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Equality Location

An import decision which has a bearing on efficient of production management relates to the suitable location of plant. The chief object of an industrial concern is to maximize profit through the minimization of cost of production. This is possible when the firm is of the right (i.e., optimum) size and is located at a place which provides economies of all kinds in production maximized. It must be clearly understood at this stage that optimum location does not necessarily imply the most favorable location where labour costs are lowest, transportation costs are minimum, and the water is the best, “bur rather where the entire group of considerations is optimized.” The various factors which usually determine the location of industries may be described as under:-

(A)    Primary Factors

1.    Raw Material

From the point of view of minimization of transport costs, the nature of raw material is of great importance. Certain raw materials are of weight-losing character, a say sugar-cane. Such materials lose much of their weight while passing through the process of production. As a result, the finished product is lighter than the raw materials used in its manufacture. Therefore, a good deal of economy in transport costs can be achieved if industries which use weight-losing materials are located near the source of materials. Other things which are taken into consideration are:-

(a)Whether the raw materials are home Product or imported- in the latter case the unit must be established near ports.
(b) It there is financial linkage with raw material supplies so that the raw material may be available below market prices at some specific points.
(c) Reliability and continuity of the source of supply, and
(d) The security of means of trans port. 

2.    Market

The industries which use ‘pure’ raw materials, that is say, material which do not lose much of their weight while being converted into finished goods, are generally located near the markets. Cotton is a good example. Up to ginning, cotton is a weight-losing material, therefore, ginning factories are generally found near cotton mantis or markets. After ginning pounds of cloth can be obtained. This is the chief reason why the cotton textile industry is located near markets.

3.    Fuel and Power

The problem of fuel and power can also be solved with reference to the nature of raw materials. The industries switches very large quantities of coal are generally located near the coal mines. The development of electric and diesel power has reduced the importance of coal. Many industries which were previously attached by coal are now located at other convenient centers. The development of paper industry in South India is an important example.

4.    Transport

The facilities for transport available in particular region and the policy of freight rates are also of great importance.

5.    Labour

Another important factor influencing the location of industries is labour. Industry can be started only at a place where the right type of labour is abundantly available at reasonable wages.

(B)    Secondary Factors

1.    Momentum of an early start.

Another factor of some importance has been the moment if an early start. There are number of places where, to begin with, only one or two factories were storied. With the passage of time these places gained importance and attracted industries.

2.    Industrial Atmosphere.

The industrial atmosphere of a place cannot be measured in tangible terms, but it has a very important advantage. Industrial atmosphere may be said to exist where people living at a place think instinctively of industry and learn the intricacies of machines without much effort. This helps the growth of even new industries.

3.    Soll and Climate.

The question of soil and climate is important particularly of agricultural products like tea, coffee and rubber, but due to scientific inventions and developments it is becoming less important for most of the manufactured goods.

4.    Personal Factors.

The initial location of an industry may, be prompted more by the personal likes and dislikes than purely economic consideration.

5.    Historical Factors.

Factors like personal fancies of entrepreneurs or historical accidents may in many cases lead to the development of a place as the centre of an industry.

6.    Political Stability.

The lack of political stability in a state makes of uncertainty in the attitude of State Governments to industry. In locating a plant, it must be seen as to whether the state has a record of political and economic stability.

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