Proper selection of site for the location of the factory is an important factor which helps in the success of the business enterprise. Site selection will be made at a place where raw material and the sources of power are available. While selecting site for the location of the plant, the following factors are to be kept in the mind:
- Availability of labour
- Availability of raw material
- Availability of power
- Proper means of transport and communication
- Proximity of the market
Availability of Labour:
Now-a-days, most of the factories are mechanized, even then manpower had occupied a significant position in the factory. Both skilled and unskilled labourers are required for factories. Skilled labourers are required for operating machines and unskilled labourers are required for other odd jobs. The site of the plant will be selected at such a place where both the skilled and unskilled labourers are cheaply available.
Availability of Raw-material:
The factory will be built at such a place where raw-materials are cheaply available. Since the prices of the product largely depend on the cost of raw-material, it should be seen that raw-materials should not cost much.
Availability of Power:
There are various sources of power like electricity, coal, gas, oil and water. The businessman will see the type of power needed and whether it is available in the areas where the factory is built. Cost of power play a significant role in determining cost of the product. In the absence of sufficient power in the area, it will not be possible to go for large scale production.
Means of Transport:
The product produced in the factory are brought to the market for sale or disposal. If the market for the product is near the factory, transportation cost will be less and ultimately it will help in the reduction of the cost of the product. If the market for the product is at a distant place, it will involve much cost and perishable goods will perish on the route.
Besides the above factors, the following factors are to be considered in mind while selecting the site of the plant:
- Cost of land and building.
- The legislation for industries.
- Climatic condition where the plant located.
- Availability of capital.
- The facility for storage.