Operations Management and Strategic Management · Designing of Operational Systems and Control

Plant Location Factors and Types of Facility Layout

Updated 10 October 2026 · Fact-checked

Plant location is the choice of site for a facility, based on factors such as raw materials, market, labour, power, transport and government policy. Facility layout is the arrangement of machines and work areas inside it. The main layouts are product, process, fixed position and cellular. Choose by volume and variety.

Understand Plant Location and Facility Layout

A plant location decision answers one question: where should the facility be built? It is a long-term decision. Once the plant is built, moving it is costly. So the firm weighs many factors before it commits.

Location factors fall into two groups. Primary or economic factors include nearness to raw materials, nearness to the market, availability and cost of labour, power and water supply, transport and communication links, and land cost. Other factors include government policy and incentives, climate, local taxes, community attitude, the scope for expansion and the availability of banking and other services. A firm that uses heavy, bulky or perishable raw material usually locates near the source. A firm whose product is fragile or loses value in transport usually locates near the market.

Once the site is fixed, facility layout decides how machines, workstations, storage and people are arranged inside the plant. A good layout cuts material handling, reduces work in process, shortens the production cycle and uses space well. It also makes work safer and supervision easier.

The four layouts you must know:

Product layout (line layout): machines are arranged in the order of operations for one product. It suits high volume and low variety, such as bottling or assembly lines.
Process layout (functional layout): similar machines are grouped together, such as all lathes in one section. It suits low volume and high variety, such as a job shop or a hospital.
Fixed position layout: the product stays in one place and workers, machines and materials come to it. It suits ships, bridges and large construction projects.
Cellular layout: machines are grouped into cells, and each cell makes a family of similar parts. It combines some flow of a product layout with the flexibility of a process layout. It is linked to group technology.

The selection rule is simple. Match the layout to volume and variety. High volume with little variety points to product layout. High variety with low volume points to process layout. A single bulky item points to fixed position. A middle case with part families points to cellular layout.

Key rules to remember

Layout selection rule: High volume + low variety → Product; Low volume + high variety → Process; One large immovable item → Fixed position; Part families of medium volume → Cellular; This is a guide, not a fixed law. Always justify with the nature of the product and the demand.
Primary location factors: Raw material + Market + Labour + Power + Transport + Land cost; A memory list of the main economic factors. Add government policy and expansion scope as other factors.
Weighted factor score: Total score of a site = Σ (weight of factor × rating of site on that factor); Used to compare sites when factors differ in importance. The site with the highest total is preferred. Weights should add to 1 or 100.

How to solve Plant Location and Facility Layout questions

Use this method for both theory questions and short case questions on location and layout.

1Read the question and mark whether it asks about location, layout, or both.
2For a location question, list the factors that fit the case first: raw material, market, labour, power, transport, then government policy and others.
3Decide which factors dominate for the given product. A bulky raw material points to the source. A perishable or fragile product points to the market.
4For a layout question, identify volume and variety of output in the case.
5Name the layout that matches, and state why in one line.
6Give its merits and its limits. Always give both sides.
7If sites are scored, compute weight × rating for each factor, add the totals and pick the highest.
8Close with a one-line conclusion that answers the exact question asked.

Quickest way: Volume-variety check

When to use it: Use this for MCQs and short case questions where you must name the layout or the main location factor in under a minute.

Underline the product and the volume in the question.
Ask: one item or many? Large and fixed, such as a ship, means fixed position.
Ask: same product in bulk, or many different jobs? Bulk means product layout. Many jobs means process layout.
Spot phrases such as part families or group technology. These mean cellular layout.
For location, ask what is costly to move: raw material or finished goods. Locate near that.

Common mistakes in Plant Location and Facility Layout

Mixing up product layout and process layout.
Both names sound alike, and students memorise them without the link to volume and variety.
Fix: Product layout follows the product, one line for one product. Process layout groups by process. Tie each to volume and variety.
Listing location factors without linking them to the case.
Students recite a standard list and do not read the product details.
Fix: Pick the two or three dominant factors for the given industry and explain why they matter here.
Giving only merits of a layout.
Students forget that questions often ask for merits and limits together.
Fix: Write at least two merits and two limits for each layout, in two separate bullet lists.
Treating cellular layout as the same as process layout.
Both group machines, so they look alike.
Fix: In cellular layout, machines are grouped by part family, not by function. Each cell makes a complete set of related parts.
Adding weights without multiplying by ratings in weighted factor scoring.
Students rush and add raw scores.
Fix: Multiply each rating by its weight first, then add. Check that the weights sum to 1 or 100.

Worked examples

Example 1

A firm makes cement. Limestone is bulky and costly to transport, while the finished cement can be moved by road and rail at moderate cost. State the key location factor and a suitable layout, with reasons.

Show the solution

Identify the product: cement, made from bulky limestone.
Limestone is bulky and weight-losing, so transport cost of the raw material is high. Locating near the source cuts that cost.
Hence the plant should be near the limestone source.
Other supporting factors are power supply, water and rail connectivity for despatch.
Output is high volume with little variety, so a product layout fits.
Merits: smooth flow, low material handling, easy control. Limit: it is inflexible and a breakdown at one stage can halt the line.

Answer: Locate near the limestone source because raw material is bulky and costly to move. Use a product layout because volume is high and variety is low.

Example 2

A firm compares two sites, A and B, using weights and ratings out of 10. Raw material availability: weight 0.4, A rates 8, B rates 6. Labour cost: weight 0.3, A rates 5, B rates 9. Market access: weight 0.3, A rates 7, B rates 6. Which site is preferred?

Show the solution

Weights add to 0.4 + 0.3 + 0.3 = 1.0, so they are valid.
Site A: (0.4 × 8) + (0.3 × 5) + (0.3 × 7) = 3.2 + 1.5 + 2.1 = 6.8.
Site B: (0.4 × 6) + (0.3 × 9) + (0.3 × 6) = 2.4 + 2.7 + 1.8 = 6.9.
Compare totals: 6.9 is greater than 6.8.
Site B scores higher by a small margin of 0.1.

Answer: Site B is preferred with a score of 6.9 against 6.8 for Site A. The margin is small, so the firm may also check non-scored factors before it decides.

Exam tips

Questions often ask for the difference between product and process layout. Present it as a two-column style list in bullets: volume, variety, flow, flexibility, handling cost and examples.
In MCQs, match the layout to the example: assembly line is product, job shop or hospital is process, shipbuilding is fixed position, part families is cellular.
For location questions, rank the factors for the given industry instead of writing a generic list.
In weighted scoring problems, show each multiplication line. Step marks are awarded even if the final sum has a slip.
Always end a theory answer with merits and limits, since examiners look for both.

Practice questions from Designing of Operational Systems and Control

Plant Location and Facility Layout: frequently asked questions

What are the main factors affecting plant location?

The main factors are raw material, market, labour, power and water, transport, land cost and government policy. Others include climate, local taxes and scope for expansion. For an exam answer, stress the factors that matter most for the product given.

What is the difference between product layout and process layout?

Product layout arranges machines in the order of operations for one product and suits high volume and low variety. Process layout groups similar machines together and suits low volume and high variety. Product layout gives faster flow, while process layout gives more flexibility.

When is a fixed position layout used?

It is used when the product is too large or heavy to move, such as a ship, bridge or building. Workers, machines and materials are brought to the product. Planning of movement and storage around the site is the main challenge.

What is cellular layout?

Cellular layout groups machines into cells, each producing a family of similar parts. It is based on group technology. It gives better flow than a process layout and more flexibility than a product layout.