PLANT DESIGN

AND
TECHNOLOGY
CHAPTER 1

CHAPTER 1:
GENERAL PLANT
DESIGN
Subtitle

OBJECTIVES OF
PLANT DESIGN
Subtitle

OBJECTIVES OF PLANT DESIGN

1.To ensure it operates at low cost

2.To provide fast delivery
3.To accommodate new products
4.To produce many varied products
5.To Increase or decrease volume of
production.
6.To provide unique services or features.

FACILITY
PLANNING
Subtitle

STAGES OF FACILITY PLANNING

STAGE
STAGE
STAGE
STAGE
STAGE

I SITE LOCATION
II SITE PLANNING
III BUILDING LAYOUT
IV - DEPARTMENT LAYOUT
V WORK STATION DESIGN

STAGE I
PLANT LOCATION
Subtitle

Location
decision
Subtitle

NEED FOR LOCATION DECISION ARISE

WHEN A NEW FACILITY TO BE ESTABLISHED
EXPANSION OF EXISTING FACILITIES
TO ESTABLISH ADDITIONAL FACILITIES IN NEW TERRITORIES

DUE TO GROWING VOLUME OF BUSINESS

WHEN ORIGINAL ADVANTAGES OF THE PLANT HAVE BEEN

OUTWEIGHT DUE TO NEW DEVELOPMENT

WHEN NEW ECONOMIC, SOCIAL , LEGAL OR POLICTICAL

FACTORS SUGGEST A CHANGE OF LOCATION OF THE EXISTING

FACILITIES.

FACTORS IN SELECTING NEW GENERAL

LOCATION OF PLANT
Availability of raw materials
Proximity to the markets.
Transport facilities
Availability of efficient and

cheap labour.

Availability of power and fuel.

Climatic and atmospheric

conditions.

Availability of water.
Availability of capital
Social and recreational
facilities.
Business and
commercial facilities.
Existence of related
industries
Other factors

SELECTION OF A PARTICULAR SITE

COMMUNITY ATTITUDE
COMMUNITY FACILITIES
TOPOGRAPHY
TRANSPORTATION

FACILITIES

WASTE DISPOSAL
ECOLOGY AND POLLUTION
SIZE OF LAND
SUPPORTING INDUSTRIES

FACTORS IN LOCATIONAL ECONOMICS

RAW MATERIAL

PROCUREMENT
PROXIMITY TO MARKET
AVAILABILITY OF LABOR,

THEIR TRAINING AND

COMPENSATION

AVAILABILITY OF POWER
AVAILABILITY OF FINANCE
MISCELLANEOUS

CONSIDERATION SUCH AS
DONATIONS AND ETC.

FACTORS IN LOCATIONAL ECONOMICS

RAW MATERIAL

PROCUREMENT

AVAILABILITY OF POWER

PROXIMITY TO MARKET

AVAILABILITY OF FINANCE

AVAILABILITY OF LABOR,

MISCELLAANOUS

THEIR TRAINING AND

COMPENSATION

CONSIDERATION SUCH AS
DONATIONS AND ETC

ECONOMIC ANALYSIS FACTOR

(a)Factors undertaking near the raw material site
1.When the source of raw material is the controlling factor.
2.When materiall are bulky and relatively low price
3.When materials are small and relatively high price.
4.When raw materials are greatly reduced in bulk during the
process of manufacture.
5.When raw materials are preishable and process makes
them less perishable.
Examples are processing industries cement, paper, meat,
canning fruit.

ECONOMIC ANALYSIS FACTOR

(b) Factors responsible for locating an industry near
the market.
1.When the size or bulk of the product is more.
2.Render it more fragile
3.More susception about the spoilage.
Examples are shoes, furniture, glassware industry.

ECONOMIC ANALYSIS FACTOR

(c) Factors responsible for the economy of labor.
1.The ratio of labor cost to total manufacturing cost. If the
ratio is small, then this factor is not important.
2.The possibility of reduction in labor cost by using better
method or better quality of labor.
3.The type of labor required.
Examples are textile industries, silk and carpet making
industry and sport good.

ECONOMIC ANALYSIS FACTOR

(d) Economy and availability of power. If power generated
from coal then coal is a raw material hence steel plants are
located near the coal mines.
(e) Availability of finance- finance can be obtained from
government agencies / banks.
(f) Miscealenous considerations
1. An offer for a factory site or an existing plant.
2. A rebate of taxes and period for which it will remain
available.
3. Non-interference by local government bodies.
4. The location should not near the border of a country to
safeguard from risk of war.

MARKET SURVEY - QUESTIONS

1. If there is a market which could be served, if retail
price of product is reduced.
2. Whether quick delivery of the product can be made to
the particular market by better plant location.
3. Whether there are competitors for product in the
market. Whether demand for product may increase.
Whether an additional plant is required to meet the
future demand.
4. What is the potential purchasing power of the
market?
5. What are the buying habits of the local people, and
what must be done to fit your service to these

Example 1
A new industrialist wants to locate a small factory. On surveying he found the three possiblities of Segamat,
Batu Pahat and Kluang with different advantages. The initial investment is going to be of the order of RM
200,000. The industrialist wants to calculate the rate of return of the three proposed sites, the site with the
highest rate of return will be the optimal choice of location of the factory.

Factors
1. Expected sales during the first year (A)

Segamat

Batu Pahat

Kluang

250,000

250,000

250,000

40,000

42,000

47,000

210,000

208,000

203,000

4. Raw material and other materials

90,000

80,000

70,000

5.Transportation of (4)

20,000

25,000

35,000

6.Labor wages & salaries

25,000

30,000

35,000

7. Fuel and power etc.

20,000

30,000

30,000

8.Misceallaneous

15,000

15,000

20,000

Total of 4-7 = (D)

170,000

180,000

180,000

40,000

28,000

23,000

20%

14%

11.5%

2. Distribution charges during the year (B)

3. Thus net sales C=A-B

Net Profit in RM C-D=E

Rate of return = E x 100 / initial investmet

NOTES
1 & 2 classified under sales and distribution cost and
other five factors under production cost.
Location of factory at Segamat with 20% ROR is the
optimal choice of location.
The ROR is the highest at Segamat due to the
following reasons: Lower distribution costs
Lower transportation costs
Lower fuel and power supply cost.
Quite useful in collecting the facts on which a sound
economic choice is based.

MARKET SURVEY - QUESTIONS

1. If there is a market which could be served, if retail
price of product is reduced.
2. Whether quick delivery of the product can be made to
the particular market by better plant location.
3. Whether there are competitors for product in the
market. Whether demand for product may increase.
Whether an additional plant is required to meet the
future demand.
4. What is the potential purchasing power of the
market?
5. What are the buying habits of the local people, and
what must be done to fit your service to these

BREAK EVEN POINT ANALYSIS - BEP

1. In most plant model, the objective is to minimize the
sum of all cost affected by the locations.
2. Fixed cost heating, lighting and administrative
expenses that are same regardless of the output
volume.
3. Variable costs are those that are fluctuate directly
with volume. Generally cost of direct labor and
materials.
4. As per the BEP , the cost exceeded the revenues at
the beginning up to a point call break even point, the
level which total cost equal the revenues.
5. Thereafter revenues exceed cost of operations

BREAK EVEN POINT ANALYSIS - BEP

REASONS FOR LOCATIONAL CHANGES

1. Need for greater capacity
2. Changes in resources. The cost availability of labor,
raw materials may change.
3. The geography of demand may shift.
4. Companies may merge , making facilities redundant.
5. New products may be introduced.
6. Change in political and economics conditions.

SELECTION OF SITES IN URBAN AREA

Advantages

Disadvantages

1. Possible to find existing building which can

house a factory

1. Often sites are limited as sufficient land is not

available and being congested climate will not be
healthy.

2. Easier to resell building

2. The cost of land is high and rates are liable to

increase further.

3. Power and water are easily available

3. Land for expansion is not available at

reasonable rate. The larger the city, the higher
the land rate.

4.Exchange of knowledge are easier due to

many manufacturers in a city.
5. Good market for small manufacturers.

4. Because the high standard of living, higher

wages of labor have to be paid.

6. Well served by railways and roads from

various parts of the country cheap incoming
and outgoing transport.

5. More problem about labour and employer

relations.

7.Good labour market. All type of labors are

available.

6. Cost of building will be high

8.Services for repairs and maintenance can be

7. High taxes

SELECTION OF SITES IN RURAL AREA

Advantages

Disadvantages

1. The cost of land is less than in a city area

and usually easier to get space for future
expansion

1. Sufficient power and water facilities may not

be available

2. The cheap land enables a more efficient

layout of works to be made and gives greater
freedom in selecting the most economic design
for buildings

2. Repairing work may become difficult, because

of less industries in the area.

3. Rail and road connections can be arranged

easily

3. Skilled worker are not easily available

4.Labour supply may be arranged from near by

areas by transport from where the labor is
cheaply available

4.No recreational facilities

5. Healthy surrounding and pleasant

atmosphere

5. Facilities for education to children and adults

(part time ) may not be available.

6. Less labour trouble

6.Government facilities may not be sufficient

7. Lesser taxes and restrictions

7. Transport and housing facilities may not be

satisfactory.

TECHNIQUES FOR SELECTING BEST PLANT

LOCATION
1. Subjective techniques
a. Industry precedence this occurs when a new facility is
locate previously selected by similar industry.
b. Preferential factor This involves a personal whim or
preferences. This is not a professional approach and is
not a good business decision making process.
c. Dominant factor: This occurs when one factor dominates
any other factors and could influence the location
decision e.g mining or petroleum drilling operations must
be located in the areas where the mineral resources is
available.

TECHNIQUES FOR SELECTING BEST PLANT

LOCATION
2. Qualitative techniques Factor ranking system ranking
conducted on overall location no comparative relationship for
values within the factor other than position in the list. A
location is either better or worse than other location. Ranking
is therefore unsatisfactory.
3. Semi quantitative technique factor weight rating
system. Rating scales is used to compare regions,
communities or sites against each other. Variable weight is
assigned for each of the factor and each location is evaluated
along the factor scale.

5. WEIGHT RATING METHOD

1. Step 1 Find the important factors. Statistical analysis,
questionnaire survey or other techniques may be employed
2. Step 2 Putting numerical value for each factor. Factors
are considered according to the same scale of desirability.
3. Step 3- weighing the factors with relative economic
importance.
4. Step 4- Calculating weighed source for alternative. Multiply
each unweigh point rating with the appropriate weight
percentage.

PROCEDURES FOR SELECTING A SITE

1. Constitution of site selection committee compose of
people having knowledge and experience of relevant
fields.
2. Determining company needs establishing goals,
vision, mission and objectives.
3. Deciding criteria for selection-for the purpose
deciding criteria for selecting the region and actual
site either checklist is prepared.
4. Accumulate the data- locate sources of data,
collecting the data and finally tabulate the data.
5. Analyse the data- after collecting all the facts, figures
and information are analysed. Base map pinpointing

PROCEDURES FOR SELECTING A SITE

6. Evaluate the alternatives most common method of
comparing the factors is by giving them a value or
weight. Evaluation is done in the following steps i)
select the important factor for the enterprise ii) Rank
them in order of importance iii) evaluate each region
or site for each alternative location.
7. Reduce number of alternatives reduced to about 6
for detail analysis.
8. Investigation in details- each site shall be visited by
the selection committee. These can include
consultants, architects and builders.
9. Collect and analyze further data-In final stage

CATEGORIES OF FACTORS AFFECTING PLANT LOCATIONS

1. Critical factors necessitates location of plant in a

particular area only. Examples energy oriented plant
require to be located at the area where plenty and cheap
electricity are available. Water based plant require area with
a lot of water supply and cheap.
2. Objective factors Factors that can be evaluated with
money term such as labor cost,raw materials, utilities,
taxes, cost of lands, construction cost and etc. Labor cost
objective but availability of labor of required type is critical
factor.
3. Subjective factor factor that can be measure
qualitatively such as nature of community support.

COST ECONOMICS
The site that gives the minimum total cost per unit, in
absence of any other critical consideration should be
selected as a suitable plant location.
1. Capital cost includes cost of land, land development,
building and services, environmental protection measures
and infrastructural facilities.
2. Operating costs includes cost of capital, overhead and
depreciation on capital, cost of materials, labour and other
variable cost.
3. Distribution cost includes transportation and sales cost.

ECONOMIES OF SCALE FOR SINGLE PLANT

LOCATION

INTERRELATIONSHIP BETWEEN THESE COSTS AND PLANT CAPACITIES

Profitable operation take places above breakeven point (BEP). After certain value the rise
of distribution cost more than offsets the fall
of operating cost resulting in a rise in the total
cost which might become higher than revenue
at break-down point (BDP). This show the plant
has reached beyond economies of scale
indicating the necessity for additional plants.

INTERRELATIONSHIP BETWEEN THESE COSTS AND PLANT CAPACITIES

For multiple plant location, relations between the total

cost (Fixed+Variable costs) and volume of production
for various location to enable management to carry out
a break even point analysis or decide optimum capacity
at such locations. One BEP is identified for each
location.

THANK YOU
BRO