factory on buildings, machinery , etc, will go waste and the owner will suffer huge loss. Therefore the site of the location should be selected very carefully as it decides the fate of the business

5. NEED OF A PLANT LOCATION When the business is newly started. Expansion of existing plant. The increased volume of business and extent of the market size. Changes in the cost and availability of materials.

6. NEED OF A PLANT LOCATION (Conti…) Availability of transportation. A lease expires and landlord does not renew the lease.

7. LOCATION THEORIES Albert Weber in 1909, Classified the Factor in location as two factors : Primary Secondary

8. STEPS INVOLVED IN SELECTING A LOCATION

9. PLANT LOCATION METHODS

10. POINT RATING METHOD In this method points are assigned to each factor. The site with the highest total number of points is considered superior to other sites. It’s the easiest method and is highly recommended.

11. HOW POINTS ARE ASSIGNED : Here we see that Location B has an advantage over Location A Factors Points to be assigned Location A B FUEL 300 200 250 TRANSPORTATION 200 150 150 WATER SUPPLY 100 100 100 LABOUR 250 220 200 POLLUTION REGULATIONS 30 20 20 SITE 50 40 30 LIVING 150 100 125 TOTAL 1080 830 875

12. FACTOR RATING METHOD Factor rating method involves giving rating to each factor based on its importance. Steps Involved : Identify and list down all the relevant factors for the location decision. Establish the relative importance of each factor in the final decision. Rate the performance of each candidate location using a rating mechanism. Compute a total score for each location based on its performance against each factor and rank them in the decreasing order of the score.

13. BREAK-EVEN ANALYSIS METHOD The Break-even analysis helps in finding out the relationship of costs and revenues to output. It enables the financial manager to study the general effect of the level of output upon income and expenses and, therefore, upon profits. This analysis is usually presented on a break-even chart. It helps in understanding the behavior of profits in relation to output. Such an understanding, among other things, is significant in planning the financial structure of a company.

14. GRAPHICAL REPRESENTATION OF BREAK-EVEN ANALYSIS

15. QUALITATIVE METHOD If economic criteria are not sufficiently influential to decide the location alternative, a system of weighing the criteria might be useful in making a plant location decision. This is called Qualitative factor analysis method.

16. CENTER OF GRAVITY METHOD Place existing locations on a coordinate grid. Grid origin and scale is arbitrary Maintain relative distances Calculate X and Y coordinates for ‘center of gravity’ Assumes cost is directly proportional to distance and volume shipped

17. ILLUSTRATION A department store has branches in four locations : A, B, C & D. Department Store has a Ware House at D and plans to seek the central location of the new house ware. Previously, it has been determined in advance the coordinates of 0.0. Store locations in A (30.120); D (130, 130), C (90, 110) and B (60.40). Total demand for containers every month for A (2000); D (1000), C (1000) and B (2000). Location A has coordinates d (1, x) = 30, d (1, y) = 120, and W1 = 2000. By using equations Center of gravity is obtained the desired central location.

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