Textile plant location.pptx

The technical parameters to be included in selecting a site for installing a Textile factory are described in this powerpoint.

1. Bahir Dar University Ethiopian Institute of Textile and Fashion Technology Course Title: Textile Plant Layout and Design Course Code: Teng 4228 Program: B.Sc. in Textile Engineering By Bewuket Teshome (Lecturer) 1

2. Chapter – 1 Textile plant Location Contents Introduction to textile industry Importance of site selection Principles of Site Selection General territory Specific Location Systematic approach for selecting location

3. Lesson 1 Objectives: To understand the nature and form of textile industry To understand the importance of plant location To know when plant site selection is necessary To understand the 10 principles of site selection

4. Introduction to Textile Industry Form Textile factories can be established as: Integrated/composite textile factories Spinning mills Weaving mills Knitting mills and Garment factories Hand spinning Rope making Handloom Present trend? Organized sector Household/cottage

5. Nature of the Industry Labour : labour intensive (level of technology medium) Level of technology: employed can range anywhere from the most primitive (e.g., throw shuttle looms) to the most modern (e.g., shuttleless looms with electronic jacquards). In general, as the level of technology is higher, capital investment is much higher and they tend to be highly labour saving.

6. Modern spinning and weaving units are highly energy intensive. Chemical processing units consume large quantities of water, chemicals and fuels ; they are also highly polluting. Garment units are extremely labour intensive where women workers are employed in very large numbers. Developing countries concentrate on this sector to generate employment.

7. 2. Importance of Site Selection Plant location: refers the place where the plant should be located for maximum operating economy and effectiveness. Site selection for the location of a facility means long-term commitment. A facility once established is very difficult to be relocated in another advantageous location. A plant has to live with all the advantages and disadvantages, once the site has been selected and the machinery installed. Generally, the approach is to select a site that will reduce cost of production reduce cost of distribution and increase of profits by exploiting locational advantages .

8. Locating a Plant is needed when: – The business in newly started – The expansion to the existing plant is not possible – A firm wants to establish new branches – The landlord does not renew the existing lease – Economic or social reasons like: - Inadequate power supply - Government regulations, etc.

9. 3. Principles of Site Selection 3.1. General Territory/Region Government Policy keeping the national priorities Encouragement is given in terms of incentives, subsidies, tax exemptions ( could be critical cost factors in deciding the viability of a location) and so on. Discouragement could be outright denial of permission for location by municipal/regional /national authorities. It is encouraged to be located in ‘remote’ areas in order to generate employment , reduce poverty and initiate industrialisation of a backward area.

10. b) Availability of Raw Material This is not a major factor. All over the world, the raw materials are transported commonly from one end of the globe to another end. However, in certain cases the cost of transportation may be critical. The availability of cheap raw materials in the neighbourhood – e.g., cotton, wool – may improve the attractiveness of a location marginally (in a small scale).

11. The total land suitable for producing cotton in the country is 3,000,808.75 hectare .

12. c) Proximity to Markets This is not also a highly relevant factor for textile industry - except for perhaps products of small scale industry of local interest . Textile materials command worldwide market and like raw materials, they are also transported over large distances. Again like raw materials transport costs, may alter the situation marginally to substantially (considerable).

13. d) Availability of Labour Unskilled Semi-skilled Skilled A large proportion of workers belong to unskilled and semiskilled (for low/medium technology). Most of these workers can be easily trained in-house. When sophisticated technologies are used, educated labour would become necessary. Locating industries in urban and semi-urban areas has the advantages of attracting educated, skilled workers in large numbers. The wages to be paid may be higher in urban and semi-urban areas. When there is an established industry in a given area there is always a surplus trained labour which is available for new units. The initial training expenses and loss of productivity/quality for new units to be set up in new areas may give up units to be unviable at least in the short run (in spite of low wages).

14. e) Transport and Communication Transport should be low in cost and quick in delivery . In-land transport of goods is generally by road for short distances and by rail for long distances. In the case of textiles, almost all of inland transport is by road in view of quickness and door delivery. For transport between continents, transport by ship is carried out. For very expensive textile items (which are generally low in weight also), air transport is also resorted to. Ethiopia to depend of foreign ports which invariably means long delay and increased costs. Communication is another important factor for the location of factories.

15. f) Availability of Power and Fuel Spinning and weaving sections of the textile industry are highly energy (particularly electrical) intensive. Wet processing industry is in general fuel (coal/oil) intensive. Availability of these resources with good quality is also a critical factor.

16. g) Climatic Conditions Spinning and weaving units general require reasonable amounts of moisture ( for spinning around 50 to 60%RH and for cotton weaving 80 to 85%RH ). The temperature should also be maintained around 20 to 30 ºC. These conditions need to be maintained throughout the year. Without humidification and air conditioning facilities , maintaining consistent ambient conditions is difficult. Nevertheless, the cost of maintaining humidification/air conditioning facilities is highly influenced by the local weather conditions. Closer the local weather conditions near the desirable conditions, lower will be the capital and recurring costs. Wet processing and garment units are less susceptible to the environmental conditions.

17. h) Availability of Water Good quality water in large quantities is essential for wet processing factories. For spinning and weaving factories too, a substantial quantity of water is required for drinking, hygiene and humidification purposes.

18. Ancillary Industries Large industrial units provide raw materials to small units for conversion to finished or semi finished products to exploit certain advantages. Large processing units can subcontract conversion of yarn to fabric and finish the cloth in house. The same concept can be extended to knitting, garment, and hand loom sectors also. So factories should have to carefully look into the presence of ancillary sector.

19. j) Business and Commercial Facilities Bank facilities for depositing surplus cash, Sending outstation cheques for collection and withdrawals, Working capital limits – all these are essential for the conduct of modern-day business.

20. 3.2.Selecting the exact plant site [specific location] The following points are considered: The cheap availability of land for current and future requirements, Soil characteristics , availability or possibility of economic drainage and waste disposal system are desirable parameters. The site should be easily accessible to various modes of transport as required so that apart from input materials, employees can also reach the site conveniently. The site should be free from zonal restrictions like from railways or civil aviation restrictions.

21. Lesson 2: Objectives To understand the general steps in systematic approach during site selection To understand and exercise the common techniques in systematic site selection

22. 4. Systematic approach for selecting location location analysis: Selection process of a site for the factory. Some geographical area is selected a particular site is selected. All factors has economic and non-economic implications of short, medium and long-term nature. All the factors need to be carefully weighed for their benefits and disadvantages. These factors need to be evaluated objectively - to the extent possible in monetary terms. A location survey must be undertaken based on the specific requirements of the given enterprise.

23. In making location decisions it is needed to: Decide on the criteria Identify the important factors Develop location alternatives Evaluate the alternatives Identify general region Identify a small number of community alternatives Identify site alternatives Evaluate and make selection Common techniques: 1. Locational cost-volume-profit analysis 2. Factor rating 3. Center of gravity method 4. Rate of return

24. 1. Locational Cost-Volume-Profit Analysis Steps: – Determine fixed & variable costs for each location – Plot total cost for each location – Select location with lowest total cost for expected production volume Example: Fixed and variable costs for four potential plant locations are shown below: Location Fixed Cost per Year Variable Cost per Unit A $250,000 $11 B $100,000 $30 C $150,000 $20 D $200,000 $35 Plot of Location Total Costs

25. Range approximations B Superior (up to 4,999 units) C Superior (>5,000 to 11,111 units) A superior (11,112 units and up)

26. 2. Factor Rating Method List relevant factors Assign importance weight to each factor (0 - 1) Develop scale for each factor (1 - 100) Develop location alternatives Score each location using factor scale Multiply scores by weights for each factor & total Select location with maximum total score Sample format Factors weight Location A Location B Location C score W*S score W*S score W*S Raw material Labor Water Transportation Total

27. 3. Center of Gravity Method This method Considers: Location of markets Volume of goods shipped to markets Shipping cost ( distance covered) Steps: Place existing locations in coordinate grid Grid origin and scale is arbitrary Maintain relative distances Calculate (X,Y) coordinates for center of gravity NB: Cost is directly proportional to distance and volume of goods.

28. If quantities to be shipped to every location are equal: the coordinate can be calculated by finding the average of the x- coordinates and the average of the y- coordinates. When the quantities to be shipped to every location are unequal: the coordinate obtained by finding the weighted average of the x- coordinates and the average of the y- coordinates.

29. Destination x y D1 2 2 D2 3 5 D3 5 4 D4 8 5 18 16 Here, the center of gravity is (4.5,4) . This is slightly west of D3 . Example1: Find the center of gravity of the following 4 destinations. a) Map showing destinations b) Coordinate system added c) Center of gravity

30. Example2 : Suppose the shipments for the above 4 destinations are not all equal. Determine the center of gravity based on the following information. Destination x y Weekly Quantity D1 2 2 800 D2 3 5 900 D3 5 4 200 D4 8 5 100 18 16 2,000 The coordinates for the center of gravity are (3.05, 3.7 ) = ( 3.0, 3.7 ).

31. 4. Rate of return Many factors considered The required capital investment, The unit cost of production and distribution for a given volume of output The most advantageous location is the one which has the highest rate of return . All Costs can be classified in the following ways Total Investment (Land cost, Building cost, Machineries and equipment cost) Total Expenses Total Sales

32. Example: Given Data for Site A & Site B Site A= 450,000-280,000 x100% = 5.66% 3,000,000 Site B= 375,000-320,000 x 100%= 1.833% 3,000,000 The site A is most advantageous as it gives high rate of return. Site A Site B Total investment (fixed capital) 3,000,000 3,000,000 Total sales 450,000 375,000 Total expense (working capital) 280,000 320,0000

33. End!!!

34. 2. Comparison of qualitative factors These are the factors to which cost values can’t be assigned. Like lack of good schools, community attitude. These can be termed as good or excellent. Clearly location B appears to be better one. factors Location A Location B labor adequate excellent relation good Very good education Good Very good

35. Ranking & weight method Various locations are ranked acc. To their contribution Various factors are assigned weights acc. To their importance Weights are then multiplied with rank assigned Total of these products for each location is calculated Location having max. total is then selected.

36. Example Criterion Weighting Possible Factory Location A B C D E PROXIMITY TO: Skilled labour 7 2 14 3 21 1 7 4 28 A pool of unskilled labour 8 5 40 2 16 4 32 2 16 A motorway 7 3 21 2 14 1 7 3 21 4 28 An airport 4 1 4 3 12 4 16 2 8 2 8 The sea / a river 2 5 5 2 1 Housing 5 4 20 3 15 3 15 4 20 Amenities 5 3 15 2 10 2 10 3 15 Potential for expansion 7 2 14 1 7 5 35 3 21 2 14 Availability of grants/incentives 8 1 8 2 16 5 40 1 8 3 24 Safety 2 3 6 2 4 5 10 2 4 2 4 Planning constraints 5 2 10 3 15 5 25 4 20 2 10 Environmental impact 4 3 12 2 8 4 16 1 4 2 8 TOTAL 164 138 149 150 175