Download - Lect 2 - Facilities Location
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Facilities Location
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Facilities Location
Types of facilities
Heavy Manufacturing facilities Light Industry facilities
Retail & Service facilities
Heavy Manufactu ring faci l i t ies : (eg Steel Mills, Automobile plants, Oil refineries)Large, need lot of space, expensive to constructFactors :Construction costs, land costs, transport modes for shipping/receiving,Labour ,Wastedisposal,
Light Indus try faci l i t ies : (cleaner plants like electronic parts, computer parts, TVs ,Pharma cos)Factors :transportation costs, market proximity,
Retai l & Service faci l i t ies : ( groceries, departmental stores,banks,hotels,clinics,)Factors :land costs, market proximity, high customer traffic
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Location DecisionsRelevant Factors
Market Related issues
Market for products / services
Raw material availability
Number & proximity of suppliers
Availability of skilled labour
Quality of infrastructure
Cost Related issues
Wage rates
Transportation costs
Taxes & other tariff issues
Regulatory & policy issues
Govt & economic stability
Quality of legal & other institutions
Trading blocks & trading agreements
Other issues
Culture
Climate
Quality of work life
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Location DecisionsRelevant Factors for MNC firms
Govt Stability,regulations, Political systemsEconomic stability & Growth
Exchange rates,culture,Climate,EXIM regulations,duties,tariffs
RM availability,Suppliers,Commercial travel,
Labour force
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Location Planning Methods
Location factor rating
Centre of Gravity Method
Load Distance Method
Transportation Model
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Location factor rating : Steps
Identify & list down all relevant factors for the location decision
Each factor weighted from 0 to 1.00 to priritize the factor &
reflect its importance
A subjective score(0-100) to each factor based on other
locations
Compute a total score for each location based on its
performance against each factor & rank them in the decreasing
order of the score
Location Planning Methods
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A company is building a new plant .The site selection team is evaluating 3sites and they have scored the important factors for each as follows
Location factor rating
Location Factor Scores (0-100)
Weight Site 1 Site 2 Site 3
Labour & climate 0.30 80 65 90
Supplier Proximity 0.20 100 91 75
Wage rates 0.15 60 95 72Community Environment 0.15 75 80 80
Customer proximity 0.10 65 90 95
Shipping Modes 0.05 85 92 65
Air service 0.05 50 65 90
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The weighted scores for each site are computed by multiplying the factorweights by the score for that factor.
Location factor rating
Location Factor Weighted scores
Site 1 Site 2 Site 3
Labour & climate 24.00 19.50 27.00
Supplier Proximity 20.00 18.20 15.00
Wage rates 9.00 14.25 10.80Community Environment 11.25 12.00 12.00
Customer proximity 6.50 9.00 9.50
Shipping Modes 4.25 4.60 3.25
Air service 2.50 3.25 4.50
Total Score 77.50 80.80 82.05
Soln
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Sweat & Sweaters is a small chain of stores specializing in casual cotton clothing. It isplanning to open a new store .The relevant factors ,weights & scores are as shown.Recommend the best location
Location factor rating
Location Factor Weighted scores
Weight Site 1 Site 2 Site 3 Site 4
College proximity 0.30 40 60 90 60
Median income 0.25 75 80 65 90
Vehicle traffic 0.25 60 90 79 85
Mall quality & Size 0.10 90 100 80 90
Proximity to other
shopping
0.10 80 30 50 70
Prob
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Center of Gravity Method
Transportation costs are a function of distance,weight & time
The Centre of Gravity (Weight Center) method used for locating (eg warehouse)
This method arrives at a central location on a map relative to other locations
Notations:
The number of demand (or supply) points : n
Co-ordinates of location iin the grid map: (xi,yi) Quantum of shipment between existing demand (or supply) point i and proposed facility: Wi Co-ordinates of the center of gravity in the grip map: (XC,YC)
n
i
i
n
iii
C
W
Wx
X
1
1
*)(
n
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n
i
ii
C
W
Wy
Y
1
1*)(
Location Planning Methods
C f G i M h d
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A restaurant chain buys ingredients from four different food suppliers. It wants to construct a new central distribution
center to process and package the ingredients before shipping them to their various restaurants. The locations of
the four suppliers A,B,C & D and the annual trailer loads which are transported to the distribution center are as
shown. The figures inside brackets are distance coordinates and outside is the load. Using the Center of Gravity
method determine a possible site for the distribution center
Centre of Gravity Method
100 200 300 400 500 600 700
100
200
300
400
500
600
Distanceinmiles
A (200,200), 75
B (100,500), 105
C (250,600), 135
D (500,300), 60
n
i
i
n
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ii
C
W
Wx
X
1
1
*)(
n
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n
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C
W
Wy
Y
1
1
*)(
Centr e of Gravity (238,444)
X= (200*75+100*105+250*135+500*60)/(75+105+135+60)=238 miles
Y= (200*75+500*105+600*135+300*60)/(75+105+135+60)=444 miles
Distance in miles
C t f G it M th d
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A company wants to construct a new warehouse served by suppliers A,B & C. The locations of the suppliers and the
annual no of truck loads are as shown below.Use the C.O.G method (Text book, solved problem,pg 209 )
Centre of Gravity Method
n
i
i
n
i
ii
C
W
Wy
Y
1
1
*)(
Centre of Gravity (290.5,311.9)
Supplier A B C
X coordinate 150 300 400Y coordinate 250 100 500
Load 140 110 170
n
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n
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ii
C
W
Wx
X
1
1
*)(
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Load Distance Method(used when number of candidates is more than one)
Provides an objective measure of total load-distance for each candidate
Notations
Co-ordinates of demand (or supply) point in the grid map: (xi,yi) Quantum of shipment between demand (or supply) point and proposed facility: W Co-ordinates of candidatejin the grid map: (Xj,Yj)
Distance measure for coordinates between demand (or supply) point i and a candidatejfor the proposed facility: D
The loaddistance for candidate for the proposed facility: LD
22)()( jijiij YyXxD
n
i
iijj WDLD
1
*
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Same ex.
Based on an initial survey of possible sites for the proposed facility, the chain identified three
candidates.
The figure has the location coordinates of the three candidates (numbered 1 to 3).
What is the best location for the proposed new facility?
Existing Supply
Points
Proposed sites
xi yi Wi Xj Yj
A 200 200 75 Site 1 360 180
B 100 500 105 Site 2 420 450
C 250 600 135 Site 3 250 400
D 500 300 60
d ( l )
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Candidate for proposed facility
Existing Demand (or supply) point
100 200 300 400 500 600 700
100
200
300
400
500
600
Distance
inmiles
A (200,200), 75
B (100,500), 105
C (250,600), 135
D (500,300), 60
Distance in miles
S l i i S l i
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Soln.
2.161)180200()360200()()( 22212
12 YyXxD AAA3.412)180500()360100()()( 2221
2
11 YyXxD BBB
Existing Supply
Points
Proposes sites
Xi Yi Wi Xj Yj
A 200 200 75 Site 1 360 180
B 100 500 105 Site 2 420 450C 250 600 135 Site 3 250 400
D 500 300 60
DA1 161.2 DA2 333 DA3 206.2
DB1 412.3 DB2 323.9 DB3 180.3
DC1 434.2 DC2 226.7 DC3 200
DD1 184.4 DD2 170 DD3 269.3
LD1= 75(161.2)+105(412.3)+135(434.2)+60(184.4) = 125063
LD2=99789 LD3=77555Since site 3 has the least LD value it is selected
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Existing Supply Points Candidates for proposed facility
xi yi Wi Xj YjA 125 550 200 1 300 500
B 350 400 450 2 200 500
C 450 125 175 3 500 350
D 700 300 150 4 400 200
Solved problem
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Existing Supply Points Candidates for proposed facility
xi yi Wi Xj Yj
A 125 550 200 1 300 500B 350 400 450 2 200 500
C 450 125 175 3 500 350
D 700 300 150 4 400 200
Dij values
1 2 3 4
A 182.00 90.14 425.00 445.11
B 111.80 180.28 158.11 206.16
C 403.89 450.69 230.49 90.14
D 447.21 538.52 206.16 316.23
LDj values
1 2 3 4
224474.41 258801.57 227410.05 245000.8
Solved problem