Steps in Location Analysis
The selection of appropriate location depending on the size of the industry can be done in two stages:
I. Evaluation of various geographic areas and the selection of an optimum area/territory/region.
II. Within each area there is a choice of proper site/community, which can be urban, sub-urban or rural are generally known as industrial zone.
Thus in the process of location analysis, firstly some appropriate geographical area is selected and from that area a proper site is selected for the establishment of the plant.
A typical team studying location possibilities might involve economists, accountants, geographers, town planners, lawyers, marketing experts, politicians, executives, industrial engineers, defense analysts, ecologists etc. it is indeed an inter-disciplinary team that should be set up for undertaking location studies.
The following are the ways of conducting or the steps of the facility locations study:
In step I for the general territory/region/area selection, the following are some of the important factors:
There has to be some customer/market for your product/service. Locating a plant or facility nearer to the market is preferred if promptness of service is required, if the product is fragile etc. Moreover, if the product is relatively inexpensive and transportation costs add substantially to the cost, the location close to the markets is desirable.
ii. Raw materials and supplies
If the raw material is bulky or low in cost, or if it is greatly reduced in bulk viz. transformed into various forms a products as by-products of, if it is perishable and processing makes it less so, then location near raw materials sources is important. If raw materials come from a variety of locations, the plant/facility may be suited so as to minimize total transportation costs.
iii. Transportation facilities
Adequate transportation facilities are essential for the economic operation of a production system. Many facilities or plants are located along river banks.
iv. Climate and fuel
Climate factors could dictate the location of certain type of industries like textile industry which requires high humidity zones.
v. Manpower supply
The availability of skilled manpower, the prevailing wage pattern, living costs and the industrial relations situation influence the location.
vi. Legislation and taxation
Factors such as financial and other incentives for new industries in backward areas or no industry districts centres exemption from certain state and local taxes are important.
vii. Other factors
a) Capital availability
b) Vulnerability to enemy stack
c) Power etc.
Site and Community Selection
Once an appropriate area is chosen for certain plant, next step in location analysis is to choose suitable site in that area. The choice of site is important both for objective and subjective reasons.
The following points should be kept in mind for the selection of the site:-
i. Community facilities
These involve factors such as quality of life which in turn depends on availability of facilities like schools, places of worship, medical services, police and fire stations, cultural, social and recreation opportunities, housing, good streets and good communication and transportation location.
ii. Community attributes
These can be difficult to evaluate. Most communities usually welcome setting up of a new industry especially since it would provide opportunities to the local people directly or indirectly. The attitude of people as well as the state government has an impact on industrial location.
iii. Waste disposal
The facilities required for the disposal of process waste including solid, liquid and gaseous effluents need to be considered. The plant should be positioned so that prevailing winds : carry any fumes away from populated areas and so that waste may be disposed off properly and at reasonable expense.
iv. Ecology and pollution
These days there is a great deal of awareness towards maintenance of natural ecological balance. There are quite a few agencies propagating the concepts to make the society at large more conscious of the dangers of certain avoidable actions.
v. Site size
The plot of land must be large enough to hold the proposal plant and parking and across facilities and provide room for future expansion. These days a lot of industrial areas/parks are being earmarked in which certain standard sheds are being provided to entrepreneurs (especially small scale ones).
The topography, soil structure and drainage must be suitable. If considerable land improvement is required low prices land might turn out to be expensive.
vii. Supporting industries and services
The availability of supporting services such as tool rooms, plant services etc. need to be considered.
viii. Land Costs
These are generally of lesser importance as they are non-recurring and possibly make up a relatively small proportion of the total cost of locating a new plant. In general the location for large-scale industries should be in rural areas, which helps in regional development also. It is seen that once a large industry is set up, a lot of infrastructure develops around it as a result of the location decision. As for the location of medium scale industries, these could be preferably in the suburban/semi-urban areas where the advantages of urban and rural areas are available. For the small-scale industries, the location could be urban areas where the infrastructural facilities are already available.
Site can be selected both in urban, semi-urban or rural areas.
1. Urban area
Urban area can provide better transport and communication system with sufficient labour supply. There can also be adequate security arrangements as well as other social services like medical, entertainment, restaurants, educational etc. But in urban area, cost of land and labour wages are likely to be on higher side.
Requirements for the choice of location in Urban areas (small size plants)
i. Availability of adequate supply of labour.
ii. High proportion of skilled employees.
iii. Rapid public transportation and contact with suppliers and customers.
iv. Small plant site or multi-floor operation.
v. Process heavily dependent on city facilities and utilities.
vi. Good communication facilities like telephone, telex, post offices, fax, internet etc.
vii. Good banking and health care delivery systems.
2. Semi-urban Area
Requirements for choice of location in Semi-urban areas (medium sized plants)
i. Large plant size close to transportation or population centre.
ii. Free from some common city building zoning (industrial areas) and other restrictions.
iii. Freedom from higher parking and other city taxes etc.
iv. Labour force required resides close to plant.
v. Community close to plant, but not in large population centre.
vi. Plant expansion easier than in the city.
3. Rural Area
Rural area can provide cheaper land and labour with scope for further expansion. The local taxes and expenditure on other amenities is likely to be very low. The main shortcomings of rural plant site lies in scarcity of skilled labour, good shopping complexes, entertainment facilities, school and colleges and other amenities. In general, rural location is good for large plants.
Requirements for choice of location in rural areas (Large plants)
i. Large plant site required for either present demand or expansion.
ii. Dangerous production processes.
iii. Lesser effort required for antipollution measures.
iv. Large volume of selectively clean water.
v. Lower property taxes, away from urban land Ceiling Act restrictions.
vi. Protection against possible sabotage as for a secret process.
vii. Balanced growth and development of a developing or underdeveloped area.
viii. Unskilled labor force required.
ix. Low wages required to meet competition.
Hence, the above requirements are taken into consideration for selecting the proper location depending on the proper size of the plants.