facility location - opreation management
DESCRIPTION
TRANSCRIPT
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Facility Facility LocationLocation
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Lecture Outline
• Types of facilities• Site selection: where to locate• Location analysis techniques
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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
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Factors in Heavy Manufacturing Location
• Construction costs• Land costs• Raw material and finished goods shipment
modes• Proximity to raw materials• Utilities• Labor availability• E.g. machines, engines parts
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Factors in Light Industry Location
• Transportation costs• Proximity to markets• Frequency of delivery required by customer• Land costs• Easily accessible geographic region• Education and training capabilities• E.g. Manufacture of clothes, furniture,
consumer electronics and home appliances
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Factors in Retail Location
• Proximity to customers• Location is everything
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Global Location Factors
• Government stability• Government regulations• Political and economic
systems• Economic stability and
growth• Exchange rates• Culture• Climate• Export import regulations,
duties and tariffs
• Raw material availability • Number and proximity of
suppliers• Transportation and
distribution system• Labor cost and education• Available technology• Commercial travel• Technical expertise• Cross-border trade
regulations• Group trade agreements
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Regional Location Factors
• 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)
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Regional Location Factors (cont.)
• Business climate• Community services• Incentive packages• Government regulations• Environmental regulations• Raw material availability• Commercial travel• Climate
• Infrastructure (e.g., roads, water, sewers)
• Quality of life• Taxes• Availability of sites• Financial services• Community inducements• Proximity of suppliers• Education system
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Location Incentives
• Tax credits• Relaxed government regulation• Job training• Infrastructure improvement• Monitory support by Government
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Location Analysis Techniques
• Location rating factor
• Center-of-gravity
• Load-distance
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Location Rating Factor
Identify important factorsIdentify important factors Weight factors (0.00 - 1.00)Weight factors (0.00 - 1.00) Subjectively score each factor (0 - Subjectively score each factor (0 -
100)100) Sum weighted scoresSum weighted scores
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Location Factor Rating: Example
Labor pool and climateLabor pool and climateProximity to suppliersProximity to suppliersWage ratesWage ratesCommunity environmentCommunity environmentProximity to customersProximity to customersShipping modesShipping modesAir serviceAir service
LOCATION FACTORLOCATION FACTOR
.30.30
.20.20
.15.15
.15.15
.10.10
.05.05
.05.05
WEIGHTWEIGHT
8080100100
60607575656585855050
Site 1Site 1
6565919195958080909092926565
Site 2Site 2
9090757572728080959565659090
Site 3Site 3
SCORES (0 TO 100)SCORES (0 TO 100)
Weighted Score for “Labor pool and climate” for Weighted Score for “Labor pool and climate” for Site 1 = (0.30)(80) = 24Site 1 = (0.30)(80) = 24
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Location Factor Rating
24.0020.00
9.0011.25
6.504.252.50
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
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Locate facility at center of Locate facility at center of geographic area geographic area
Based on weight and distance Based on weight and distance traveled establish grid-map of areatraveled establish grid-map of area
Identify coordinates and weights Identify coordinates and weights shipped for each locationshipped for each location
Center-of-Gravity Technique
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Grid-Map Coordinates
where,where,xx, , y y ==coordinates of new coordinates of new facility at center of gravityfacility at center of gravityxxii, y, yii ==coordinates of existing coordinates of existing
facility facility iiWWii = =annual weight shipped annual weight shipped
from facility from facility ii
nn
WWii
i = i = 11
xxiiWWii
i = i = 11
nn
x =x =
nn
WWii
i = i = 11
yyiiWWii
i = i = 11
nn
y =y =
xx11 xx22 xx33 xx
yy22
yy
yy11
yy33
1 (1 (xx11, , yy11), ), WW11
2 (2 (xx22, , yy22), ), WW22
3 (3 (xx33, , yy33), ), WW33
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Center-of-Gravity Technique: Example
AA BB CC DD
xx 200200 100100 250250 500500yy 200200 500500 600600 300300WtWt 7575 105105 135135 6060
yy
700700
500500
600600
400400
300300
200200
100100
00 xx700700500500 600600400400300300200200100100
AA
BB
CC
DD
(135)(135)
(105)(105)
(75)(75)
(60)(60)
MilesMiles
Mil
esM
iles
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Center-of-Gravity Technique: Example (cont.)
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
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Center-of-Gravity Technique: Example (cont.)
AA BB CC DD
xx 200200 100100 250250 500500yy 200200 500500 600600 300300WtWt 7575 105105 135135 6060
yy
700700
500500
600600
400400
300300
200200
100100
00 xx700700500500 600600400400300300200200100100
AA
BB
CC
DD
(135)(135)
(105)(105)
(75)(75)
(60)(60)
MilesMiles
Mil
esM
iles
Center of gravity Center of gravity (238, 444)(238, 444)
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Load-Distance Technique
• Compute (Load x Distance) for each site• Choose site with lowest (Load x Distance)
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Load-Distance Calculations
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,
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Load-Distance: Example
Potential SitesPotential SitesSiteSite XX YY11 360360 18018022 420420 45045033 250250 400400
SuppliersSuppliersAA BB CC DD
XX 200200 100100 250250 500500YY 200200 500500 600600 300300WtWt 7575 105105 135135 6060
Compute distance from each site to each supplierCompute distance from each site to each supplier
= (200-360)= (200-360)22 + (200-180) + (200-180)22ddAA = (x = (xAA - x - x11))22 + (y + (yAA - y - y11))22Site 1Site 1 = 161.2= 161.2
= (100-360)= (100-360)22 + (500-180) + (500-180)22ddBB = (x = (xBB - x - x11))22 + (y + (yBB - y - y11))22 = 412.3= 412.3
ddCC = 434.2 = 434.2 ddDD = 184.4 = 184.4
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Load-Distance: Example (cont.)
Site 2Site 2 ddAA = 333 = 333 ddCC = 226.7 = 226.7ddBB = 323.9 = 323.9 ddDD = 170 = 170
Site 3Site 3 ddAA = 206.2 = 206.2 ddCC = 20 = 20ddBB = 180.4 = 180.4 ddDD = 269.3 = 269.3
Compute load-distanceCompute load-distance
i = 1i = 1
nn
lli i ddiiLD =LD =
Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063Site 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) = 99,791Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,791
Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*
* Choose site 3* Choose site 3