PRODUCTION AND OPERATION MANAGEMENT

Production Locations

Introduction of Plant Location

A factory or a plant is the manufacturing facility of a company. A warehouse is the storage facility of a manufacturing or a distribution company. The offices of a service sector company such as a courier company, a bank, or an insurance company are its facilities. The facility location decision is very important for big business houses as well as new entrepreneurs Wrong location of the facility may lead to a failure of the complete project shows the repercussions [results] of setting up a facility without proper facility location planning.

What is Plant Location?

It may be understood as the function of determining where the plant should be located for maximum operating economy and effectiveness.

Factors Responsible for Plant Location Choice

Availability of rawmaterials Proximity to market (nearness) Availability of labour Availability of transport Availability of electricity/power Availability of amenities Suitability of climate Political factor /Govt. subsidies

Regional regulations Room for expansion Safety requirements Site cost Personal factors

Location Models
Ranking Method Factors
Rating out of 5 Locat ion rating Out Of 10

Prod uct ratin g 32 6 24 12

Tax advantage Availabilty of labour Proximity to supplier Adequacy of H2O

4 3

8 2

6 3

5
3

2
6

4
5

10
18

20
15

Essence to rail Suitability of climate Availability of Power Receptivity of Community Total

3 2 2 5

10 7 6 4

8 9 4 3

30 14 12 20 145

24 18 8 12 136

 To get the product rating coloumn multiply factor rating with location rating. Example 4 x 8 = 32 (a) 4 x 6 = 24 (b) Similarly ,Product rating column which haS more total will be preferred as a location in this ranking method.

Weight Model
Factor Rated Max. points 300 200 100 250 Points assign to locatio n (a) (b) 200 250 150 100 220 150 100 200

Future availability Of fuel Transportation H2O supply Labour

Pollution regulation
Living condition Total

30

20

20

150

100

125

790

845 Adopted

Break Even Analysis

Location A
B

Fixed cost 25000

50000

Variable cost 50
25

80000

18

Expected Sales = 2000units/year TC = TVC + TFC Total cost: A = 25000+50X2000=125000 B = 50000+25X2000=100000 C = 80000+18X2000=116000 Similarly,location B will be selected.

Break even analysis

It is to determine the range of annual volume of production at which each of 3 locations would becme most economical.It is necessary to determine the break even volume.

Rate of Return Analysis

Particulars Total initial invest. Expected sales 2L 250000 x 2L y 2L z

300000 259000 40000 75000

Distribution 40000 expences Rawmaterial 70000 expences Power & H2O supply 40000 expences

80000
30000

90000
20000

Wages & salary 20000 Miscellaneous expences 25000

25000 40000

20000 30000

 Rate of return = T. Sales T. expences x100 T. Investment Location x =25000-195000x100 20000 = 55000 x 100 =27.5% 200000

Location y = 300000 215000x100 200000 = 85000 X 100 =42.5% 200000 Location y is more suitable than others. Location z =250000 235000x100 200000 = 15000x100 =7.5% 200000

THANK
YOU