Post on 20-Aug-2015
Copyright 2011 John Wiley & Sons, Inc.
Lecture Outline
• Types of Facilities• Site Selection: Where to Locate• Global Supply Chain Factors• Location Analysis Techniques
Supplement 7-2
Copyright 2011 John Wiley & Sons, Inc.
Types of Facilities
• Heavy-manufacturing facilities• large, require a lot of space, and are expensive
• Light-industry facilities• smaller, cleaner plants and usually less costly
• Retail and service facilities• smallest and least costly
Supplement 7-3
Copyright 2011 John Wiley & Sons, Inc.
Factors in Heavy Manufacturing Location
Supplement 7-4
• Construction costs• Land costs• Raw material & finished goods shipment modes• Proximity to raw materials• Utilities• Means of waste disposal• Labor availability
Copyright 2011 John Wiley & Sons, Inc.
Factors in Light Industry Location
• Land costs• Transportation costs• Proximity to markets
• depending on delivery requirements including frequency of delivery required by customer
Supplement 7-5
Copyright 2011 John Wiley & Sons, Inc.
Factors in Retail Location
Supplement 7-6
• Proximity to customers• Location is everything
Copyright 2011 John Wiley & Sons, Inc.
Site Selection: Where to Locate
• Infrequent but important• being “in the right place at
the right time”• Must consider other factors,
especially financial considerations
• Location decisions made more often for service operations than manufacturing facilities
• Location criteria for service• access to customers
• Location criteria for manufacturing facility• nature of labor force• labor costs• proximity to suppliers and
markets• distribution and transportation
costs• energy availability and cost• community infrastructure• quality of life in community • government regulations and
taxes
Supplement 7-7
Copyright 2011 John Wiley & Sons, Inc.
Global Supply Chain Factors
• Government stability• Government regulations• Political & economic systems• Economic stability & growth• Exchange rates• Culture• Export/import regulations,
duties & tariffs• Raw material availability
• Climate • Number & proximity of
suppliers• Transportation & distribution
system• Labor cost & education• Available technology• Commercial travel• Technical expertise• Cross-border trade
regulations• Group trade agreements
Supplement 7-8
Copyright 2011 John Wiley & Sons, Inc.
Regional and Community Location Factors in U.S.
• Labor (availability, education, cost, and unions)
• Proximity of customers• Number of customers• Construction/leasing costs• Land cost
• Modes and quality of transportation
• Transportation costs• Community government
Local business regulations• Government services (e.g.,
Chamber of Commerce)
Supplement 7-9
Copyright 2011 John Wiley & Sons, Inc.
Regional and Community Location Factors in U.S.
• Business climate• Community services• Incentive packages• Government regulations• Environmental regs.• Raw material availability• Commercial travel• Climate
• Infrastructure (road & utilities)
• Quality of life• Taxes• Availability of sites• Financial services• Community inducements• Proximity of suppliers• Education system
Supplement 7-10
Copyright 2011 John Wiley & Sons, Inc.
Location Incentives
Supplement 7-11
• Tax credits• Relaxed government regulation• Job training• Infrastructure improvement• Money
Copyright 2011 John Wiley & Sons, Inc.
Geographic Information Systems (GIS)
• Computerized system for storing, managing, creating, analyzing, integrating, and digitally displaying geographic, i.e., spatial, data
• Specifically used for site selection• Enables users to integrate large quantities of
information about potential sites and analyze these data with many different, powerful analytical tools
Supplement 7-12
Copyright 2011 John Wiley & Sons, Inc.
Location Analysis Techniques
Supplement 7-14
• Location factor rating• Center-of-gravity• Load-distance
Copyright 2011 John Wiley & Sons, Inc.
Location Factor Rating
Supplement 7-15
• Identify important factors• Weight factors (0.00 - 1.00)• Subjectively score each factor (0 - 100)• Sum weighted scores
Copyright 2011 John Wiley & Sons, Inc.
Location Factor Rating
Supplement 7-16
Labor pool and climateProximity to suppliersWage ratesCommunity environmentProximity to customersShipping modesAir service
LOCATION FACTOR
.30
.20
.15
.15
.10
.05
.05
WEIGHT
80100
6075658550
Site 1
65919580909265
Site 2
90757280956590
Site 3
SCORES (0 TO 100)
Weighted Score for “Labor pool and climate” for Site 1 = (0.30)(80) = 24
Copyright 2011 John Wiley & Sons, Inc.
Location Factor Rating
Supplement 7-17
24.0020.00
9.0011.256.504.252.50
77.50
Site 1
19.5018.2014.2512.00
9.004.603.25
80.80
Site 2
27.0015.0010.8012.00
9.503.254.50
82.05
Site 3
WEIGHTED SCORES
Site 3 has the highest factor rating
Copyright 2011 John Wiley & Sons, Inc.
Center-of-Gravity Technique
Supplement 7-20
• Locate facility at center of movement in geographic area
• Based on weight and distance traveled; establishes grid-map of area
• Identify coordinates and weights shipped for each location
Copyright 2011 John Wiley & Sons, Inc.
Grid-Map Coordinates
Supplement 7-21
where,x, y = coordinates of new facility at center of gravityxi, yi = coordinates of existing facility iWi = annual weight shipped from facility i
n
Wi
i = 1
xiWi
i = 1
n
x =
n
Wi
i = 1
yiWi
i = 1
n
y =
x1 x2 x3 x
y2
y
y1
y3
1 (x1, y1), W1
2 (x2, y2), W2
3 (x3, y3), W3
Copyright 2011 John Wiley & Sons, Inc.
Center-of-Gravity Technique
Supplement 7-22
A B C D
x 200 100 250 500y 200 500 600 300W 75 105 135 60
y
700
500
600
400
300
200
100
0 x700500 600400300200100
A
B
C
D
(135)
(105)
(75)
(60)
Miles
Mile
s
Copyright 2011 John Wiley & Sons, Inc.
Center-of-Gravity Technique
Supplement 7-23
x = = = 238n
Wii = 1
xiWii = 1
n
n
Wii = 1
yiWii = 1
n
y = = = 444(200)(75) + (500)(105) + (600)(135) + (300)(60)
75 + 105 + 135 + 60
(200)(75) + (100)(105) + (250)(135) + (500)(60)
75 + 105 + 135 + 60
Copyright 2011 John Wiley & Sons, Inc.
Center-of-Gravity Technique
Supplement 7-24
A B C D
x 200 100 250 500y 200 500 600 300W 75 105 135 60
y
700
500
600
400
300
200
100
0 x700500 600400300200100
A
B
C
D
(135)
(105)
(75)
(60)
Miles
Mile
s Center of gravity (238, 444)
Copyright 2011 John Wiley & Sons, Inc.
Center-of-Gravity With Excel
Supplement 7-25
Formula for x coordinate
Copyright 2011 John Wiley & Sons, Inc.
Load-Distance Technique
• Compute (Load x Distance) for each site• Choose site with lowest (Load x Distance)• Distance can be actual or straight-line
Supplement 7-27
Copyright 2011 John Wiley & Sons, Inc.
Load-Distance Calculations
Supplement 7-28
li di
i = 1
n
LD =
LD = load-distance value
li = load expressed as a weight, number of trips or unitsbeing shipped from proposed site and location i
di = distance between proposed site and location i
di = (xi - x)2 + (yi - y)2
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility
where,
where,
Copyright 2011 John Wiley & Sons, Inc.
Load-Distance
Supplement 7-29
Potential SitesSite X Y1 360 1802 420 4503 250 400
SuppliersA B C D
X 200 100 250 500Y 200 500 600 300Wt 75 105 135 60
Compute distance from each site to each supplier
= (200-360)2 + (200-180)2dA = (xA - x1)2 + (yA - y1)2Site 1 = 161.2
= (100-360)2 + (500-180)2dB = (xB - x1)2 + (yB - y1)2 = 412.3
dC = 434.2 dD = 184.4
Copyright 2011 John Wiley & Sons, Inc.
Load-Distance
Supplement 7-30
Site 2 dA = 333 dC = 226.7dB = 323.9 dD = 170
Site 3 dA = 206.2 dC = 200dB = 180.3 dD = 269.3
Compute load-distance
i = 1
n
li diLD =
Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063
Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789
Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*
* Choose site 3
Copyright 2011 John Wiley & Sons, Inc.
Load-Distance With Excel
Supplement 7-31
=B7*C11+C7*C12+D7*C13+E7*C14
Copyright 2011 John Wiley & Sons, Inc. Supplement 7-33
Copyright 2011 John Wiley & Sons, Inc.All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.