This article throws light upon the sixteen main factors affecting plant location. Some of the factors are: 1. Nearness to Raw Material 2. Transport Facilities 3. Nearness to Markets 4. Availability of Labour 5. Availability of Fuel and Power 6. Availability of Water 7. Climatic Conditions 8. Financial and Other Aids 9. Land 10. Community Attitude and Few Others.

1. Nearness to Raw Material:

It will reduce the cost of transporting raw material from the vendor’s end to the plant. Especially those plants, which consume raw material in bulk, or raw material is heavy, is cheap but loses a good amount of its weight during processing (trees and saw mills), must be located close to the source of raw material.

2. Transport Facilities:


A lot of money is spent both in transporting the raw material and the finished goods. Depending upon the size of raw material and finished goods, a suitable method of transportation like roads, rail, water or air is selected and accordingly the plant location is decided. One point must be kept in mind that cost of transportation should remain fairly small in proportion to the total cost.

3. Nearness to Markets:

It reduces the cost of transportation as well as the chances of the finished products getting damaged and spoiled in the way (especially perishable products). Moreover a plant being near, to the market can catch a big share of the market and can render quick service to the customers.

4. Availability of Labour:


Stable labour force, of right kind, of adequate size (number), and at reasonable rates with its proper attitude towards work are a few factors which govern plant location to a major extent. The purpose of the management is to face less boycotts, strikes or lockouts and to achieve lower labour cost per unit of production.

5. Availability of Fuel and Power:

Because of the wide spread use of electric power, in most cases fuel (coal, oil, etc.) has not remained a deciding factor for plant location. Even then steel industries are located near source of fuel (coal) to cut down the fuel transportation costs.

It is of course essential that electric power should remain available continuously, in proper quantity and at reasonable rates.


6. Availability of Water:

Water is used for processing, as in paper and chemical industries, and is also required for drinking and sanitary purposes. Depending upon the nature of plant, water should be available in adequate quantity and should be of proper quality (clean and pure). A chemical industry should not be set up at a location which is famous for water shortage.

7. Climatic Conditions:

With the developments in the field of heating, ventilating and air- conditioning, climate of the region does not present much problem. Of course, control of climate needs money.


8. Financial and Other Aids:

Certain states give aids as loans, feed money, machinery, built up sheds, etc., to attract industrialists.

9. Land:

Topography, area, the shape of the site, cost, drainage and other facilities, the probabil­ity of floods, earthquakes (from the past history) etc., influence the selection of plant location.


10. Community Attitude:

Success of an industry depends very much on the attitude of the local people and whether they want work or not.

(11) Presence of related industries.

(12) Existence of hospitals, marketing centres, schools, banks, post offices, clubs, etc.


(13) Local bye-laws, taxes, building ordnances, etc.

(14) Housing facilities.

(15) Security.

(16) Facilities for expansion.