Site Selection for a Plant: Key Considerations

II JAY SHRI KRISHNA II

Site selection is a critical strategic decision for any company planning to establish a new plant. It directly impacts the long-term viability, operational efficiency, and overall success of the venture. A well-considered site selection process ensures that the plant is located in an environment that supports its operations, minimizes costs, and maximizes productivity.

A well-chosen site can lead to streamlined operations, reduced costs, and enhanced market competitiveness. Conversely, a poorly selected site can result in increased expenses, logistical challenges, and compliance issues. Therefore, a thorough evaluation of potential locations is crucial to ensure the long-term viability of the manufacturing facility.

Site Selection for a Plant: Key Considerations

Site Selection Factors

Site selection for a plant is a strategic, long-term decision that requires careful consideration of various factors to ensure the plant's operational success, technological viability, and economic efficiency. Since such decisions are non-repetitive, they must incorporate a degree of forward-looking planning and alignment with corporate objectives.

Additionally, in India, site selection is often guided by the government’s industrial development policies. Here are some critical factors that will shape your site selection decision:

Location Factor:

The location factor holds significant importance due to its long-term implications. A poor choice of location can lead to persistent challenges such as:

Higher costs and investments

Transportation inefficiencies

Marketing difficulties

Employee dissatisfaction

Low availability of skilled professionals

Frequent production interruptions and wastages

Relocating a plant after its establishment is difficult due to economic, political, and social reasons. For example, social considerations may include employee welfare and job opportunities, while political factors might include regional development policies in a developing country like India. Therefore, meticulous planning is required to minimize risks.

Adequate Facilities to Consider:

1. District Classification

Check if the plant’s license permits establishment in a no-industry district as per the government’s zoning policies.

2. Transportation Facilities

Efficient and uninterrupted transportation is essential for raw materials and finished products.

1. Ensure proper connectivity through roads, ports and railheads.

2. Evaluate the feasibility of an in-plant rail siding based on the volume of materials to be handled.

Airport connectivity is important for professional movement, especially in cases involving foreign collaborations.

3. Raw Material Availability

Geographical proximity to raw material sources minimizes transportation expenses and maximizes supply chain reliability.

Consider climatic conditions and specific requirements. For example:

1. Heat-sensitive components: Should be manufactured in cooler climates (e.g., Hindustan Photo Films located in Ooty to avoid the need for extensive air conditioning).

2. Plywood industry: Should avoid coastal zones to mitigate moisture-related product damage.

4. Manpower Availability

Skilled and Semi-Skilled Labor: Local availability adds to efficient operations.

Trade Unions and Stability: Assess the robustness and attitude of trade unions and labor stability.

Training Cost: Proximity to training facilities can reduce costs and enhance workforce skills.

5. Industrial Infrastructure

Includes railways, roadways, waterways, airways and communication facilities (telephone, microwave systems).

Supporting services such as maintenance, repair workshops and plant services must be available in the vicinity.

Vibrant existing infrastructure is preferred over infrastructure developed after plant commissioning.

6. Community Infrastructure

A good community infrastructure is essential to attract qualified professionals.

This includes quality schools, colleges, medical services, communication facilities, and cultural/recreational opportunities.

7. Availability of Raw Water

Proximity to a perennial source of water to meet plant and non-plant requirements is recommended.

Drawing water solely from deep tube wells is not preferred due to potential depletion of groundwater resources.

8. Effluent Disposal

A nearby effluent disposal facility, such as a nala, is advantageous.

If unavailable, transporting effluent to a safe disposal area must address legal and ecological concerns.

9. Availability of Power

Stable and uninterrupted power of the required magnitude, without voltage or frequency fluctuations, is critical.

Nearness to a power facility reduces costs.

10. Availability of Industrial Gas

Proximity to the gas pipeline network is advantageous for energy efficiency and pollution control.

A gas-based captive steam power generation unit can provide uninterrupted power supply and support future expansions.

11. Site Size and Nature

The plot area and topography should accommodate plant requirements, township facilities and future expansions.

Preferably, the site should have natural soil with high load-bearing capacity to minimize foundation costs.

12. Ecology and Pollution

The site should meet social and ecological obligations by maintaining a natural balance and minimizing pollution.

Qualitative Analysis: Weight-Cum-Rating Method

The weight-cum-rating method is a widely used technique to evaluate and rank potential sites. It involves the following steps:

1. Assign Weights:

Identify Key Factors: Determine the most critical factors influencing the site selection decision. These factors could include proximity to raw materials, transportation infrastructure, labor availability, environmental impact, and regulatory compliance.

Assign Weights: Assign weights, to factors based on their relative importance. For instance, a factor like proximity to raw materials might be assigned a higher weight than a factor like recreational facilities.

2. Evaluate Potential Sites:

Rating Scale: Develop a rating scale, typically a 0-5 scale, to assess each potential site against each factor.

Factor-wise Evaluation: Evaluate each site on a factor-by-factor basis. For example, a site with excellent transportation infrastructure might receive a rating of 5, while a site with limited access might receive a rating of 2.

3. Calculate Points:

Multiply Ratings by Weights: Determine the weighted score for each site by multiplying the assigned rating, for each factor by its corresponding weight.

Summation: Sum up the weighted scores for all factors to obtain the total score for the site.

4. Total Score and Ranking:

Compare Total Scores: Compare the total scores of all potential sites.

Rank Sites: Rank the sites based on their total scores, with the highest-scoring site being the most preferred.

Example: Focusing on the Key Factors

Focusing on the Key Factors

In this example, Site A would be the preferred choice based on the highest total weighted score.

By systematically evaluating potential sites using the weight-cum-rating method, companies can make informed decisions that align with their strategic objectives and operational needs.

Conclusion:

Site selection is a complex but crucial decision that can significantly impact the success of a new plant. By carefully considering factors such as location, infrastructure, labor availability, and environmental impact, companies can make informed decisions that will lead to long-term operational efficiency and profitability.

A thorough and systematic approach, such as the weight-cum-rating method, can help businesses objectively evaluate potential sites and select the one that best aligns with their strategic goals. Remember, a well-chosen site is not just a location; it's a strategic advantage.

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