Plant location and factors affecting plant location
A good location of a
production or service facility will give cost advantage to production or
services and may also reduce the raw material and distribution costs. The
location aspect is particularly advantageous to small business enterprises and
service units. Location adds to competitive advantages and improved profits.
Usually location question arises when:
(1) a new plant or service
facility is planned
(2) there is addition to the existing
business or added capacities in the other regions
(3) existing facilities are
to be relocated or modified to remove drawback
(4) to get advantage of
better infrastructure or incentives from the government sources.
Location of organization
plant or service facilities is a permanent fixture and has considerable
expenditure. The selection has to be done considering all relevant aspects. If
there is any mistake or wrong choice of location, all the expenditure in the
form of site development, factory construction, installation of machinery and
other infrastructure development will go waste. The location selection has
three main issues:
(i) Selection of the region:
It is imperative to produce near the raw material base or customer to meet set
competition, trade agreement and transport costs.
(ii) Selection of locality:
The choices are the rural place, the urban place or suburban area near the
metro. The selection usually boils down to developed industrial area or having
government sponsored advantages.
(iii) Selection of site:
Advantages of low labour cost, low land cost, infrastructure or transport
facilities chosen. After the selection of location of manufacturing or
services, the next important activity is facilities layout. The arrangement of
various departments, machines in the building and plant services is to be done
in order to get the maximum efficiency by the optimum usage of resources. The
type of production equipment and product characteristics are to be considered
while evolving a good factory layout. A factory layout means location of
different departments, like foundry, forging, machine shop, tool room,
administration, maintenance shop whereas a plant layout means the location
sequence or arrangement of machines and equipments in a department.
Factors affecting plant location
Selection of proper location
is very important for the success of any business. Plant location is considered
as the function of determining where the plant should be located for maximum
operating economy and effectiveness. Manufacturing and service companies make
location decisions based on many criteria. Following are the factors that
should be considered for location of an industry or service unit:
(1) Primary Factors :
a) Nearness to customers
b) Near raw materials
c) Supply of capital
d) Logistic facilities and
infrastructure
e) Skilled labour
availability
f) Power supply
g) Business climate
(2) Secondary Factors :
a) Host community and
political factors
b) Natural factors
c) Historical factors
d) Initial start and living
conditions
e) Personal factors
f) Government policies
g) Environmental
considerations
h) International factors
Primary Factors:
(a) Nearness to Customers:
Nearness to customer helps a plant to incorporate customer needs into the
products being made in the unit. Finished goods to customers can reach faster
and in less cost. There is less chance of breakage or damage during
transportation.
(b) Nearness to raw
materials: Cost of raw material input is a large cost in case of manufactured
goods. The time & cost of transporting raw material is less if the plant is
located near the source of raw material. For example, thermal power plants are
located near to the coal mines.
(c ) Supply of capital: Short
term and long term funds are required for any manufacturing or service
industry. A company decides to locate its plant in such a location where fund
movement is hassle free.
(d) Logistic facilities and
Infrastructure: Adequate roads, rail, phone, postal and transportation
facilities are to be considered while deciding on the location of plant and
service facilities.
(e ) Skilled labour Supply:
Regular supply of skilled labour is one of the major factors to be considered
while deciding on the plant or service location. Example: Software companies
are located in Bangalore, Hyderabad and New Delhi.
(f) Power Supply: This is a
very critical factor to be analyzed. Uninterrupted power supply with proper
voltage is one of the prerequisites of plant location decision.
(g) Business Climate:
Companies must find a positive business climate or environment in the area,
state or a country to set-up manufacturing or service facility there.
Secondary Factors:
(a) Host community and
political factors: The community near the industry proposed location should be
willing to welcome the new industry. Local people should feel that there will
be improvement in their quality of life due to the new industry.
(b) Natural Factor: Land,
water, climate condition, sources of material attract and help some industries
Example: Tea industry, cotton industry, coffee industry, coconut oil industry
etc.
(c) Historical factors:
Capitals of old kingdoms of yesteryears, large religious places sometimes
attract companies to set up their plants.
(d) Initial start and living
conditions: Some industries were started earlier in certain places during the
British era in its early stages. The industries since then have developed
making good living conditions. The related industries start getting located in
the place. e.g: Jamshedpur, Kirloskarwadi.
(e) Personal factors: The
history of the entrepreneuring company or family or personal considerations
play a key role in location decision.
(f) Government policies:
Government play their own role in the location decision of new industries. The
Government of India and the state governments have made special efforts in
making industries grow and made manufacturing and service units all over India
with a view to have a balanced developmental spread all over the country and
the region.
(g) Environmental considerations:
Environmental issues for certain industries for a particular location are to be
checked before deciding on location.
(h) International factors:
For companies deciding to go overseas for locating a unit for manufacturing or
service must consider behavioral aspects, cultural differences, technology,
government policies etc.
Meaning and Definition of Plant location
The efficiency of production depends on how
well the various machines; production facilities and employee’s amenities are
located in a plant. Only the properly laid out plant can ensure the smooth and
rapid movement of material, from the raw material stage to the end product
stage. Plant layout encompasses new layout as well as improvement in the
existing layout.
It may be defined as a technique of locating
machines, processes and plant services within the factory so as to achieve the
right quantity and quality of output at the lowest possible cost of
manufacturing. It involves a judicious arrangement of production facilities so
that workflow is direct.
Definition: A plant layout can be defined as
follows:
Plant layout refers to the arrangement of
physical facilities such as machinery, equipment, furniture etc. with in the
factory building in such a manner so as to have quickest flow of material at
the lowest cost and with the least amount of handling in processing the product
from the receipt of material to the shipment of the finished product.
According to Riggs, “the overall objective of
plant layout is to design a physical arrangement that most economically meets
the required output – quantity and quality.”
According to J. L. Zundi, “Plant layout
ideally involves allocation of space and arrangement of equipment in such a
manner that overall operating costs are minimized.
Need and objectives of plant layout
Plant layout is an important decision as it
represents long-term commitment. An ideal
plant layout should provide the optimum relationship among output, floor area and manufacturing process. It
facilitates the production process, minimizes material handling, time and cost, and allows flexibility of
operations, easy production flow,
makes economic use of the building, promotes effective utilization of manpower, and provides for employee’s convenience,
safety, comfort at work, maximum
exposure to natural light and ventilation. It is also important because it affects the flow of material and processes,
labour efficiency, supervision and
control, use of space and expansion possibilities etc. An efficient plant layout is one that can be instrumental in
achieving the following objectives:
a) Proper
and efficient utilization of available floor space
b) To
ensure that work proceeds from one point to another point without any delay
c) Provide
enough production capacity.
d) Reduce
material handling costs
e) Reduce
hazards to personnel
f) Utilise
labour efficiently
g)
Increase employee morale
h) Reduce
accidents
i) Provide
for volume and product flexibility
j) Provide
ease of supervision and control
k) Provide
for employee safety and health
l) Allow
ease of maintenance
m) Allow
high machine or equipment utilization
n) Improve
productivity
Factors Affecting plant layout
While
deciding his factory or unit or establishment or store, a small-scale businessman
should keep the following factors in mind:
a) Factory
building: The nature and size of the building determines the floor space
available for layout. While designing the special requirements, e.g. air conditioning,
dust control, humidity control etc. must be kept in mind.
b) Nature
of product: product layout is suitable for uniform products whereas process
layout is more appropriate for custom-made products.
c) Production process: In assembly line
industries, product layout is better. In job order or intermittent manufacturing on
the other hand, process layout is desirable.
d) Type of machinery: General purpose machines
are often arranged as per process layout while special purpose machines
are arranged according to product layout.
e) Repairs and maintenance: machines should be
so arranged that adequate space is available between them for movement
of equipment and people required for repairing the machines.
f) Human needs: Adequate arrangement should be
made for cloakroom, washroom, lockers, drinking water, toilets
and other employee facilities, proper provision should be made for disposal
of effluents, if any.
g) Plant environment: Heat, light, noise,
ventilation and other aspects should be duly considered, e.g. paint shops and plating
section should be located in another hall so that dangerous fumes can be
removed through proper ventilation etc. Adequate safety arrangement
should also be made.
Thus, the layout should be conducive to health
and safety of employees. It should ensure free and efficient flow of men
and materials. Future expansion and diversification may also be considered while
planning factory layout.
Production Planning and Control
Production Planning means to fix the
production goals and to estimate the resources which are required to achieve
these goals. It prepares a detailed plan for achieving the production goals
economically, efficiently and in time. The plan determines steps in every
production process. It forecasts the problems which may arise in production
process and tries to remove them. It also tries to eliminate or minimize
wastage to ensure cost effective production.
Ray Wild defines Production Planning as
“Production Planning is concerned with the determination, acquisition and
arrangement of all facilities necessary for future operations.”
Production Planning is followed by Production
Control. Production control is a process by which actual performance is
compared with the pre-determined standards. Production control guides and
directs the flow of production so that products are manufactured in the best
and cheapest method, which conforms to the desired quality and are ready for
sale at right time.
Production comes into being as a result of
combining materials, machines and other factors in operation. Managing
individual factor is isolation from one another cannot make the work of production
manager complete unless efforts are directed towards their combined results.
Production planning and control direct the flow of production which symbolizes
the combined effect of all factors.
Objectives
of Production Planning and Control: The objectives of production
planning and control are as follows:
a) To
determine the sequence of operation; which will ensure continuous production
with the least possible interruption.
b) To issue
coordinated work schedule of production to the foremen of various shops.
c) To plan
plant capacity that will provide sufficient facilities for future production
programmes.
d) To
maintain sufficient inventories of materials to support the continuous flow of
production.
e) To
maintain production and employment levels that is relatively stable and
consistent with the volume of sales.
f) To follow
up production schedule to ensure that delivery promises are kept.
g) To
evaluate the performance of various workshops and individuals.
Steps/Stages in Production Planning and Control
According to
the British Standards Institute, there are four stages, steps or techniques in
the process of production planning and control. These are as follows:
a)
Routing.
b)
Scheduling.
c)
Dispatching or issuing instructions.
d)
Inspection or Follow-up.
The initial two stages i.e. Routing and
Scheduling relate to Production Planning; while the last two steps i.e.
dispatching and follow-up relate to Production Control.
1. Routing: It is the selection of the path or
the route along which each piece of materials is to travel while being
transformed from raw-materials to finished product. It establishes the
operations, their path and sequence in addition to determining the proper class
of machines and personnel required for these operations.
The objectives of routing is to determine the
best and the cheapest sequence of operations and to ensure that this sequence
is strictly followed. Efficient routing is one which permits the best
utilization of physical and human resources employed in the manufacture of a
product. In small enterprises this is done by the entrepreneur himself, in a
rather ad hoc manner. In fact, routing requires great ability and experience.
2. Scheduling: Scheduling involves determination of
the time when various operations are to be performed. It assigns the starting
and finishing times for each operation as well as for a group of integrated
operations. Scheduling is primarily concerned with time element and priorities
of a job. This becomes more important in those cases where several parts and
components with varying sizes are to be produced for final assembly in to a
finished product. The pattern of scheduling varies from one job to another. It
ensures increased production and a higher margin of profit. Different trends of
scheduling are enumerated below:
a)
Production
Schedule: The aim of production scheduling is to ensure that the plant and
equipments can conveniently handle a great volume of work without interference.
This depends upon the following facilities.
1) Physical
plant facilities of the type required to process the materials being scheduled;
2) Personnel
who possess the desired skills and experience to operate the equipment and
perform the type of work involved; and
3) Necessary
materials and purchased parts.
b)
Master
Schedule: Scheduling usually starts with the preparation of the master
schedule, which is simply a weekly or monthly breakup of the production
requirement for each product for a definite period of time. This provides not
only a convenient way of keeping running the total of production requirements
but also enables an entrepreneur to plan in advance for any shift from one
product to another or for a possible increase or decrease in production
requirements. Thus, it provides information which becomes the basis of all
subsequent scheduling activities.
c)
Manufacturing
Schedule: Depending upon the type of manufacturing process involved, a
Manufacturing Schedule is prepared. It is primarily useful when a single
product or a relatively few products are manufactured continuously or repeated
at regular intervals.
d)
Scheduling
of job order Manufacturing: In job order manufacturing scheduling acquires
great importance. This enables speedy execution of a job at each focal point.
3.
Dispatching
or issuing instructions: Dispatching is a doing function of production
management and initiates actual manufacturing in accordance with the work of
routing and scheduling. Dispatching consists essentially of the issue of order
in terms of their priority as determined by scheduling. It includes assignment
of works to the operators at their machines or work place. Thus, dispatching
determines who will do the work, as routing determines where and scheduling
determines when it shall be done. Dispatching consists of official instructions
on following aspects of production management and control system of an
organisation.
a)
Movement of materials to different work
places.
b)
Movement of tools and fixtures necessary for
each operation.
c)
Beginning of work on each operation.
d)
Recording of beginning and completion time of
each operation.
e)
Movement of work in accordance with a routing
schedule.
f)
Control over progress of all operations.
g)
Making necessary adjustments in the release of
instructions.
Further, dispatching provides report on the
work progress and ensures the completion of operations. Data for cost finding
are also supplied from the dispatching work. More importantly, dispatching
becomes a pointer to the deficiencies of routing and scheduling in many cases
and thereby suggests changes in the production planning.
4.
Inspection
or Follow-Up: ‘Inspection’ is the manufacturing function that examines whether
the production is carried out as per the standard set or not. Inspection aims
at maintaining quality standard and calls for minimizing product scraping or
rejection. As faulty production results mostly from defects in materials or
machines, inspection requires testing of materials before their transformation
into finished product as well as the checking of machines and tools to ensure
their accuracy of performance. Instead of permitting products to be scrapped
after manufacturing, inspection is supposed to reduce the cost of rejections by
preventing the occurrence of such faulty production.
Inspection pursues the production
process step by step till its completion and evaluates the work process with
reference to predetermined standards of performance. However, the extent of
inspection works differs between companies or between products. In some
companies, inspection is confined to a limited number of products under the
statistical method of random sampling. On the contrary, a policy of cent per
cent inspection is followed in many companies.
Quality Control in Small Business Enterprises
Quality Control in a manufacturing enterprise
means the systematic control of those variables which affect the excellence of
the ultimate product. The variables in general are man, machines, materials and
manufacturing conditions. Each of these variables is not always uniformly
available in the nature. There are differences in them for variety of reasons.
For example, due to caprices of nature, materials may differ in their
composition and physical characteristics. Similarly, men vary in their degree
of skill and proficiency. All machines are not of equal quality as they are
made by men by use of materials which vary in several counts. Further,
manufacturing conditions such as temperature, humidity, building, vibrations,
composition of coolers, dust and dirt in the air are all subject to great
variations. The practice of Quality control ensures proper regulation of all
these variables so that they do not cause any distortion in excellence of the
finished product.
Quality is a related concept, which relates to
certain predetermined characteristics such as shape, dimension, compositions,
strength, finish, colour, time weight, etc. According to Alford and Beatty,
“Quality control is the mechanism by which products are made to measure upto
the specifications determined from the customer’s demand and transformed into
sales, engineering and manufacturing equipments. It is concerned with making
things right rather than discovering and rejecting those made wrong. Quality
control is a technique by which the products of uniform acceptable quality are
manufactured”.
Quality control techniques are widely used in
manufacturing industries for rapid development of the industrial economy. Many
improvements are made in the quality of products without any additional capital
investment. Several countries of the world have recovered their economies and
established firm foreign markets by improving the quality of their products.
Among other thing, quality control provides considerable savings at various
stages of production. For this purpose, standardization plays a fundamental
role in the assessment, specification and measurement of quality of a product.
With the help of standardization, it is possible to lay down the basic
procedures for ensuring quality control. Thus, standardization and quality
control go hand in hand.
Objectives
of Quality Control: The practice of Quality Control is introduced
by manufacturing enterprises towards attainment of the following objectives.
a)
To
establish quality standards: Efficient manufacturing concerns always work
towards satisfaction of their customers. They pay due to importance on
consumers’ behaviour and always try to bring out the best quality products into
the market. To them, qualitative upgradation of products is a continuous
process. In doing so, the manufacturers set quality standards for their
products which are readily acceptable to the customers. In fact, this is the
primary objective of quality control.
b)
To
ascertain Quality Deviation: Another important objective of quality control
is to examine the quality deviation in the products and analyze the causes of
such deviations to take corrective measures for ensuring quality sustenance.
c)
To examine
the method adopted in the process of production and suggest improvements: The
practice of quality control goes deep into the method adopted in the process of
production and examines if there is any imperfection that may cause quality
degradation of products. In case any imperfection is located, corrective
measures are suggested.
d)
To
increase sales by presenting only quality goods: In a
competitive market environment where customers are quality conscious, only
quality goods as competitive price find their place. Therefore, the ultimate
objective of quality control is to ensure supply of only quality goods into the
market at least possible price.
Importance of Quality Control
Quality control has come to occupy a very
prominent place in the today’s market driver economy. It is now increasingly
realized that improvement and sustenance of quality it services of every
concern is the only pre-condition for its very survival. To highlight the
importance of quality control in a manufacturing concern, Alford and Beatty
have pointed out the following benefits as Quality control.
a)
Improvement in quality level and uniformity of
incoming materials.
b)
Improvement in quality level and uniformity of
finished products with either higher market value for a.
c)
Reduction in inspection costs.
d)
Reduction in rejections, scrap and rework.
e)
Improvements in quality consciousness on the
part of those in direct contact with quality control.
f)
Improvement in designs of product and process
to enable production of a given product standard at lower costs.
g)
Improvement in producer-customer relations.
h)
Improvements in technical and engineering data
for use of a product and process development and manufacturing design.
Advantages of Quality Control
The Practice of quality control techniques
provides the following the following advantages.
a) It
encourages distribution, increases sales and builds up goodwill of brand in the
market.
b) It
facilitates all-round efficiency in the organisation.
c) It advises
the entrepreneur in determining responsibility of individual worker and of the
production unit.
d) It reduces
cost by checking wastages, increasing efficiency, standardizing procedures,
machines, tools materials and working conditions.
e) It enables
the entrepreneur to know the cost of a product in advance; so that he may
determine the competitive price.
Methods of Quality Control
There are two methods of Quality Control as
discussed below:
1. Inspection: Inspection pursues the production
process step by step till its completion and evaluates the work process with
reference to predetermined standards of performance. However, the extent of
inspection works differs between companies or between products. Inspection may
either be preventive or curative. While preventive inspection is carried out at
every stage of a production process to check any imperfection; curative
inspection is taken up after the production takes place, to separate the
defective goods from the right quality goods.
On the whole, this method examines whether the
production is carried out as per the standard set or not. Inspection aims at
maintaining quality standard and calls for minimizing product scraping or
rejection. As faulty production results mostly from defects in materials or
machines, inspection requires testing of materials before their transformation
into finished product as well as the checking of machines and tools to ensure
their accuracy of performance. Instead of permitting products to be scrapped
after manufacturing, inspection is supposed to reduce the cost of rejection by
preventing the occurrence of such faulty production.
2. Statistical Quality Control: Statistical
Quality Control (SQC) is a special type of technique to control the quality of
a product. In this method, statistical techniques are used to gather and
analyze data with a view to determining and controlling quality. It is based on
sampling, probability and statistical inference. This means that it judges an
entire lot by the characteristics of sample. Under this process, a small part
of a certain lot of products is inspected and its quality is assumed to be the
quality of the entire lot. This is called statistical inference. The
Statistical Quality Control system is divided into three steps namely:
a) Analysis
of samples;
b) Use of
Control Charts and
c) Taking
corrective actions.
Statistical Quality Control is a diagnostic
and preventive device of quality control. It is an anti-waste device, operated
with such scientific thoroughness that it ensures flow of quality goods into
the market at least inspection or such other costs. It also enables optimum
utilization of resources. It is widely used in process control in continuous
process industries producing goods on a mass scale.
ADVANTAGES
OF STATISTICAL QUALITY CONTROL: The method of Statistical Quality
Control enjoys the following advantages:
a)
Lower cost
of Inspection: As this method is based on sampling technique, the cost of
inspection becomes lower.
b)
Ensures
quality of work at every individual operation: The use of
Control Chart technique informs the management about any imperfection in the
production process. This significantly helps in controlling the quality of
works done on individual operation when the work is being done.
c)
Helps to
decide on acceptance or otherwise of products: Statistical
Quality Control helps management to decide whether to accept or reject the lots
of production already produced or manufactured.
d)
Enables
prompt remedial actions: Statistical Quality Control sets up levels of
deviations (tolerance limits) to be allowed. When these limits are crossed,
action is promptly taken.
e)
Enhances
goodwill of the enterprise: Statistical Quality Control enhances goodwill
of the enterprise.
f)
Boosts
worker’s morale: Statistical Quality Control increases the
morale of the workers as they get satisfaction by working in an organisation
producing high quality goods.
Technology for small business enterprises and its role
Technology plays a crucial role for survival
of any industrial unit. Technology is always time tested. It changes over time
with advancement of civilization. Technological obsolescence fails to adapt to
the market change and as such is a great hindrance to progress and development.
In fact, the status of technology of a country is considerably determined by
the level of development of the economy. Developed economies use highly
developed and sophisticated technologies as against the use of poor and out
dated technologies by less the less developed economies. As a matter of fact,
development itself is the outcome of the status of technology in use; which in
turn depends upon various factors.
In a country like India, where close to 95 per
cent of all the business enterprises is Micro and Small Enterprises, use of
appropriate technology is great challenge. The 4th MSME Census data
available shows that out of the total Micro and Small Enterprises, only 67.10
per cent is manufacturing enterprises and only 67.07 per cent use electricity
in their operations. It is still pathetic to find that the average size of
investment in plant and machinery is significantly how in micro (Rs. 1.94 lakh)
and small (Rs. 71.59 lakh) enterprises. This is even lower when compared to the
respective service sector limits (Rs. 10 lakh and Rs. 2 crore) under the MSMED
Act, 2006
It is observed that prior to globalization of
Indian economy, except for a small segment of modern small industry, which made
use of state of art technology; the sector was saddled with obsolete
technology. This indeed appeared as a serious challenge for India to withstand
the onslaught of global competition. With no access to the latest developments
in the fields of knowledge and skill, productivity in this sector continued to
be low.
However, the post liberalization era in the
Indian economy has enhanced the opportunities and challenges for the small
industries sector. On late, with Government interventions, the Indian small
business entrepreneurs are gradually getting adapted to the needs of the time
and pace. Today, with their dynamism, flexibility and innovative drive they are
increasingly focusing on improved production methods, penetrative marketing
strategies and management capabilities to sustain and strengthen their
operations. They are thus poised for global partnership and to absorb latest
technologies in diverse industrial fields.
Technical
Know-How and its Importance in Small Enterprises: The
knowledge and skill required to do something correctly is called technical
know-how. It is the term used to denote practical knowledge on how to
accomplish something. In fact, it refers to a person who knows the craft of
doing something, not usually known by others.
Business enterprises, more particularly
manufacturing concerns require certain specific type of knowledge for their
operation. The traditional manufacturing processes are more confined to the
culture of the people for long time and as such are spontaneously absorbed by
the people who are traditionally accustomed to them. But when it comes to
modern manufacturing process, it calls for something new to be acquired by the
generation. Therefore, modern industrialization requires certain special skill
for operation of manufacturing process. These are the special type of
technologies operated through power driven machines and not only produce better
quality products but are also cost effective. Such modern technologies continue
to change for better with new inventions. As the new technologies come up,
products become more efficient to satisfy consumers’ needs at more and more
cheaper price. Such changes in technologies require special technical know-how
for their operation. This is developed through training and apprenticeship.
In is imperative that in competitive and
constantly changing marketing conditions, the production of quality good at
minimu7m cost depends solely on the availability of technical know-how from
time to time. Modernization for higher productivity also depends on technical
know-how, which is essential for healthy growth of small manufacturing
enterprises. In fact, acquiring appropriate technology and the required
technical know=how to match the technology is a great challenge for the Small
Manufacturing Enterprises sector in India. Technical know-how, however, depends
on industrial research. Particularly in the small manufacturing enterprises
sector, availability of technical know-how not only ensures stability in
marketing and profits, but is also essential for very survival of a unit.
Researches are essential for ensuring cheaper
production. For this purpose, product research and research on equipment and
process of small manufacturing enterprises are most essential.
a)
Profit
Research: It relates to designing a product in addition to giving colour,
assigning brand, etc. to it. Product research helps management by giving
various ideas about a product and also helps to stabilize and expand sales. It
also evolves the necessary technical know-how for a product.
b)
Equipment
and process Research: It is the study of industrial process,
methods, tools and equipments and handling devices to produce a product on
commercial basis at minimum cost. The development of new methods and mechanisms
for increasing the safety process are fertile fields for this type of research.