Facility Location 8

7/28/2019 Facility Location 8

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Facility Location



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• Issues in Facility Location

• Various Plant Location Methods

OBJECTIVES



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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

• Proximity to Customers

• Business Climate

•Total Costs

• Infrastructure

• Quality of Labor

• Suppliers

• Other Facilities



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Issues in Facility Location

•Free Trade Zones

• Political Risk

• Government Barriers

• Trading Blocs

• Environmental Regulation

• Host Community

• Competitive Advantage



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Plant Location Methodology: Factor Rating

Method Example

Fuels in region 0 to 330Power availability and reliability 0 to 200

Labor climate 0 to 100

Living conditions 0 to 100

Transportation 0 to 50

Water supply 0 to 10

Climate 0 to 50

Supplies 0 to 60

Tax policies and laws 0 to 20

Two refineries sites (A and B) are assigned the following range of

point values and respective points, where more the points the

better for the site location.

123150

54

24

45

4

8

5

5

Major factors for site location Pt. Range

156100

63

96

50

5

4

50

20

Sites

A B

Total pts. 418 544

Best Site

is B



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Plant Location Methodology:

Transportation Method of Linear

Programming

Transportation method of linear

programming seeks to minimize costs of shipping n units to m destinations or it

seeks to maximize profit of shipping n

units to m destinations



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Centroid Method

The centroid method is used for locating single

facility that considers existing facilities, the

distances between them, and the volumes of

goods to be shipped between them

This methodology involves formulae used to

compute the coordinates of the two-

dimensional point that meets the distance and

volume criteria stated above



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Centroid Method Formulae

C =d V

V x

ix i

i

Where:

Cx = X coordinate of centroid

Cy = Y coordinate of centroid

dix = X coordinate of the ith locationdiy = 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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Example of Centroid Method

Question: What is the best location for a new Model

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 of Z-Mobile s

s old pe r month

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 (Continued): Determining Existing Facility

Coordinates

To begin, you must identify the

existing facilities on a two-

dimensional plane or grid and

determine their coordinates.

X

Y

A(100,200)

D(250,580)

Q(790,900)

(0,0)

You must also have the

volume information on the

business activity at the

existing facilities.

S howroom No of Z-Mobile s

s old p e r month

A 1250

D 1900

Q 2300

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Plant Location Methodology: Example of Centroid

Method (Continued): Determining the Coordinates

of the New Facility

C =100(1250) + 250(1900) + 790(2300)

1250 + 1900 + 2300=

2,417,000

5,450=x 443.49

C =200(1250) + 580(1900) + 900(2300)

1250 + 1900 + 2300

=3,422,000

5,450

=y 627.89

S ho wroo m No of Z-Mo bile s

s old pe r month

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:

Z

New

locationof facility

Z about

(443,627)

You then take the coordinates and place them on the map:

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Question Bowl

Criteria that influences manufacturing plant andwarehouse location planning can include which

of the following?

a. Proximity to customers

b. Business climate

c. Infrastructure

d. Quality of labor

e. All of the above

Answer: e. All of the above

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Question Bowl

Criteria that influences manufacturing plant andwarehouse location planning can include

which of the following?

a. Political risk

b. Government barriers

c. Environmental regulation

d. All of the above

e. None of the above

Answer: d. All of the above

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Question Bowl

Which of the following are plant location methods?a. Transportation method of linear programming

b. Factor-rating systems

c. Centroid method

d. All of the above


Answer: d. All of the above

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Question Bowl

Which of the following methods of plant location

analysis considers the existing facilities, the

distances between them, and the volumes of

goods to be shipped?

a. Transportation method of linear

programming


c. Centroid methodd. All of the above

e. None of the aboveAnswer: c. Centroid method

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Question Bowl

Which of the following methods of plant location

analysis is the most widely used general

location technique because it combines

diverse factors in an easy-to-understand

format?

a. Transportation method of linear programming


c. Centroid method

d.

All of the abovee. None of the above

Answer: b. Factor-rating systems

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Question Bowl

The location decision for service facilities is

closely tied to which of the following?

a. Market selection decision

b. Material costs

c. Nearness to distributors

d. Nearness to high-skilled labor


Answer: a. Market selection decision

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Facility Location 8