Plant location
Plant location means where the plant should be located. This is very important business activity which decide the fate of the business locating. A business involve a large amount of relatively permanent capital and a single wrong decision may waste the whole investment. Thus it should be done with full care and after proper research.
Why plant location is important
A good location may reduce the cost of production and distribution to a considerable extent. By easy availability of raw material and labour etc the cost can be reduced. Thus reduced cost of production and distribution helps in evaluating the competitive strength and profit margin of business.
When the need for selecting suitable selection arise
o While starting a new factory.
o During the expansion of existing plant.
o When the existing plant is to be re-located at some other place to remove the drawback of present location or to gain benefits of still better location.
The problem of location
The problem of site selection of a factory can be solved in the following three steps:
1. Selection of region
2. Selection of locality
3. Selection of actual site
Selection of region
Generally the geographical area is divided on the basis of natural regions or political boundaries with in the nation. Example: Maharastra, Delhi, Haryana etc. that suitability can be considered on the basis of comparative cost advantage.
Selection of locality
With in the region, new locality is chosen following alternative are open in selecting the locality Urban area, suburban area, rural area.
Selection of site
The possibility of plant expansion, other infrastructure facility like transport, banking, power, communication facility etc. are considered while selecting the final site for location of plant.
Factors affecting the plant location
The consideration of factors affecting plant location requires careful analysis because the location once chosen, can’t be changed often.
1. Primary factors
2. Secondary factors
Primary factors
1. Supply of raw material
The cost of raw material are an important element of total cost of production. If the supply of raw material is not regular, it may lead to frequent stoppages. Therefore, industrial units are located near sources of raw material.
2. Nearness to market
Nearness to the market is important for supplying goods to the customers in a minimum period of time. Adjusting supply according to changes in demand and gain control over the market. Nearness to market reduces the cost of transporting of furnished goods to the market and enhances taking advantage of favorable prices and demand in the market. Nearness to market is important in case of delicate and perishable goods e.g. glass, food, cosmetics, fashionable goods etc.
3. Transport facility
Speedy transport facility are needed for regular and timely supply of raw material, furnished product and labour at the place required. After making cost and speed comparative study of different means of transport i.e. roads, railways, and water ways etc. the decision is taken.
4. Supply of labour
Machine’s can not produce anything without the availability of skilled labourers. Unavailability of labour leads to loss of man-hours and machine hours forever. Due to labour legislations, trade unions, high absenteeism, the stability of labour force is most important.
5. Power
Power is necessary for the process of production and transportation furnished goods and raw materials. Power may be electrical, diesel, and atomic energy. All type of powers are localized and mobile power shortage leads to tremendous losses due to stoppage of machinery. Therefore, industries must have co-sufficient and regular supply of power if continuity of production at full capacity is to be manufactured.
6. Supply of capital
Industries require capital for initial promotion and expansion. Large-scale production, mechanization and big industries require large amount of equity and debenture capital for a long period. It is therefore, necessary that development banks and long term institutions are developed. So as of availability of working capital etc.
Secondary factors
1. Facilities
An enterprising spirit, innovation, technical know-how and an industrious nature of population – all these factors taken together and a favourable government policy create a favourable atmosphere for the purpose of establishment of industries.
2. Natural factors:
Land, water, taw material, agriculture climate are some natural factors which are important for some industries like cotton textiles, sugar, jute. These industries depend on a good climate and sources of natural raw material.
3. Political factors:
The good government policy of licensing and encouraging location of industry subsidizing small industries on village areas and will also determine that location.
4. Government subsidy and facility:
Land, water, power available at a subsidies rate. Development rebate, tax rebate, price subsidies, banking installments at lower rate, priority in transport and supply of raw material.
5. Historical and religious factor:
Some cities are historical importance like banaras, kolhapur, nasik etc. industries grow at these religious centers because these are places of historical importance.
6. Initial start and goodwill:
Some industries get located at a place because some industrialists start the industry at that place at an early stage. E.g. in jamshedpur, iron and steel industry received its initial start here by Tata’s. The motor car industry was started at a place where MR pord started his workshop.
7. Personal Factors:
when there is a possibility of multiple locations, this factor plays a decisive role in locational consideration. Henry ford stated the automobile industry in Detroit ( u.s.a) because it was his home town.
Factors affecting selection of site ( urban, rural, suburbaner )
Urban area
Due to certain advantages available in city area promoters show preferences for the city area as the location of industrial unit.
Advantages
o Good transportation facilities.
o Good postal and communication facility.
o Banking and insurance facility.
o Skilled and unskilled workers.
o Fairly high local demand.
o Educational, medical and recreational facility.
o Training institutes for workers and management.
Disadvantages
o Cost of land is very high.
o Due to high standard of living, cost of labour is high.
o Even at high cost, sufficient land is not available.
o Various types of taxes are charge and at high rate.
o Certain municipal restrictions like treatment of efficient water, elimination of air pollution etc.
Rural area
In certain situations, rural area is also preferred.
Advantage
o In addition to disadvantage of urban areas same are.
o Labour management relations are relatively a mixable.
o Less danger of fire caused by surroundings.
Disadvantages
o Advantages of urban area.
o Increasing cost of distribution.
Suburban area
Advantages
o Land availability at cheaper rate.
o Adequate land availability.
o Infrastructure facility like road, water and power etc.
o Educational, medical, recreational facility.
o Both skilled and unskilled labour availability.
Disadvantages
o Development process is continuous not fully developed.
o In general the big city offers particular benefits to small enterprise .
o Rural areas offers benefits to large manufacturing industries.
o Suburban areas offers medium sized industry.
Recent trends in the location of industries.
The traditional factor like nearness of sources of raw material, motive powers, nearness of markets, labour supply etc. have no longer remained the effective pulling forces in the location of industries. The locational trends have changed substantially due to the development of substitute raw materials, network of electrification and transportation by roads or railways, mobility of the labour and persuasive and compulsive policies of the government for balanced regional development.
The recent trends in the selection of industrial location can be described as under:
1. Priority of sub urban area
The industrial policy of the government does not permit the establishment of new unit or expansion of an existing one in city areas. At the same time, infrastructure facility are developed in the suburban areas.
2. Industrial development is notified backward areas
In order to have balanced regional development, the government has notified certain backward areas. Different type of incentives like cash subsidy, tax relief, cheaper land and power supply, concessional financial assistance etc.
3. Establishment of industrial estate
Industrial estate is a piece of vast land sub-divided into different industrial plots. Where factory sheds are constructed on each state, the state development corporation (S.D.C) has developed many industrial estates particularly in all the district of state. The plot of land along with factory shed and infrastructural facilities are developed in the industrial estates and are sold to the prospective promoters.
4. Decentralization of industries
As per the licensing policy, new units are not permitted to be started. The establish of additional plants in a less developed areas or sometimes relocate the whole unit in such areas.
5. Increase role of government in the decision of location of industries
Government through its persuasive and compulsion methods greatly affects the location decision. It provides certain attractive incentives to the parameters to establish their units in less developed areas, at the same time it doesn’t permit executive industrialization in certain developed areas.
6. Government control on location of industries
The government being of public interest, intervenes in the location decisions as under:
o Licensing policy restricts concentration of industries in developed areas.
o Providing certain tempting incentives for spread of industries in industrial backward areas.
o Establishing the grant public sector units in relatively less developed areas.
This is done because:
o Balanced regional development.
o Narrow down the gap of inequality of income and wealth.
o Reducing concentration of population and industries in city.
o Reducing chances of heavy losses in war time.
Selection of actual site
Price of land
Waste disposal
Water supply
Expansion potential
Communication facility
Health of locality
Statutory consideration
Technological
Plant location means where the plant should be located. This is very important business activity which decide the fate of the business locating. A business involve a large amount of relatively permanent capital and a single wrong decision may waste the whole investment. Thus it should be done with full care and after proper research.
Why plant location is important
A good location may reduce the cost of production and distribution to a considerable extent. By easy availability of raw material and labour etc the cost can be reduced. Thus reduced cost of production and distribution helps in evaluating the competitive strength and profit margin of business.
When the need for selecting suitable selection arise
o While starting a new factory.
o During the expansion of existing plant.
o When the existing plant is to be re-located at some other place to remove the drawback of present location or to gain benefits of still better location.
The problem of location
The problem of site selection of a factory can be solved in the following three steps:
1. Selection of region
2. Selection of locality
3. Selection of actual site
Selection of region
Generally the geographical area is divided on the basis of natural regions or political boundaries with in the nation. Example: Maharastra, Delhi, Haryana etc. that suitability can be considered on the basis of comparative cost advantage.
Selection of locality
With in the region, new locality is chosen following alternative are open in selecting the locality Urban area, suburban area, rural area.
Selection of site
The possibility of plant expansion, other infrastructure facility like transport, banking, power, communication facility etc. are considered while selecting the final site for location of plant.
Factors affecting the plant location
The consideration of factors affecting plant location requires careful analysis because the location once chosen, can’t be changed often.
1. Primary factors
2. Secondary factors
Primary factors
1. Supply of raw material
The cost of raw material are an important element of total cost of production. If the supply of raw material is not regular, it may lead to frequent stoppages. Therefore, industrial units are located near sources of raw material.
2. Nearness to market
Nearness to the market is important for supplying goods to the customers in a minimum period of time. Adjusting supply according to changes in demand and gain control over the market. Nearness to market reduces the cost of transporting of furnished goods to the market and enhances taking advantage of favorable prices and demand in the market. Nearness to market is important in case of delicate and perishable goods e.g. glass, food, cosmetics, fashionable goods etc.
3. Transport facility
Speedy transport facility are needed for regular and timely supply of raw material, furnished product and labour at the place required. After making cost and speed comparative study of different means of transport i.e. roads, railways, and water ways etc. the decision is taken.
4. Supply of labour
Machine’s can not produce anything without the availability of skilled labourers. Unavailability of labour leads to loss of man-hours and machine hours forever. Due to labour legislations, trade unions, high absenteeism, the stability of labour force is most important.
5. Power
Power is necessary for the process of production and transportation furnished goods and raw materials. Power may be electrical, diesel, and atomic energy. All type of powers are localized and mobile power shortage leads to tremendous losses due to stoppage of machinery. Therefore, industries must have co-sufficient and regular supply of power if continuity of production at full capacity is to be manufactured.
6. Supply of capital
Industries require capital for initial promotion and expansion. Large-scale production, mechanization and big industries require large amount of equity and debenture capital for a long period. It is therefore, necessary that development banks and long term institutions are developed. So as of availability of working capital etc.
Secondary factors
1. Facilities
An enterprising spirit, innovation, technical know-how and an industrious nature of population – all these factors taken together and a favourable government policy create a favourable atmosphere for the purpose of establishment of industries.
2. Natural factors:
Land, water, taw material, agriculture climate are some natural factors which are important for some industries like cotton textiles, sugar, jute. These industries depend on a good climate and sources of natural raw material.
3. Political factors:
The good government policy of licensing and encouraging location of industry subsidizing small industries on village areas and will also determine that location.
4. Government subsidy and facility:
Land, water, power available at a subsidies rate. Development rebate, tax rebate, price subsidies, banking installments at lower rate, priority in transport and supply of raw material.
5. Historical and religious factor:
Some cities are historical importance like banaras, kolhapur, nasik etc. industries grow at these religious centers because these are places of historical importance.
6. Initial start and goodwill:
Some industries get located at a place because some industrialists start the industry at that place at an early stage. E.g. in jamshedpur, iron and steel industry received its initial start here by Tata’s. The motor car industry was started at a place where MR pord started his workshop.
7. Personal Factors:
when there is a possibility of multiple locations, this factor plays a decisive role in locational consideration. Henry ford stated the automobile industry in Detroit ( u.s.a) because it was his home town.
Factors affecting selection of site ( urban, rural, suburbaner )
Urban area
Due to certain advantages available in city area promoters show preferences for the city area as the location of industrial unit.
Advantages
o Good transportation facilities.
o Good postal and communication facility.
o Banking and insurance facility.
o Skilled and unskilled workers.
o Fairly high local demand.
o Educational, medical and recreational facility.
o Training institutes for workers and management.
Disadvantages
o Cost of land is very high.
o Due to high standard of living, cost of labour is high.
o Even at high cost, sufficient land is not available.
o Various types of taxes are charge and at high rate.
o Certain municipal restrictions like treatment of efficient water, elimination of air pollution etc.
Rural area
In certain situations, rural area is also preferred.
Advantage
o In addition to disadvantage of urban areas same are.
o Labour management relations are relatively a mixable.
o Less danger of fire caused by surroundings.
Disadvantages
o Advantages of urban area.
o Increasing cost of distribution.
Suburban area
Advantages
o Land availability at cheaper rate.
o Adequate land availability.
o Infrastructure facility like road, water and power etc.
o Educational, medical, recreational facility.
o Both skilled and unskilled labour availability.
Disadvantages
o Development process is continuous not fully developed.
o In general the big city offers particular benefits to small enterprise .
o Rural areas offers benefits to large manufacturing industries.
o Suburban areas offers medium sized industry.
Recent trends in the location of industries.
The traditional factor like nearness of sources of raw material, motive powers, nearness of markets, labour supply etc. have no longer remained the effective pulling forces in the location of industries. The locational trends have changed substantially due to the development of substitute raw materials, network of electrification and transportation by roads or railways, mobility of the labour and persuasive and compulsive policies of the government for balanced regional development.
The recent trends in the selection of industrial location can be described as under:
1. Priority of sub urban area
The industrial policy of the government does not permit the establishment of new unit or expansion of an existing one in city areas. At the same time, infrastructure facility are developed in the suburban areas.
2. Industrial development is notified backward areas
In order to have balanced regional development, the government has notified certain backward areas. Different type of incentives like cash subsidy, tax relief, cheaper land and power supply, concessional financial assistance etc.
3. Establishment of industrial estate
Industrial estate is a piece of vast land sub-divided into different industrial plots. Where factory sheds are constructed on each state, the state development corporation (S.D.C) has developed many industrial estates particularly in all the district of state. The plot of land along with factory shed and infrastructural facilities are developed in the industrial estates and are sold to the prospective promoters.
4. Decentralization of industries
As per the licensing policy, new units are not permitted to be started. The establish of additional plants in a less developed areas or sometimes relocate the whole unit in such areas.
5. Increase role of government in the decision of location of industries
Government through its persuasive and compulsion methods greatly affects the location decision. It provides certain attractive incentives to the parameters to establish their units in less developed areas, at the same time it doesn’t permit executive industrialization in certain developed areas.
6. Government control on location of industries
The government being of public interest, intervenes in the location decisions as under:
o Licensing policy restricts concentration of industries in developed areas.
o Providing certain tempting incentives for spread of industries in industrial backward areas.
o Establishing the grant public sector units in relatively less developed areas.
This is done because:
o Balanced regional development.
o Narrow down the gap of inequality of income and wealth.
o Reducing concentration of population and industries in city.
o Reducing chances of heavy losses in war time.
Selection of actual site
Price of land
Waste disposal
Water supply
Expansion potential
Communication facility
Health of locality
Statutory consideration
Technological
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