Production and Operations Management
Module-2
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Prof. Vijay Bhatu 03-02-2026
Factors affecting plant location
• Facility location is the process of determining a geographic site for
a firm’s operations. Managers of both service and manufacturing
organizations must weigh many factors when assessing the
desirability of a particular site, including proximity to customers
and suppliers, labor costs, and transportation costs.
• These factors play an important role when it comes to deciding
plant location.
• The various factors that affect plant location is as follows:
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Prof. Vijay Bhatu 03-02-2026
Factors affecting plant location
Proximity to Supply of Transportation Infrastructure
markets materials facilities availability
Labor and Government Supporting Community
Wages Policy Industries Attitude
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Prof. Vijay Bhatu 03-02-2026
Proximity to markets:
• Every company is expected to serve its customers by providing goods and
services at the time needed and at reasonable price.
• Organizations may choose to locate facilities close to the market or away
from the market depending upon the product.
• When the buyers for the product are concentrated, it is advisable to locate the
facilities close to the market.
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Prof. Vijay Bhatu 03-02-2026
Supply of raw material:
• It is essential for the organization to get raw material in right qualities and
time, have an uninterrupted production. This factor becomes very important
if the materials are perishable, and cost of transportation is very high.
• When a single raw material is used without loss of weight, locate the plant at
the raw material source, at the market or at any point in between.
• When weight loosing raw material is demanded, locate the plant at the raw
material source.
• When raw material is universally available, locate close to the market area.
• If the raw materials are processed from variety of locations, the plant may be
situated to minimize total transportation costs.
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Prof. Vijay Bhatu 03-02-2026
Transportation facilities:
• Speedy transport facilities ensure timely supply of raw materials
to the company and finished goods to the customers. The
transport facility is a prerequisite for the location of the plant.
• There are five basic modes of physical transportation, air, road,
rail, water and pipeline. Goods that are mainly intended for
exports demand a location near to the port or large airport.
• The choice of transport method and hence the location will
depend on relative costs, convenience, and suitability. Thus,
transportation cost to value added is one of the criteria for plant
location.
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Prof. Vijay Bhatu 03-02-2026
Infrastructure availability:
• The basic infrastructure facilities like power, water and waste disposal,
etc., become the prominent factors in deciding the location.
• Certain types of industries are power hungry e.g., aluminum and steel
and they should be located close to the power station or location where
uninterrupted power supply is assured throughout the year.
• The non-availability of power may become a survival problem for such
industries. Process industries like paper, chemical, cement, etc.,
require continuous supply of water in large amount and good quality,
and mineral content of water becomes an important factor.
• A waste disposal facility for process industries is an important factor,
which influences the plant location.
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Prof. Vijay Bhatu 03-02-2026
Labor and wages:
• The problem of securing adequate number of Labor and with
skills specific is a factor to be considered both at territorial as well
as at community level during plant location. Importing Labor is
usually costly and involve administrative problem.
• The history of Labor relations in a prospective community is to be
studied. Prospective community is to be studied. Productivity of
Labor is also an important factor to be considered.
• Prevailing wage pattern, cost of living and industrial relation and
bargaining power of the unions’ forms in important
considerations.
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Prof. Vijay Bhatu 03-02-2026
Government policy:
• The policies of the state governments and local bodies concerning
labor laws, building codes, safety, etc., are the factors that demand
attention. To have a balanced regional growth of industries, both
central and state governments in our country offer the package of
incentives to entrepreneurs in particular locations.
• The incentive package may be in the form of exemption from a
safes tax and excise duties for a specific period, soft loan from
financial institutions, subsidy in electricity charges and
investment subsidy. Some of these incentives may tempt to locate
the plant to avail these facilities offered.
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Prof. Vijay Bhatu 03-02-2026
Supporting industries and services:
• Nowadays the manufacturing organization will not make all the components
and parts by itself, and it subcontracts the work to vendors. So, the source of
supply of component parts will be the one of the factors that influences the
location.
• The various services like communications, banking services, professional
consultancy services and other civil amenities services will play a vital role in
selection of a location.
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Prof. Vijay Bhatu 03-02-2026
Community and labor attitudes:
• Community attitude towards their work and towards the
prospective industries can make or mar the industry. Community
attitudes towards supporting trade union activities are important
criteria.
• Facility location in specific location is not desirable even though
all factors are favoring because of labor attitude towards
management, which brings very often the strikes and lockouts.
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Prof. Vijay Bhatu 03-02-2026
Need for selecting a plant location
• The need for selecting a suitable plant location emerges because of the following
reasons:
• Identification of region: The organizational objectives along with the various
long-term considerations about marketing, technology, internal organizational
strengths and weaknesses, region specific resources and business environment,
legal-governmental environment, social environment and geographical environment
suggest a suitable region for locating the operations facility.
• Product specialization may be necessary in a highly competitive market:
It may be necessary to exploit the special resources of a particular geographical area.
The more decentralized these pairs are in terms of the management and in terms of
their physical location, the better would be the planning and control and the
utilization of the resources.
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Prof. Vijay Bhatu 03-02-2026
Need for selecting a plant location
• Manufacturing plants supplying to a specific market area: Here,
each plant manufactures almost based on the company’s products. This type
of strategy is useful where market proximity consideration dominates the
resources and technology considerations. This strategy requires great deal of
coordination from the corporate office. An extreme example of this strategy is
that of soft drinks bottling plants.
• Plants divided on the basis of the process or stages in
manufacturing: Each production process or stage of manufacturing may
require distinctively different equipment capabilities, labor skills,
technologies, and managerial policies and emphasis. Since the products of
one plant feed into the other plant, this strategy requires much centralized
coordination of the manufacturing activities from the corporate office that
are expected to understand the various technological aspects of all the plants.
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Prof. Vijay Bhatu 03-02-2026
Need for selecting a plant location
• Maintaining Proximity with the customer: One needs to select a
proper plant location that enables an organization to service their
customers in a way that is beneficial to them. Hence it is necessary to
maintain a close contact with the customer to grab any opportunities
that may come in future. By maintaining proximity with the customer,
an organization can serve them well in a short time and can also offer
after sales service more effectively.
• Strategic Reasons: The firm may want to locate their plant in a way
that results in a strategic advantage to their company. This advantage
can be anything, ranging from proximity to raw material, proximity to
customer, availability of cheap labor, availability of easy transportation
facilities. This will result in a strong advantageous edge to the company
which is not available with their competitors.
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Prof. Vijay Bhatu 03-02-2026
Types of plant layout
Types of
Plant Layout
Product Process Fixed Combination
Layout Layout Layout Layout
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Prof. Vijay Bhatu 03-02-2026
Product layout
Mixing of
• Machines are located according to the various Moulding Cutting
processing sequence. ingredients
• Use of special machines for quick &
reliable function.
• Used when the volume of the production is Baking Cooling Packaging
high, and a separate line is justified.
• Machines are not shared by products.
• It helps to ensure efficient flow of
materials and reduction in cost per unit. End Product-
Biscuit
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Prof. Vijay Bhatu 03-02-2026
Advantages of product layout
• The flow of product will be smooth and logical in flow lines.
• In-process inventory is less.
• Minimum material handling cost.
• Simplified production, planning and control systems are possible.
• Less space is occupied by work transit and for temporary storage.
• Reduced material handling cost due to mechanized handling systems
and straight flow.
• Perfect line balancing which eliminates bottlenecks and idle capacity.
• Manufacturing cycle is short due to uninterrupted flow of materials.
• Small amount of work-in-process inventory.
• Unskilled workers can learn and manage the production.
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Prof. Vijay Bhatu 03-02-2026
Disadvantages of product layout
• A breakdown of one machine in a product line may cause
stoppages of machines in the downstream of the line.
• A change in product design may require major alterations in the
layout.
• The line output is decided by the bottleneck machine.
• Comparatively high investment in equipments is required.
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Prof. Vijay Bhatu 03-02-2026
Process layout
• Recommended for batch production.
• Machines with similar operations or functions are clubbed
together.
• The flow-path of materials or functions will vary from product to
product.
• Used when the production volumes are not sufficient to justify a
product layout.
• The biggest advantage is that the machines are utilized better.
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Prof. Vijay Bhatu 03-02-2026
Advantages of process layout
• In process layout machines are better utilized and fewer machines
are required.
• Flexibility of equipment and personnel is possible in process
layout.
• Lower investment on account of comparatively a smaller number
of machines and lower cost of general purpose machines.
• Higher utilization of production facilities.
• A high degree of flexibility with regards to work distribution to
machineries and workers.
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Prof. Vijay Bhatu 03-02-2026
Disadvantages of process layout
• Backtracking and long movements may occur in the handling of
materials thus, reducing material handling efficiency.
• Material handling cannot be mechanized which adds to cost.
• Lowered productivity due to number of set-ups.
• Throughput (time gap between in and out in the process) time is
longer.
• Space and capital are tied up by work-in-process.
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Prof. Vijay Bhatu 03-02-2026
Fixed layout
• Also known as Project Layout.
• Materials and components remain at a fixed location.
• Tools, machinery, men and other materials are brought to this
location.
• This layout is followed when the heavy and bulky products are to
be produced. E.g. Construction, Shipbuilding, locomotives, air
crafts etc.
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Prof. Vijay Bhatu 03-02-2026
Advantages of fixed layout
• Men and machines can be used for a wide variety of operation
producing different products.
• The investment on the layout is small.
• The worker identifies himself with the product and takes pride in
it when the work is complete.
• The high cost of and difficulty associated in transporting a bulky
product are avoided.
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Prof. Vijay Bhatu 03-02-2026
Disadvantages of fixed layout
• Manufacturing products in fixed layout is time consuming.
• It lacks flexibility in terms of operating and customization.
• Fixed layout needs to be considered various factors that may have
an impact on the same.
• It is always difficult to handle bulky and heavy materials
associated with fixed layout.
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Prof. Vijay Bhatu 03-02-2026
Group Layout (or Cellular Layout)
• Group layout is a combination of the product layout and process
layout. It combines the advantages of both layout systems.
• If there are m-machines and n-components, in a group layout
(Group-Technology Layout), the m-machines and n-components
will be divided into distinct number of machine-component cells
(group) such that all the components assigned to a cell are almost
processed within that cell itself.
• Here, the objective is to minimize the intercell movements.
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Prof. Vijay Bhatu 03-02-2026
Con…
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Prof. Vijay Bhatu 03-02-2026
Types of Processes
• Production and Operations Management classifies processes
based on volume of production, variety of output,
flexibility, and degree of standardization. The major
process types are:
▫ Job Shop Process
▫ Batch Process
▫ Assembly Line (Mass Production)
▫ Continuous Process
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Prof. Vijay Bhatu 03-02-2026
Types of Processes
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Prof. Vijay Bhatu 03-02-2026
Job Shop Process
• A Job Shop process is used for highly customized, low-volume
production. Work is carried out according to specific customer
requirements. Machines are arranged functionally (process layout).
• Characteristics
▫ High product variety, low output volume
▫ Skilled labor and flexible equipment
▫ Non-standard routing of materials
▫ Jobs differ in size, design, and processing requirements
• Examples
▫ Customized furniture workshops
▫ Repair and maintenance units
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Prof. Vijay Bhatu 03-02-2026
Job Shop Process
Merits Demerits
• High flexibility in design and production • High production cost per unit
• Suitable for customized and specialized • Long and unpredictable lead time
products • Complex scheduling and material handling
• Capable of handling complex and varied • Lower productivity and difficult capacity
work planning
• High learning and skill utilization among
workers
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Prof. Vijay Bhatu 03-02-2026
Batch Process
• Production is carried out in groups or batches of similar products.
Each batch passes through one operation before moving to the next.
• Characteristics
▫ Medium volume, moderate variety
▫ Equipment shared across batches
▫ Set-up time required between batches
▫ Production planning needed for sequencing
• Examples
▫ Bakeries (bread, biscuits)
▫ Pharmaceutical tablets
▫ Textile manufacturing
▫ Paint, chemical mixtures
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Prof. Vijay Bhatu 03-02-2026
Batch Process
Merits Demerits
• Balanced trade-off between flexibility and • Idle time during setup and changeovers
efficiency • Higher inventory of semi-finished goods
• Better utilization of machines compared to • Scheduling and coordination challenges
job shops • Quality variations possible between
• Economical for intermediate volumes batches
• Suitable for seasonal and demand-based
production
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Prof. Vijay Bhatu 03-02-2026
Assembly Line / Mass Production
• Used for large-scale, repetitive production of standardized
products. Equipment is arranged in the sequence of operations.
• Characteristics
▫ High volume, very low variety
▫ Standardized parts and components
▫ Simple, repetitive tasks
▫ Mechanized or automated workflow
• Examples
▫ Automobile manufacturing
▫ Home appliances
▫ Mobile phones and electronics
▫ Fast-moving consumer goods (FMCG) packaging
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Prof. Vijay Bhatu 03-02-2026
Assembly Line / Mass Production
Merits Demerits
• Very high productivity and output
• Very low flexibility (design changes are
• Low cost per unit due to economies of
difficult)
scale
• High initial capital investment
• Smooth material flow and minimum
handling • Breakdown of one unit can disrupt the
entire line
• Easy supervision and control
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Prof. Vijay Bhatu 03-02-2026
Continuous Process
• Used where production is uninterrupted and operates 24×7. The
process is highly automated and standardized.
• Characteristics
▫ Very high volume, zero variety
▫ Continuous material flow
▫ Highly capital-intensive
▫ Minimal manual intervention
• Examples
▫ Oil refineries
▫ Cement and steel plants
▫ Paper mills
▫ Chemical and fertilizer industries
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Prof. Vijay Bhatu 03-02-2026
Continuous Process
Merits Demerits
• Extremely high output and production • Very high investment and operating cost
efficiency • Very hard to modify or change product
• Uniform quality and standardized output design
• Low labor cost per unit • Highly specialized workforce required
• Suitable for demand-stable products • Risk of large losses in case of breakdown
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Prof. Vijay Bhatu 03-02-2026
Comparison Table
Process Type Volume Variety Flexibility Cost per Unit Example
Customized
Job Shop Low High Very High Very High
tools
Batch Medium Medium Moderate High Bakery, textiles
Assembly
High Low Low Low Automobiles
Line
Continuous Very High Very Low Very Low Very Low Oil, cement
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Prof. Vijay Bhatu 03-02-2026
Thank You