11

Location

PowerPoint Slides
by Jeff Heyl

For Operations Management, 9e by

Krajewski/Ritzman/Malhotra
2010 Pearson Education

11 1

Location Decisions
Location decisions affect processes and
departments

Marketing

Human resources

Accounting and finance

Operations

International operations

11 2

Location Decisions
Many factors

Sensitive to location

High impact on the companys ability to meet its goals

Divide location factors

Dominant factors in manufacturing

Favorable labor climate

Proximity to markets

Quality of life

Proximity to suppliers and resources

Proximity to the parent companys facilities

Utilities, taxes, and real estate costs

Other factors
11 3

Location Decisions
Dominant factors in services
Impact of location on sales and customer
satisfaction

Proximity to customers

Transportation costs and proximity to markets

Location of competitors

Site-specific factors

11 4

Geographic Information Systems

GIS is a system of computer software, hardware,
and data
Use to manipulate, analyze, and present
information relevant to a location decision

Create a visual representation of a firms location

choices

Useful decision-making tool

Using GIS to identify locations and demographic

customer segments

Identifying locations that relate to target market

Part of an array of decision-making tools

11 5

Locating a Single Facility

Expand onsite, build another facility, or
relocate to another site

Onsite expansion

Building a new plant or moving to a new retail

or office space

Comparing several sites

11 6

Selecting a New Facility

Step 1: Identify the important location factors and
categorize them as dominant or secondary
Step 2: Consider alternative regions; then narrow to
alternative communities and finally specific
sites
Step 3: Collect data on the alternatives
Step 4: Analyze the data collected, beginning with
the quantitative factors
Step 5: Bring the qualitative factors pertaining to
each site into the evaluation

11 7

Calculating Weighted Scores

EXAMPLE 11.1
A new medical facility, Health-Watch, is to be located in Erie,
Pennsylvania. The following table shows the location factors,
weights, and scores (1 = poor, 5 = excellent) for one potential
site. The weights in this case add up to 100 percent. A weighted
score (WS) will be calculated for each site. What is the WS for
this site?
Location Factor

Weight

Score

Total patient miles per month

25

Facility utilization

20

Average time per emergency trip

20

Expressway accessibility

15

Land and construction costs

10

Employee preferences

10

11 8

Calculating Weighted Scores

SOLUTION
The WS for this particular
site is calculated by
multiplying each factors
weight by its score and
adding the results:

Location Factor

Weight

Score

Total patient miles per month

25

Facility utilization

20

Average time per emergency trip

20

Expressway accessibility

15

Land and construction costs

10

Employee preferences

10

WS = (25 4) + (20 3) + (20 3) + (15 4) + (10 1) + (10 5)

= 100 + 60 + 60 + 60 + 10 + 50
= 340
The total WS of 340 can be compared with the total weighted
scores for other sites being evaluated.
11 9

Application 11.1
Management is considering three potential locations for a new
cookie factory. They have assigned scores shown below to the
relevant factors on a 0 to 10 basis (10 is best). Using the
preference matrix, which location would be preferred?
Location
Factor

Weight

The
Neighborhood

Sesame
Street

Ronalds
Playhouse

Material Supply

0.1

Quality of Life

0.2

Mild Climate

0.3

10

Labor Skills

0.4

11 10

Application 11.1
Management is considering three potential locations for a new
cookie factory. They have assigned scores shown below to the
relevant factors on a 0 to 10 basis (10 is best). Using the
preference matrix, which location would be preferred?
Location
Factor

Weight

The
Neighborhood

Material Supply

0.1

0.5

0.9

0.8

Quality of Life

0.2

1.8

1.6

0.8

Mild Climate

0.3

10

3.0

1.8

2.4

Labor Skills

0.4

1.2

1.6

2.8

6.5

Sesame
Street

5.9

Ronalds
Playhouse

6.8

11 11

Load-Distance (ld) Method

Identify and compare candidate locations

Like weighted-distance method

Select a location that minimizes the sum of

the loads multiplied by the distance the load
travels

Time may be used instead of distance

11 12

Load-Distance (ld) Method

Calculating a load-distance score

Varies by industry

Use the actual distance to calculate ld score

Use rectangular or Euclidean distances

Different measures for distance

Find one acceptable facility location that

minimizes the ld score

Formula for the ld score

ld = lidi
i

11 13

Application 11.2
What is the distance between (20, 10) and (80, 60)?
SOLUTION
Euclidean distance:
dAB =

(xA xB)2 + (yA yB)2 =

(20 80)2 + (10 60)2 = 78.1

Rectilinear distance:
dAB = |xA xB| + |yA yB| = |20 80| + |10 60| = 110

11 14

Application 12.3
Management is investigating which location would be best to
position its new plant relative to two suppliers (located in
Cleveland and Toledo) and three market areas (represented by
Cincinnati, Dayton, and Lima). Management has limited the
search for this plant to those five locations. The following
information has been collected. Which is best, assuming
rectilinear distance?
Location

x,y coordinates

Trips/year

Cincinnati

(11,6)

15

Dayton

(6,10)

20

Cleveland

(14,12)

30

Toledo

(9,12)

25

Lima

(13,8)

40

11 15

Application 12.3
SOLUTION
Calculations:

Location

x,y coordinates

Trips/year

Cincinnati

(11,6)

15

Dayton

(6,10)

20

Cleveland

(14,12)

30

Toledo

(9,12)

25

Lima

(13,8)

40

Cincinnati = 15(0) + 20(9) + 30(9) + 25(8) + 40(4)

Dayton = 15(9) + 20(0) + 30(10) + 25(5) + 40(9)

= 810
= 920

Cleveland = 15(9) + 20(10) + 30(0) + 25(5) + 40(5)

= 660

Toledo = 15(8) + 20(5) + 30(0) + 25(0) + 40(8)

= 690

Lima = 15(4) + 20(9) + 30(5) + 25(8) + 40(0)

= 590

11 16

Center of Gravity Method

A good starting point

Find x coordinate, x*, by multiplying each

points x coordinate by its load (lt), summing
these products li xi, and dividing by li

The center of gravitys y coordinate y* found

the same way

Generally not the optimal location

li xi
x* =

li
i

li y i
y* =

li
i

11 17

Finding the Center of Gravity

EXAMPLE 11.2
A supplier to the electric utility industry produces power
generators; the transportation costs are high. One market area
includes the lower part of the Great Lakes region and the upper
portion of the southeastern region. More than 600,000 tons are
to be shipped to eight major customer locations as shown
below:
Customer Location
Three Rivers, MI

Tons Shipped

x, y Coordinates

5,000

(7, 13)

Fort Wayne, IN

92,000

(8, 12)

Columbus, OH

70,000

(11, 10)

Ashland, KY

35,000

(11, 7)

9,000

(12, 4)

227,000

(13, 11)

Wheeling, WV

16,000

(14, 10)

Roanoke, VA

153,000

(15, 5)

Kingsport, TN
Akron, OH

11 18

Finding the Center of Gravity

What is the center of gravity
for the electric utilities
supplier? Using rectilinear
distance, what is the resulting
loaddistance score for this
location?
SOLUTION

Customer Location
Three Rivers, MI

Tons Shipped

x, y Coordinates

5,000

(7, 13)

Fort Wayne, IN

92,000

(8, 12)

Columbus, OH

70,000

(11, 10)

Ashland, KY

35,000

(11, 7)

9,000

(12, 4)

227,000

(13, 11)

Wheeling, WV

16,000

(14, 10)

Roanoke, VA

153,000

(15, 5)

Kingsport, TN
Akron, OH

The center of gravity is calculated as shown below:

li = 5 + 92 + 70 + 35 + 9 + 227 + 16 + 153 = 607
i

li xi = 5(7) + 92(8) + 70(11) + 35(11) + 9(12) + 227(13)

i

+ 16(14) + 153(15) = 7,504

li x i
7,504
i
= 12.4
x* = l =
607
i
i
11 19

Finding the Center of Gravity

What is the center of gravity
for the electric utilities
supplier? Using rectilinear
distance, what is the resulting
loaddistance score for this
location?

Customer Location
Three Rivers, MI

Tons Shipped

x, y Coordinates

5,000

(7, 13)

Fort Wayne, IN

92,000

(8, 12)

Columbus, OH

70,000

(11, 10)

Ashland, KY

35,000

(11, 7)

9,000

(12, 4)

227,000

(13, 11)

Wheeling, WV

16,000

(14, 10)

Roanoke, VA

153,000

(15, 5)

Kingsport, TN
Akron, OH

li yi = 5(13) + 92(12) + 70(10) + 35(7) + 9(4) + 227(11)

i

+ 16(10) + 153(5) = 5,572

l i yi
x* =

li

5,572
= 9.2
=
607

11 20

Finding the Center of Gravity

What is the center of gravity
for the electric utilities
supplier? Using rectilinear
distance, what is the resulting
loaddistance score for this
location?

Customer Location
Three Rivers, MI

Tons Shipped

x, y Coordinates

5,000

(7, 13)

Fort Wayne, IN

92,000

(8, 12)

Columbus, OH

70,000

(11, 10)

Ashland, KY

35,000

(11, 7)

9,000

(12, 4)

227,000

(13, 11)

Wheeling, WV

16,000

(14, 10)

Roanoke, VA

153,000

(15, 5)

Kingsport, TN
Akron, OH

The resulting load-distance score is

ld = lidi = 5(5.4 + 3.8) + 92(4.4 + 2.8) + 70(1.4 + 0.8) +
i
35(1.4 + 2.2) + 90(0.4 + 5.2) + 227(0.6 + 1.8) +
16(1.6 + 0.8) + 153(2.6 + 4.2)
= 2,662.4
where

di = |xi x*| + |yi y*|

11 21

Application 11.4
A firm wishes to find a central location for its service. Business
forecasts indicate travel from the central location to New York
City on 20 occasions per year. Similarly, there will be 15 trips to
Boston, and 30 trips to New Orleans. The x, y-coordinates are
(11.0, 8.5) for New York, (12.0, 9.5) for Boston, and (4.0, 1.5) for
New Orleans. What is the center of gravity of the three demand
points?
SOLUTION

li xi
i

x* =

li

[(20 11) + (15 12) + (30 4)]

= 8.0
=
(20 + 15 + 30)

l i yi
y* =

li

[(20 8.5) + (15 9.5) + (30 1.5)]

= 5.5
=
(20 + 15 + 30)

i
11 22

Using Break-Even Analysis

Compare location alternatives on the basis
of quantitative factors expressed in total
costs
Determine

each site

Plot

the variable costs and fixed costs for

total cost lines

Identify

the approximate ranges for which each

location has lowest cost

Solve

algebraically for break-even points over

the relevant ranges

11 23

Break-Even Analysis for Location

EXAMPLE 11.3
An operations manager narrowed the search for a new facility
location to four communities. The annual fixed costs (land,
property taxes, insurance, equipment, and buildings) and the
variable costs (labor, materials, transportation, and variable
overhead) are as follows:
Community

Fixed Costs per Year

Variable Costs per Unit

$150,000

$62

$300,000

$38

$500,000

$24

$600,000

$30

11 24

Break-Even Analysis for Location

Step 1: Plot the total cost curves for all the communities
on a single graph. Identify on the graph the
approximate range over which each community
provides the lowest cost.
Step 2: Using break-even analysis, calculate the breakeven quantities over the relevant ranges. If the
expected demand is 15,000 units per year, what is
the best location?

11 25

Break-Even Analysis for Location

SOLUTION
To plot a communitys total cost line, let us first compute the
total cost for two output levels: Q = 0 and Q = 20,000 units per
year. For the Q = 0 level, the total cost is simply the fixed costs.
For the Q = 20,000 level, the total cost (fixed plus variable
costs) is as follows:

Community

Fixed Costs

$150,000

$300,000

$500,000

$600,000

Variable Costs
(Cost per Unit)(No. of Units)

Total Cost
(Fixed + Variable)

11 26

Break-Even Analysis for Location

SOLUTION
To plot a communitys total cost line, let us first compute the
total cost for two output levels: Q = 0 and Q = 20,000 units per
year. For the Q = 0 level, the total cost is simply the fixed costs.
For the Q = 20,000 level, the total cost (fixed plus variable
costs) is as follows:

Community

Fixed Costs

Variable Costs
(Cost per Unit)(No. of Units)

Total Cost
(Fixed + Variable)

$150,000

$62(20,000) = $1,240,000

$1,390,000

$300,000

$38(20,000) = $760,000

$1,060,000

$500,000

$24(20,000) = $480,000

$980,000

$600,000

$30(20,000) = $600,000

$1,200,000

11 27

Break-Even Analysis for Location

A

1,600
Annual cost (thousands of dollars)

Figure 11.1 shows the

graph of the total cost
lines.
The line for community
A goes from (0, 150) to
(20, 1,390). The graph
indicates that
community A is best for
low volumes, B for
intermediate volumes,
and C for high volumes.
We should no longer
consider community D,
because both its fixed
and its variable costs
are higher than
community Cs.

(20, 1,390)

1,400

(20, 1,200)

1,200

(20, 1,060)

1,000

800

(20, 980)

600
Break-even
point

400
200

Break-even
point

C best

B best

A best
|

8 10 12 14 16 18 20 22

6.25
14.3
Q (thousands of units)

Figure 11.1 Break-Even Analysis of Four

Candidate Locations
11 28

Break-Even Analysis for Location

Step 2: The break-even quantity between A and B lies at the
end of the first range, where A is best, and the
beginning of the second range, where B is best. We
find it by setting both communities total cost
equations equal to each other and solving:
(A)

(B)

$150,000 + $62Q = $300,000 + $38Q

Q = 6,250 units

The break-even quantity between B and C lies at the end of the

range over which B is best and the beginning of the final range
where C is best. It is
(B)

(C)

$300,000 + $38Q =

$500,000 + $24Q

Q = 14,286 units

11 29

Break-Even Analysis for Location

No other break-even quantities

are needed. The break-even
point
between
A and
C lies
Step 2: The break-even quantity
between
A and
B lies
at the
area,
end of the first range, above
where the
A isshaded
best, and
thewhich
does
not mark
the start
beginning of the second
range,
whereeither
B is best.
We
or
the
end
of
one
of
the
three
find it by setting both communities total cost
relevant
ranges.
equations equal to each
other and
solving:
(A)

(B)

$150,000 + $62Q = $300,000 + $38Q

Q = 6,250 units

The break-even quantity between B and C lies at the end of the

range over which B is best and the beginning of the final range
where C is best. It is
(B)

(C)

$300,000 + $38Q =

$500,000 + $24Q

Q = 14,286 units

11 30

Application 11.5
By chance, the Atlantic City Community Chest has to close
temporarily for general repairs. They are considering four
temporary office locations:
Property Address

Move-in Costs

Monthly Rent

Boardwalk

$400

$50

Marvin Gardens

$280

$24

St. Charles Place

$350

$10

$60

$60

Baltic Avenue

Use the graph on the next slide to determine for what length
of lease each location would be favored? Hint: In this
problem, lease length is analogous to volume.

11 31

Application 11.5
500

SOLUTION

Fs + c s Q = FB + c B Q

400

FB Fs

c s cB
$60 $360
=
$10 $60
300
=
= 6 months
50

St Charles Place

Total Cost

Q=

Boardwalk

300

Marvin
Gardens

Baltic Avenue

200

100

The short answer: Baltic

Avenue if 6 months or less,
St. Charles Place if longer

4
5
Months

11 32

Locating Within a Network

When a firm with a network of existing
facilities plans a new facility, one of two
conditions exists

Facilities operate independently

Facilities interact

The GIS method for locating multiple

facilities

The transportation method

11 33

Locating Within a Network

A five step GIS framework
Step 1: Map the data
Step 2: Split the area
Step 3: Assign a facility location
Step 4: Search for alternative sites
Step 5: Compute ld scores and check capacity

Other methods of location analysis

Heuristics

Simulation

Optimization
11 34

Locating Multiple Facilities

EXAMPLE 11.4
Witherspoon Automotive remanufactures automotive
components and subassemblies
Full truckloads of parts to and from customers
Two locations: Spartanburg, SC and Orlando, FL
Locations have a remanufacturing facility and a warehouse
Spartanburg covers a total of 362 customers
Orlando facility covers a total of 66 customers
Spartanburg DC shipped 17,219 and Orlando DC shipped
4,629 full truckloads last year
Operating regions and customer locations are shown in
Figure 11.2.

11 35

Locating Multiple Facilities

Figure 11.2 Operating Regions and Customer Location for Witherspoon Automotive
11 36

Locating Multiple Facilities

The senior management decided to close the Spartanburg
facility and split the region into two each with its own
manufacturing and distribution center
Five important location factors:
1.

The new facilities should be located in a major

metropolitan area

2.

Total loaddistance score should be minimized

3.

Size of the two new facilities should not exceed a

maximum of 9,500 truckloads of output per year

4.

Customer truckloads allocated between the two facilities

should be fairly balanced

5.

New distribution network should be able to accommodate

up to 1,000 full truckload shipments per year from the
Alabama

11 37

Locating Multiple Facilities

Where should the two new facilities be opened, assuming that
the Orlando DC will stay where it is, and that fixed cost
differences in opening a new facility are comparable across
most potential sites in the region?
SOLUTION
Using the data in their system and MapPoint, the managers at
Witherspoon automotive overlaid the locations and the number
of full truckload shipments delivered last year for each
customer in the Spartanburg region onto a map. The
Witherspoon Automotive video on myomlab shows how to
perform this analysis using MapPoint. To achieve a greater
degree of aggregation in customer base and to also give due
consideration to the quality of life location factor, the map was
changed from displaying data for each street address
(customer) to an aggregate view that displays data for each
Metropolitan Statistical Area (MSA).
11 38

Locating Multiple Facilities

Figure 11.3 Truckload Concentration for Witherspoon

11 39

Locating Multiple Facilities

The darker the shade, the greater the number of truckloads in
the MSA. It was visually clear that Atlanta and Charlotte were
the major markets, with Columbia, South Carolina; Greenville,
South Carolina; and Richmond, Virginia, also having a heavy
concentration of customers. From this map in Figure 11.3, it
was easy to see that the dark green shaded area in Atlanta has
a heavy customer-trips concentration. It represents 4,475 full
truckloads, which would easily support half a facility. It seems
reasonable for the management to locate one of the two new
facilities near Atlanta. This decision will also achieve two other
management objectives, in that the facility is near a major
metropolitan area and is also well placed to serve the proposed
expansion of the northern Alabama market. Management stated
that if it decides to locate a facility near the Atlanta area, it
would be in Buford, Georgia.

11 40

Locating Multiple Facilities

The next step was to partition the customers into 2 regions,
each with a total demand of less than 9,500 truckloads.
Because it seemed clear that the Atlanta area would have a
facility, one region was circled around Atlanta as shown in
Figure 11.4. Furthermore, if the northern Alabama market
develops as hoped, it will handle an additional 1,000
truckloads. Because of this potential, the Atlanta region can
only handle 8,500 truckloads for current customers. After a
careful look at the map data, it was decided that Georgia,
Tennessee, Alabama, and the parts of South Carolina that were
within 2.5 hours of the Atlanta facility would be assigned to the
Atlanta region. The Augusta/Aiken MSA that straddles the
Georgia/South Carolina border was also added to this region to
balance the two regions. This scenario results in the Atlanta
region being assigned 8,397 truckloads and the second region
having 8,822 trips, and achieving a 48.8 percent to 51.2 percent
split while still allowing capacity in the Atlanta region for the
proposed expansion of the northern Alabama market.
11 41

Locating Multiple Facilities

Figure 11.4 Witherspoons Facilities Areas

11 42

Locating Multiple Facilities

In order to identify a good location for the second facility, the
center of gravity for the second region was determined to find a
good starting point. Looking at the map in Figure 11.4, it
appears that the center of the second region is around Durham,
North Carolina. However, the center of gravity for the second
region is close to a National Forest in Randolph County, North
Carolinanot too far from Charlotte but considerably south
and west of Durham. Such an outcome is to be expected
because the Charlotte and to a lesser extent Columbia, South
Carolina, markets have such a large percentage of the
truckload volume for this region. However, the center of gravity
does not appear to be a promising site because it is only near
one customer. Given this dilemma, the management of
Witherspoon Automotive decided to pick a site next to the
center of gravity as well as several sites in the general area of
the center of gravity that are near Interstate I-85.

11 43

Locating Multiple Facilities

Loaddistance scores were computed using driving mileage
and driving time based on last years demand for each of the
possible locations. The following results were obtained for
loaddistance calculations based on one-way trips:
Site

City

Load-Distance Using
One-Way Mileage

Load-Distance Using
One-Way Travel Hours

Albemarle

1,331,608

22,194

Salisbury

1,075,839

18,541

Greensboro

1,222,675

20,378

Concord

1,037,424

17,938

11 44

Locating Multiple Facilities

As the Witherspoon Automotive managers reviewed the results,
they noted that Concord will provide the minimum mileage and
drive time, and have the additional advantage of being near
Charlottefulfilling the managerial objective of being located
near a major city. Another attractive feature of this solution is
that the Greenville, South Carolina, and Augusta, Georgia,
markets are almost as close to the Concord facility as they are
to the Buford facility. Management can reassign customers in
these markets to the Charlotte region at little additional cost if
the northern Alabama market grows faster than expected.

11 45

Solved Problem 1
An electronics manufacturer must expand by building a second
facility. The search is narrowed to four locations, all of which
are acceptable to management in terms of dominant factors.
Assessment of these sites in terms of seven location factors is
shown in Table 11.1. For example, location A has a factor score
of 5 (excellent) for labor climate; the weight for this factor (20)
is the highest of any. Calculate the weighted score for each
location. Which location should be recommended?

11 46

Solved Problem 1
TABLE 11.1

FACTOR INFORMATION FOR ELECTRONICS MANUFACTURER

Factor Score for Each Location

Location Factor

Factor Weight

1. Labor climate

20

2. Quality of life

16

3. Transportation system

16

4. Proximity to markets

14

5. Proximity to materials

12

6. Taxes

12

7. Utilities

10

11 47

Solved Problem 1
SOLUTION
Based on the weighted scores shown in Table 11.2, location C
is the preferred site, although location B is a close second.
TABLE 11.2

|
|

CALCULATING WEIGHTED SCORES FOR ELECTRONICS

MANUFACTURER
Weighted Score for each Location

Location Factor

Factor Weight

1. Labor climate

20

2. Quality of life

16

3. Transportation system

16

4. Proximity to markets

14

5. Proximity to materials

12

6. Taxes

12

7. Utilities

10

Totals

100
11 48

Solved Problem 1
SOLUTION
Based on the weighted scores shown in Table 11.2, location C
is the preferred site, although location B is a close second.
TABLE 11.2

|
|

CALCULATING WEIGHTED SCORES FOR ELECTRONICS

MANUFACTURER
Weighted Score for each Location

Location Factor

Factor Weight

1. Labor climate

20

2. Quality of life

100

80

80

100

16

32

48

64

16

3. Transportation system

16

48

64

48

32

4. Proximity to markets

14

70

42

56

56

5. Proximity to materials

12

24

36

36

48

6. Taxes

12

24

60

60

48

7. Utilities

10

50

40

30

30

100

348

370

374

330

Totals

11 49

Solved Problem 2
The operations manager for Mile-High Lemonade narrowed the
search for a new facility location to seven communities. Annual
fixed costs (land, property taxes, insurance, equipment, and
buildings) and variable costs (labor, materials, transportation,
and variable overhead) are shown in Table 11.3.
a. Which of the communities can be eliminated from further
consideration because they are dominated (both variable
and fixed costs are higher) by another community?
b. Plot the total cost curves for all remaining communities on a
single graph. Identify on the graph the approximate range
over which each community provides the lowest cost.
c. Using break-even analysis, calculate the break-even
quantities to determine the range over which each
community provides the lowest cost.

11 50

Solved Problem 2
TABLE 11.3

FIXED AND VARIABLE COSTS FOR MILE-HIGH LEMONADE

Community

Fixed Costs per Year

Variable Costs per Barrel

Aurora

$1,600,000

$17.00

Boulder

$2,000,000

$12.00

Colorado Springs

$1,500,000

$16.00

Denver

$3,000,000

$10.00

Englewood

$1,800,000

$15.00

Fort Collins

$1,200,000

$15.00

Golden

$1,700,000

$14.00

11 51

Location costs (in millions of dollars)

Solved Problem 2
10
8
6

Break-even
point

Golden

4
Break-even
point

Fort Collins

Denver

Boulder

2.67
Barrels of lemonade per year (in hundred thousands)
Figure 11.5 Break-Even Analysis of Four Candidate Locations
11 52

Solved Problem 2
SOLUTION
a. Aurora and Colorado Springs are dominated by Fort Collins,
because both fixed and variable costs are higher for those
communities than for Fort Collins. Englewood is dominated
by Golden.
b. Figure 11.5 shows that Fort Collins is best for low volumes,
Boulder for intermediate volumes, and Denver for high
volumes. Although Golden is not dominated by any
community, it is the second or third choice over the entire
range. Golden does not become the lowest-cost choice at
any volume.

11 53

Solved Problem 2
c. The break-even point between Fort Collins and Boulder is
$1,200,000 + $15Q =
Q=

$2,000,000 + $12Q

266,667 barrels per year

The break-even point between Denver and Boulder is

$3,000,000 + $10Q =
Q=

$2,000,000 + $12Q

500,000 barrels per year

11 54

Solved Problem 3
The new Health-Watch facility is targeted to serve seven census
tracts in Erie, Pennsylvania, whose latitudes and longitudes are
shown in Table 11.4. Customers will travel from the seven
census-tract centers to the new facility when they need health
care. What is the target areas center of gravity for the HealthWatch medical facility?
TABLE 11.4
Census Tract

LOCATION DATA AND CALCULATIONS FOR HEALTH WATCH

Population

Latitude

Longitude

Population
Latitude

Population
Longitude

15

2,711

42.134

80.041

114,225.27

216,991.15

16

4,161

42.129

80.023

175,298.77

332,975.70

17

2,988

42.122

80.055

125,860.54

239,204.34

25

2,512

42.112

80.066

105,785.34

201,125.79

26

4,342

42.117

80.052

182,872.01

347,585.78

27

6,687

42.116

80.023

281,629.69

535,113.80

28

6,789

42.107

80.051

285,864.42

543,466.24

Total

30,190

1,271,536.04

2,416.462.80
11 55

Solved Problem 3
SOLUTION
We use MapPoint in this solution, with coordinates represented
in the form of latitude and longitude rather than an (x, y) grid, to
calculate the center of gravity. First the target area is displayed
on the map of Erie, Pennsylvania, using MapPoint. In Figure
11.6 a pushpin is placed in the approximate geographical
center of the census tracts. The location sensor is then turned
on. By moving the cursor over the pushpin, the location sensor
will register the longitude and latitude for the pushpin. The
population of each census tract is added to the map using
MapPoints built-in demographic data. Thus, we obtain the
following table in which latitudes and longitudes for each of the
seven census-tracts are given, along with their actual
populations, in thousands.

11 56

Solved Problem 3

Figure 11.6 Center of Gravity for Health-Watch

11 57

Solved Problem 3
Next we solve for the center of gravity x* and y*. Because the
coordinates are given as longitude and latitude, x* is the
longitude and y* is the latitude for the center of gravity.
1,271,536.05
x* =
= 42.1178
30,190
2,416,462.81
y* =
= 80.0418
30,190
The center of gravity is (42.12 North, 80.04 West), and is shown
on the map to be fairly central to the target area.
Active Model 11.2 in myomlab confirms these calculations for
the center of gravity, and allows us to explore other alternative
locations as well.
11 58

11 59