Facilities Location: Least Cost Assignment Routine

(Heuristic Method)

Transportation Method

A company is considering to build a new factory in addition

to its existing 2 unit of factories.

Existing Factory Weekly Capacity Forecasted Total

Weekly Demand
Tulsa 7,000
25,000
Tempe 5,500

Two Alternative locations for new factory:

a) Youngstown
b) Sparta

San
Washi- Cleve- Linc- Phoen Weekly Production
From\To Franc-
ngton land oln ix Capacity Cost
isco
Tulsa 5.00 3.00 2.00 3.00 2.00 7,000 $75.00
Tempe 6.50 5.00 3.50 1.50 0.20 5,500 $70.00
Youngstown 1.50 0.50 1.80 6.50 5.00 12,500 $70.00
Sparta 3.80 5.00 8.00 7.50 8.00 12,500 $67.00
Forecasted
weekly 5,000 6,000 4,000 7,000 3,000
Demand
 Solution

Total Cost per unit = Production cost + Distribution cost

e.g : Tulsa Washington, TC = 75.00 + 5.00 = $ 80.00

Tulsa Cleveland, TC = 75.00 + 3.00 = $ 78.00
Tulsa Lincoln, TC = 75.00 + 2.00 = $ 77.00

San
Washi Cleve- Linc- Phoen Plant
From\To Franci
-ngton land oln ix Capacity
-sco
80.00 78.00 77.00 78.00 77.00
Tulsa 7,000

76.50 75.00 73.50 71.50 70.20

Tempe 5,500
3,000 (2,500)

71.50 70.50 71.80 76.50 75.00

Youngstown 12,500

Forecasted Total
weekly 5,000 6,000 4,000 7,000 3,000 25,000
Demand (0)
 San
Washi Cleve- Linc- Phoen Plant
From\To Franci
-ngton land oln ix Capacity
-sco
80.00 78.00 77.00 78.00 77.00
Tulsa 7,000
2,500 4,500 (4500) (0)

76.50 75.00 73.50 71.50 70.20

Tempe 5,500
2,500 3,000 (2500) (0)

71.50 70.50 71.80 76.50 75.00 12,500

Youngstown (6500)(1500)
1,500 (0)
5,000 6,000
Forecasted
weekly 5,000 6,000 4,000 7,000 Total
(0)
(2500)
(0)
(4500) 3,000 25,000
Demand (0) (0) (0)

Total cost with Youngstown as selected location:

= 2500 (77.00) + 4500 (78.00) + 2500 (71.50) + 3000 (70.20)

+ 5000 (71.50) + 6000 (70.50) + 1500 (71.80)

= $ 1,821,050.00
 San
Washi Cleve- Linc- Phoen Plant
From\To Franci
-ngton land oln ix Capacity
-sco
80.00 78.00 77.00 78.00 77.00
Tulsa 7,000

76.50 75.00 73.50 71.50 70.20

Tempe 5,500
3,000 (2500)

70.80 72.00 75.00 74.50 75.00

Sparta 12,500

Forecasted Total
weekly 5,000 6,000 4,000 7,000 3,000 25,000
Demand (0)
 San
Washi Cleve- Linc- Phoen Plant
From\To Franci
-ngton land oln ix Capacity
-sco
80.00 78.00 77.00 78.00 77.00
Tulsa 7,000
4,000 3,000
76.50 75.00 73.50 71.50 70.20
Tempe 5,500
2,500 3,000
70.80 72.00 75.00 74.50 75.00
Sparta 12,500
1,500
5,000 6,000
Forecasted Total
weekly 5,000 6,000 4,000 7,000 3,000 25,000
Demand

Total cost with Sparta as selected location:

= 4000 (77.00) + 3000 (78.00) + 2500 (71.50) + 3000 (70.20)

+ 5000 (70.80) + 6000 (72.00) + 1500 (74.50)

= 308000 +
234000+178750+210600+354000+432000+111750

= $ 1,829,100.00

The total weekly cost of production and shipment of

Youngstown is $ 1,821,050.00, which is $8,050 per week
more economical than the total cost of production and
shipment at Sparta. This implies that, if all other factors are
equal, the plant should be build in Youngstown. Both
solutions were obtained using heuristic rather than optimal
seeking methods. Thus, the solutions are probably “close to
optimum” rather than optimum.