Lect 2 - Facilities Location

8/12/2019 Lect 2 - Facilities Location

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Facilities Location


2/18

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


3/18

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


4/18

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


5/18

Location Planning Methods

Location factor rating

Centre of Gravity Method

Load Distance Method

Transportation Model


6/18

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



7/18

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 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


8/18

The weighted scores for each site are computed by multiplying the factorweights by the score for that factor.


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


9/18

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 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


10/18

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

i

i

n

i

ii

C

W

Wy

Y

1

1*)(


C f G i M h d


11/18

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


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

i

ii

C

W

Wx

X

1

1

*)(

n

i

i

n

i

ii

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


12/18

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 )


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

i

i

n

i

ii

C

W

Wx

X

1

1

*)(


13/18

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

*


14/18

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 )


15/18

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


16/18

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


17/18

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


18/18

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

Documents

Lect 2 - Facilities Location