Post on 13-Jan-2016
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Technical Note 11
Facility Location
Issues in Facility Location
Various Plant Location Methods
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Competitive Imperatives Impacting Location The need to produce close to the customer
due to time-based competition, trade agreements, and shipping costs.
The need to locate near the appropriate labor pool to take advantage of low wage costs and/or high technical skills.
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Issues in Facility Location
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Issues in Facility Location
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Characteristics of Location Decisions
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– Objective:
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Location Decision Sequence
1. Country1. Country 2. Region/Community2. Region/Community
3. Site3. Site© 1995 Corel Corp.
© 1995 Corel Corp.
© 1995 Corel Corp.
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Factors Affecting Country Decision
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© 1995 Corel Corp.
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Factors Affecting Region/Community Decision
© 1995 Corel Corp.
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Factors Affecting Site Decision
© 1995 Corel Corp.
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Manufacturing Location Strategies
© 1995 Corel Corp.
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Service Location Strategies
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– © 1995 Corel Corp.
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Some Location Methods
Factor weighting method
Center of gravity method
© 1995 Corel Corp.
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Location Methods:
Factor Rating Method
Most widely used location technique Useful for service & manufacturing locations Rates locations using factors
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Weighted Factor Rating Method Steps
1.
2.
3.
4.
5.
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Factor Rating Method Example
You’re an analyst for John Deere. You’re considering locating a new plant in Omaha (NE) or Denver (CO).
Factor Wgt NE CO
Mfg. costs .7 8 6
Cost of living .1 7 6
Labor avail. .2 10 8
Where should you locate?
© 1995 Corel Corp.
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Factor Rating Method Solution
Omaha Denver
Factor Weight ScoreWeighted Factor Score
Weighted Factor
Mfg. costs 0.7 8 5.6 6 4.2Cost of living 0.1 7 0.7 6 0.6Labor avail. 0.2 10 2 8 1.6
1 8.3 6.4
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Factor Rating Method Thinking Challenge
You’re owner of a hot tub store. You’re considering relocating to Phoenix (AZ) or Santa Fe (NM).
Factor Wgt AZ NM
Population .4 10 5
Competition .1 3 8
Life style .5 2 9
Where should you locate? © 1995 Corel Corp.
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Solution
TOTAL
Phoenix Santa Fe
Factor WeightScore
Weighted Factor Score
Weighted Factor
Population 0.4 10 4 5 2Compensation 0.1 3 0.3 8 0.8Life Style 0.5 2 1 9 4.5
1 5.3 7.3
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Location Methods:
Factor Rating Method +/-
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Location Methods:
Transportation Method of Linear Programming
Seeks to minimize costs of shipping n units to m destinations or its seeks to maximize profit of shipping n units to m destinations.+
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Location Methods:
Centroid Method The centroid method is used for locating
single facilities that considers:– existing facilities, – the distances between them, and – the volumes of goods to be shipped between
them. This methodology involves formulas used to
compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above.
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Plant Location Methodology: Centroid Method Formulas
C = d V
V x
ix i
i
Cx = X coordinate of centroid
Cy = X coordinate of centroid
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith location
C = d V
Vy
iy i
i
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Plant Location Methodology: Example of Centroid Method
Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month?
Centroid method example– Several automobile showrooms are located according to the
following grid which represents coordinate locations for each showroom.
S howroom No o f Z-Mo b ile s s o ld p e r mo nth
A 1250
D 1900
Q 2300X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
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Plant Location Methodology: Example of Centroid Method: Determining the Coordinates of the New Facility
= Cx
= Cy
S ho wro o m No o f Z-Mo b ile s s o ld p e r mo nth
A 1250
D 1900
Q 2300X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
You then compute the new coordinates using the formulas:
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Thinking ChallengeYou’re a planner for Sears. You want to find the best location of a warehouse serving retail stores in:
Seattle (50, 60)
Aberdeen (20, 35)
Spokane (160, 50)
Monthly demand is:
Seattle 494k units
Aberdeen 18k units
Spokane 171k units respectively.
© 1995 Corel Corp.
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Solution
ii
iiiy
y
ii
iiix
x
V
VdC
V
VdC
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Thinking Challenge Solution
00 3030 6060 9090 120120 150150
3030
6060
9090
00
Seattle(50,60)494k units
Aberdeen (20,35)18k units
Spokane (160,50)171k units
© 1995 Corel Corp.