facility location ( operations and quality management)

Amity Business School

Facility Location

Presented by :-

Swati Khemka (B-22)Udita Vijayvargia (B-24)Saumyah Singh (B-27)Shanti Pandey (B-38)


INTRODUCTION

• Branch of operations research and computational geometry .

• Focuses on optimal placement of facilities to reduce costs associated with transportation, distribution and production.

• Need for Facility Location

1. Start a new factory.

2. Expansion of existing Plant.

3. Plant Relocation.


Location Problem

Selection of Region

Selection of Locality

Selection of Actual Site


Factors affecting Plant location

• Adequate Supply of Raw materials.• Proximity to the market – Minimum supply time.• Transport Facilities – Good capacity and speedy transportation.• Supply of Labor – Cheap Labor Supply.• Power – Regular Power Supply for operation machinery at full

capacity.• Supply of Capital – Required for Initial promotion and Expansion. • Natural Factors – Land, Water, Climate(Agriculture based

Industries).• Political Factors – Favorable Development Policies.• Government Subsidies – Exemptions, Rebates and Subsidies.• Historical and religious factors.


Selection of Location

Selection of Location

Semi-UrbanRuralUrban


Selection of Location - Urban• Advantages of Urban Areas

- Good transportation, communication services.- Banking, Credit and Insurance facilities.- Storage facilities.- Availability of skilled, unskilled labor.- Educational, Medical facilities.

• Disadvantages of Urban Area- High Land Cost.- High Labor Cost.- High Attrition Rate.- Municipal Restrictions, High Taxes.- Strong Trade Unions.


Selection of Location - Rural

• Advantages of Rural Areas- Cheap Land and Labor.- Low Labor attrition rate.- Lesser Taxes, Municipal Restrictions.- Sufficient Land available.- Amicable relations between management and Labor.

• Disadvantages of Rural Area- Lack of Transportation.- Warehouse facilities unavailable.- High Distribution Costs.- Shortage of Skilled Labor.- Lack of Banking, Municipal facilities.


Selection of Location – Semi Urban

• Advantages of Semi Urban Areas- Cheap Land compared to Urban areas.- Availability of Adequate Land.- Lesser cost of Distribution as compared to Rural areas.

• Disadvantages of Semi Urban Areas

- Conversion into Urban area with all its merits, demerits.


Selection of Site - Factors

• Availability of cheap land.• Repair facilities.• Cost of laying the water supply and providing sewage.• Cheap facilities for disposing of trade waste• Fire protection facilities.• Post and telegraph facilities.• Cheap facilities for disposing of trade waste.


Decision Techniques

• Qualitative methods

a. Equal weights methodb. Variable methodc. Weights cum rating method

• Quantitative methods

a. Location Break even analysisb. Bridgeman’s Dimensional analysisc. Median methodd. Centre of Gravity method


Hypothetical Problem – Company Profile

• Company : Jubilant Life Sciences Limited.• It is largest Custom Research and Manufacturing Services

(CRAMS) player and a leading Drug Discovery and Development Solution (DDDS) provider out of India.

• Jubilant Organosys Ltd., headquartered at sector-16, Noida, near New Delhi in India.

• Jubilant Organosys Ltd. has five existing facilities. The details of the facilities are given in the table. The company wants to locate a new facility so that the total transportation cost is the minimum. The management of the company wants to know about the best possible location using the median and centre of gravity method.


Hypothetical Problem – Data Collection

Existing Plant Annual Load(Tons)

Coordinates Cost of 1ton per 1Km distance (Rs.)

Kochi 350 9.58°N 76.14°E

4

Vadodara 480

22.18°N 73.12 °E

4

Renukoot 27524.2°N 83.03°E

4

Ghaziabad 370

28.40°N 77.26°E

4

Ludhiana 200

30.55°N 75.54°E

4


Data Analysis Methods

- Median Method.

It is done on an assumption that the movement of load is done on rectangular/rectilinear pattern. It is useful for single new facilities.

- Centre of Gravity Method.

It is an attempt to establish a ‘ Centre of Gravity’ with respect to existing ancillary facilities.

Transportation cost = distance*annual load*cost of 1 unit by 1 distance.

Distance = | XJFC - Xmarket |+ |YJFC – Ymarket |


Median method

Total annual load for all markets = 1675Median = 1675/2 = 837.5

Moving along X-axis: XJFL coordinate = 76.14 (i.e. the x coordinate of Kochi).

Moving along Y- axis: YJFC coordinate = 24.2 (i.e. the y coordinate of Renukoot).

Now, transportation cost if operating from coordinate (76.14, 24.2) is calculated.


For distance from my location to Kochi:|76.14 -76.14| + | 24.2 -9.58| = 14.62Transportation cost = 14.62*350*4 = 20468For distance from my location to Vadodara:|76.14 -73.12| + |24.2 -22.18|= 5.04Transportation cost = 5.04*480*4 = 9676.80For distance from my location to Renukoot:|76.14 -83.03|+ |24.2 -24.2| = 6.89Transportation cost = 6.89*275*4 = 7579For distance from my location to Ghaziabad:|76.14 -77.26| + |24.2 – 28.40| = 5.32Transportation cost = 5.32*370*4 = 7873.6For distance from my location to Ludhiana:|76.14 -75.54| + |24.2 – 30.55| = 6.95Transportation cost = 6.95*200*4 = 5560

Total transportation cost = 20468+9676.8+7579+7873.6+5560 = 51157.4


Centre of gravity method

Formulae: X= Xi Li / Li

Y = Yi Li / Li

X= (76.14*350 + 73.12*480 + 83.03*275 + 77.26*370 + 75.54*200) / 1675

X = 76.58

Y= (9.58*350 + 22.18*480 + 24.2*275 + 28.40*370 + 30.55*200) / 1675

Y = 22.25


For distance from my location to Kochi:|76.58 -76.14| + | 22.25 -9.58| = 13.11Transportation cost = 13.11*350*4 = 18354For distance from my location to Vadodara: |76.58 -73.12| + |22.25 -22.18|= 3.53Transportation cost = 3.53*480*4 = 6777.6For distance from my location to Renukoot:|76.58 -83.03|+ |22.25 -24.2| = 8.4Transportation cost = 8.4*275*4 = 9240For distance from my location to Ghaziabad:|76.58 -77.26| + |22.25 – 28.40| = 6.83Transportation cost = 6.83*370*4 = 10108.4For distance from my location to Ludhiana:|76.58 -75.54| + |22.25 – 30.55| = 9.34Transportation cost = 9.34*200*4 = 7472Total transportation cost =18354+6777.6+9240+10108.4+7472= 51952


Conclusion• MEDIAN METHOD:

Coordinates (24.2, 76.14) and Transportation Cost for this coordinate is 51157.4

• CENTRE OF GRAVITY METHOD:

Coordinates (22.25, 76.58) and Transportation Cost for this coordinate is 51952

Thus it is seen that transportation Cost by Median method is less than the Transportation Cost by Centre of Gravity method

Thus the coordinates (24.2, 76.14) are used for establishing the facility.

facility location ( operations and quality management)

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