As a production and planning I/C of an organisation, what basic factors you will consider while electing a site for a proposed new plant.

Plant location: Introduction & meaning 

Plant location or the facilities location problem is an important strategic level decision-making for an organisation. One of the key features of a conversion process (manufacturing system) is the efficiency with which the products (services) are transferred to the customers. This fact will include the determination of where to pace the plant or facility. 

The selection of location is a key-decision as large investment is made in building plant and machinery. It is mot advisable or not possible to change the location very often. So an improper location of plant may lead to waste of all the investments made in building and machinery, equipment. 

Before a location for a plant is selected, long range forecast should be made anticipating future needs for the company. The plant location should be based on the company’s expansion plant and policy, diversification plant for the products. Changing market conditions, the changing source of raw material and many other functions of the location study is to find an optimum location on that will result in the greatest advantage to the organisation. 

Need for selecting a suitable location- 

The need for selecting a suitable location arises because of two situations. 

1. When starting a new organisation, i.e. location choice for the first time 
2. In case of existing organisation 

Because of these events, an organisation will be kept in additional or alternate sites for its production activities. So, the plant location becomes as important decision which in turn influences plant layout and facility needed. Also, it influences capital investment and operating costs. For example, in steel industry, if we integrate the units’ right from ore extraction to final steel formation in a nearby area, the transportation cost would be substantially reduced and also, the reliability of supply to the final stages of production in the integrated plant would be improved. This in turn, improves the productivity of the plant. 

In case of location choice for the first time or new organisation- 

Cost economies are always important while selecting a location for the first time, but should keep in mind the cost of long-term business / organisational objectives. The following are the factors to be considered while selecting the location for the new organisation: 

1- Identification of Region- the organisational objectives along with the various long-term consideration about marketing, technology, internal organisational strength and weakness, region- specific resources and business environmental, social environment and geographical environment suggest a suitable region for locating the operations facility. 

2- Choice of a site within a region- once the suitable region is identified, the next step is choosing the beat site from an available set. Choice of a site is less dependent on the organisational long term strategies. Evaluation of alternative site for their tangible and intangible costs will resolve facilities- location problem. 

The problem of location of a site within the region can be approached with the following cost-oriented non-interactive model, i.e., dimensional analysis. 

3- Dimensional Analysis- if all the costs were tangible and quantifiable, the comparison and selection of a site is easy. The location with the least cost is selected. In most of cases intangible costs which are expressed in relative terms than in absolute terms. There relative merits and demerits of sites can also be compared easily. Since both tangible and intangible costs need to be considered for a selection of a site, dimensional analysis is used. 

4- Dimensional analysis consists in computing the relative merits (cost ratio) for each of the cost times for two determinative sites. for each of the ratios an appropriate weightange by means of power is given and multiplying these weighted ratio to come with a comprehensive figure on the relative merit of two alternative sites, i.e., 

C1M, C2M, . . . . CzM are the different costs associated with a site M on the ‘z’ different costs items. 

C1N, C2N, . . . . CzN are the different costs associated with a site N and W1, W2, W3, . . . . Wz are the weightage given to these cost items, and then relative merit of the M and site N is given by. 

If this is >1, sites N is superior and vice-versa. 

When starting a new factory, plant location decisions are very important because they have direct bearing on factors like, financial, employment and distribution patterns. In the long run, relocation of plant may be even benefit the organisation. But, the relocation of the plant involves stoppage of production, and also cost for shifting the facilities to a new location. In addition to these things, it will introduce some inconvenience in the normal functioning of the business. Hence, at the time of stating any industry, one should generate several alternate sites for locating the plant. After a critical analysis, the best site is to be selected for commissioning the plant. Location of warehouse and other facilities ate also having direct bearing on the operational performance of organisations. 

The existing firms will seek new locations in order to expend the capacity or to place the existing facilities. When the demand for product increases, it will give rise to following decisions: 

• Whether to expand the existing capacity and facilities 
• Whether to look for new locations for additional facilities 
• Whether to close down existing facilities to take advantage of some new location