5 Location

Supply Chain Location
Decisions
Copyright 2013 Pearson Education, Inc. publishing as
Prentice Hall
11- 01
What is a Facility
Location?
Facility Location
The process of
determining
geographic sites for a
firms operations.
Distribution
center (DC)
A warehouse or
stocking point where
goods are stored for
subsequent
distribution to
manufacturers, Copyright 2013 Pearson Education, Inc. publishing
11- 02 as
Prentice Hall
Location Decisions
Location decisions affect processes
and departments
Marketing
Human resources
Accounting and finance
Operations
International operations
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11 - 03
Location Decisions
Factors affecting location
decisions
Sensitive to location
High impact on the companys
ability to meet its goals

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11 - 04
Location Decisions
Dominant factors in manufacturing
Favorable labor climate

Proximity to markets
Impact on Environment
Quality of life
Proximity to suppliers and resources
Proximity to the parent companys
facilities
Utilities, taxes, and real estate costs
Other factors
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11 - 05
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
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11 - 06
What is a GIS?
GIS
Geographical
Information
System
A system of computer
software, hardware,
and data that the
firms personnel can
use to manipulate,
analyze, and present
information relevant
to a location
decision.
Copyright
2013 Pearson Education, Inc. publishing as
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11- 07
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

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11 - 08
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.
Copyright 2013 Pearson Education, Inc. publishing as 11 - 09
Prentice Hall
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.
Weight
Score
WhatLocation
is the Factor
WS for this site?
Total patient miles per
month
25
Facility utilization
20
Average time per

emergency trip
20
Expressway accessibility
15
Copyright
Land and
construction
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10
costs
11 - 10
Example 11.1
The WS for this
particular site is
calculated by
multiplying each
factors weight by
its score and
adding the results:
Weig
ht
Scor
e
Total patient miles per

month
25
Facility utilization
20
Average time per

emergency trip
20
Expressway
accessibility
15
Location Factor
Land and construction
1 (10
(25WS
4)=+ (20 3) + (20 costs
3) + (15 4) + (1010
1) +
10
5
= 100 + 60 + 60 + 60 + Employee
10 + 50preferences
= 340
The total WS of 340 can be compared with

the total weighted scores for other sites
being evaluated.
11 - 11
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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
Weigh
t
The
Neighborhoo
d
Sesame
Street
Ronalds
Playhouse
Material
Supply
0.1
Quality of
Life
0.2
Mild
Climate
0.3
10
Labor Skills
0.4

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11 - 12
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
Weigh
t
The
Neighborhoo
d
0.5
Material
Supply
0.1
Quality of
Life
0.2
Mild
Climate
0.3
10
Labor Skills
0.4
1.8
3.0
1.2
6.5
Sesame
Street
0.9
9
8
6
1.6
1.8
1.6
5.9

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Ronalds
Playhouse
0.8
8
4
8
7
11 - 13
0.8
2.4
2.8
6.8
Applying the
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
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11 - 14
Applying the
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

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11 - 15
Application 11.2
What is the distance between (20, 10) and (80, 60)?
Euclidean distance:
dAB =
(xA xB)2 + (yA (20

yB)2 80)
= 2 + (10 60)2 = 78.1
Rectilinear distance:
|20
80| + |10 60| = 110
dAB = |xA xB| + |yA y
B| =

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11 - 16
Application 11.3
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.
Location
x,y coordinates
Trips/year
WhichCincinnati
is best, assuming
rectilinear distance?
(11,6)
15
Dayton
(6,10)
20
Cleveland
(14,12)
30
Toledo
(9,12)
25
Lima
(13,8)
40

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11 - 17
Application 11.3
Locatio
n
x,y
coordinate
s
Trips/y
ear
Cincinn
ati
(11,6)
15
Dayton
(6,10)
20
Clevela
nd
(14,12)
30
Toledo
(9,12)
25
Cincinnati 15(0) + 20(9) + 30(9) + 25(8)
Lima
(13,8)
40
= +
40(4)
15(9)
+ 20(0) + 30(10) + 25(5)
40(9)
Dayton = +
15(9)
+ 20(10) + 30(0) + 25(5)
40(5)
Cleveland +
15(8)
+ 20(5) + 30(5) + 25(0)
= + 40(8)
15(4) + 20(9) + 30(5) + 25(8)
Toledo =
+ 40(0)
Lima =
11 - 18
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=
810
=
920
=
660
=
690
=
590
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
li y i
x* =
li
i
y* =
li
i

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11 - 19
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
Customer Location
Tons Shipped
x, y Coordinates
major customer locations as shown below:
Three Rivers, MI
5,000
(7, 13)
Fort Wayne, IN
92,000
(8, 12)
Columbus, OH
70,000
(11, 10)
Ashland, KY
35,000
(11, 7)
Kingsport, TN
9,000
(12, 4)
Akron, OH
227,000
(13, 11)
Wheeling, WV
16,000
(14, 10)
Roanoke, VA
153,000
(15, 5)
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11 - 20
Example 11.2
Customer
Location
Tons
Shipped
x, y
Coordinate
s
What is the center of

Three
gravity for the
Rivers, MI
5,000
Fort Wayne,
electric utilities
IN
92,000
supplier? Using
Columbus,
OH
70,000
10)
rectilinear distance,
Ashland, KY
what is the resulting
35,000
Kingsport,
loaddistance score
TN
The center of gravity is calculated
as9,000
for this
location?
l92
= + 70 + 35 + 9 + 227 + 16 + 153 = 607
5 +below:
shown
i
Akron, OH
227,000
11)
(7, 13)
(8, 12)
(11,
(11, 7)
(12, 4)
(13,
Wheeling,
(14,
li x+
i =
WV
16,000
10)
5(7)
92(8) + 70(11) + 35(11)
+ 9(12)
+ 227(13)
i
Roanoke,
+ 16(14) + 153(15) = 7,504
(15, 5)
VA
153,000
li xi
7,504
i
x* =
li = 607 = 12.4
i
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11 - 21
Example 11.2
Customer
Location
Tons
Shipped
x, y
Coordinate
s

Three
gravity for the
(7, 13)
Rivers, MI
5,000
electric utilities
Fort Wayne,
(8, 12)
IN
92,000
supplier? Using
Columbus,
(11,
OH
70,000
10)
Ashland, KY
(11, 7)
35,000
loaddistance score
Kingsport,
(12, 4)
l
y
=
i i + 92(12) + 70(10) + TN
9,000+ 227(11)
5(13)
35(7)
+
9(4)
for this
location?
i
+ 16(10) + 153(5) = 5,572Akron, OH
li yi
Wheeling,
5,572
WV
i
x* =
li = 607 = 9.2 Roanoke,
i
VA
227,000
11)
16,000
10)
153,000

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11 - 22
(13,
(14,
(15, 5)
Example 11.2
Customer
Location
Tons
Shipped
x, y
Coordinate
s

gravity for the
Three
(7, 13)
Rivers,
MI
5,000
electric utilities
Fort Wayne,
(8, 12)
supplier? Using
IN
92,000
Columbus,
(11,
OH
70,000
10)
Ashland, KY
(11, 7)
35,000
loaddistance
score
The resulting load-distance score
is
Kingsport,
(12, 4)
for this location?
TN
9,000
ld = lidi =5(5.4 + 3.8) + 92(4.4 + 2.8) + 70(1.4
i
where
(13,
Akron,
OH
+ 0.8) + 35(1.4
+ 2.2)
+227,000
90(0.411)
+
Wheeling,
(14,
5.2) + 227(0.6
+ 1.8) + 16(1.6 + 0.8)
WV
16,000
10)
+ 153(2.6 + 4.2)
Roanoke,
(15, 5)
VA
153,000
= 2,662.4
di = |xi x*| + |yi y*|

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11 - 23
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
li Orleans.
xi
[(20 11) + (15 12) + (30 4)]
i
gravity
of
the
three
demand points? = 8.0
x* =
=
li
(20 + 15 + 30)
i
li y i
y* =
[(20 8.5) + (15 9.5) + (30 1.5)]

=
= 5.5
li
(20 + 15 + 30)

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11 - 24
Using Break-Even
Analysis
Compare location alternatives on
the basis of quantitative factors
expressed in total costs
Determine the variable costs and
fixed costs for each site
Plot total cost lines
Identify the approximate ranges for
which each location has lowest cost
Solve algebraically for break-even
pointsCopyright
over
relevant
ranges
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11 - 25
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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
Communit are
Fixed
Costs per
Variable Costs per
overhead)
as follows:
y
Year
Unit
$150,000
$62
$300,000
$38
$500,000
$24
$600,000
$30

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11 - 26
Example 11.3
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 break-even
quantities over the relevant
Copyright 2013
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ranges.
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11 - 27
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Example 11.3
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
Variable Costs
Total Cost
follows:
Commun
Fixed
(Cost per Unit)(No. of
(Fixed +
ity
Costs
$150,000
$300,000
$500,000
$600,000
Units)

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Variable)
11 - 28
Example 11.3
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:
Variable Costs
Total Cost
Commun
ity
Fixed
Costs
$150,000
$300,000
$500,000
$600,000
(Cost per Unit)(No. of

Units)
$62(20,000) =
$1,240,000
$38(20,000) =
$760,000
$24(20,000) =
$480,000
$30(20,000) =
$600,000

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(Fixed +
Variable)
$1,390,000
$1,060,000
$980,000
$1,200,000
11 - 29
Example 11.3
1,600
Annual cost (thousands of dollars)
The figure shows

the graph of the
total cost lines.
1,400
(20, 1,390)
D
(20, 1,200)
1,200
A is best for low

1,000
C
volumes
(20, 980)
800
B for intermediate
Break-even
600
point
volumes
400
Break-even
C for high
point
200
volumes.
C best
B best
A best
We should no
0 2 4 6 8 10 12 14 16 18 20 22
6.25
14.3
longer consider
Q (thousands of units)
community D,
because both its
11 - 30
fixed andCopyright
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(20, 1,060)
Example 11.3
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.
(A)
(B)
$150,000 + $300,000 +
$62Q = $38Q
Q = 6,250
units quantity
break-even
The
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. (B)
(C)
$300,000 +
$38Q =
$500,000 +
$24Q
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= 14,286
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units
11 - 31
Example 11.3
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,
No other break-even
where B is best.
quantities are needed.
(A)
(B)
The break-even point
between A and C lies
$150,000 + $300,000 +
above the shaded area,
$62Q = $38Q
which does not mark
either the start or the
Q = 6,250
end of one of the three
unitsbreak-even quantity between
The
B and C lies at
relevant ranges.
the end of the range over which B is best and

the beginning of the final range where C is best.
(B)
$300,000 +
$38Q =
Q = 14,286
units
(C)
$500,000 +
$24Q

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11 - 32
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
Move-in
Monthly
Address
Costs
Rent
Boardwalk
$400
$50
Marvin Gardens
$280
$24
St. Charles
Place
$360
$10
Baltic
$60
Use
the Avenue
graph on the$60
next slide to determine
for what length of lease each location would be
favored?
Hint: In this problem, lease length is
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publishing as
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volume.
11 - 33
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Application 11.5
500
Fs + c s Q = FB + c B Q
Total Cost
400
FB Fs
Q=
cs cB
$60 $360
300
=
$10 $60
300
=
= 6 months
200
50
Boardwalk
St Charles Place
Marvi
n
Garde
ns Baltic Avenue
100
The short answer:
Baltic Avenue if 6
months or less, St.
|
|
|
|
|
|
|
0
1
2
3
4
5
6
Charles Place if
Months
longer
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11- 34
Locating a facility within a

Supply Chain Network
When a firm with a network of
existing facilities plans a new
facility, one of two conditions
exists
Facilities operate independently
Facilities interact

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11 - 35
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

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11 - 36
The Transportation
Method
A special case of linear programming
Represented as a standard table,
sometimes called a tableau
Rows of the table are linear constraints
that impose capacity limitations
Columns are linear constraints that
require a certain demand level to be met
Each cell in the tableau is a decision
variable, and a per-unit cost is shown in
each cell
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11 - 37
Transportation Method for Location

Basic steps in setting up the initial
tableau
Create a row for each plant and a column for
each warehouse
Add a column for plant capacities and a row
for warehouse demands
Each cell not in the requirements row or
capacity column represents a shipping route
from a plant to a warehouse.
The sum of the shipments in a row must

equal the corresponding plants capacity
and the sum of shipments in a column
must equal the corresponding
warehouses demand
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11 - 38
Transportation Method for

Location
Warehouse
Plant
San Antonio, TX
(1)
Hot Spring, AR
(2)
5.00
Sioux Falls, SD
(3)
6.00
Capacity
5.40
Phoenix
400
7.00
4.60
6.60
Atlanta
500
900
Requirements
200
400
300
900

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11 - 39
Transportation Method for Location

Dummy plants or warehouses
The sum of capacities must equal the sum of
demands
If capacity exceeds requirements we add an extra
column (a dummy warehouse)
If requirements exceed capacity we add an extra
row (a dummy plant)
Assign shipping costs to equal the stockout costs
of the new cells
Finding a solution
The goal is to find the least-cost allocation pattern
that satisfies all demands and exhausts all
capacities
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11 - 40
Example 11.4
The optimal solution for the Sunbelt Pool
Company, found with POM for Windows, is
shown below and displays the data inputs,
with the cells showing the unit costs, the
bottom row showing the demands, and the
last column showing the supply capacities.

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11 - 41
Example 11.4
Below shows how the existing network of plants
supplies the three warehouses to minimize costs for
a total of $4,580.
All warehouse demand is satisfied:

Warehouse 1 in San Antonio is fully supplied by Phoenix
Warehouse 2 in Hot Springs is fully supplied by Atlanta.
Warehouse 3 in Sioux Falls receives 200 units from
Phoenix and 100 units from Atlanta, satisfying its 300-unit
demand.
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11 - 42
Example 11.4
Below shows the total quantity and cost of
each shipment.
The total optimal cost reported in the

upper-left corner of the previous table is
$4,580, or 200($5.00) + 200($5.40) +
400($4.60) + 100($6.60) = $4,580.

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11 - 43
Example 11.4

11- 44
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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 the following table.
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. Copyright
Which
location should be
11 - 45
Prentice Hall
recommended?
Solved Problem 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

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11 - 46
Solved Problem 1
Based on the weighted scores shown below,
location C is the preferred site, although
location B is a close second.
CALCULATING WEIGHTED SCORES FOR ELECTRONIC
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. ProximityCopyright
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materialsPrentice Hall
11 - 47
Solved Problem 1
Based on the weighted scores shown below,
location C is the preferred site, although
location B is a close second.
CALCULATING WEIGHTED SCORES FOR ELECTRONIC
MANUFACTURER
Weighted Score for each
Location
Location Factor
Factor
Weight
1. Labor climate
20
10
A
0
32
48
B
80
48
64
C
80
64
48
10
D
0
16
32
2. Quality of life
16
70
42
56
56
3. Transportation
system
16
24
36
36
48
4. Proximity to
markets
14
24
60
60
48
50
40
30
5. ProximityCopyright
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materialsPrentice Hall
34
37
37
30
33
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
a. Which
the
communities
shown
in of
the
following
table.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
to determine
the range
Copyrightquantities
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11 - 49
Prentice each
Hall
over which
community provides the
Solved Problem 2
FIXED AND VARIABLE COSTS FOR MILE-HIGH LEMONADE
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
Community

11- 50
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Location costs (in millions of dollars)
Solved Problem 2
10
8
6
Breakeven
point
Golden
Breakeven
point
2
Fort Collins
Denver
Boulder
3
2.67
Barrels of lemonade per year (in hundred thousands)

11- 51
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Solved Problem 2
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. 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
11 - 52
Prentice Hall
volume.
Solved Problem 2
c. The break-even point between Fort Collins
and Boulder is
1,200,000 + $15Q =$2,000,000 + $12Q

= 266,667 barrels per year
The break-even point between Denver and Boulder is
3,000,000 + $10Q =$2,000,000 + $12Q

= 500,000 barrels per year

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11 - 53
Solved Problem 3
The new Health-Watch facility is targeted to serve
seven census tracts in Erie, Pennsylvania, whose
latitudes and longitudes are shown below.
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
LOCATION DATA AND CALCULATIONS FOR HEALTH WATCH
for the Health-Watch medical facility?
Populatio
Census
Tract
15
16
17
25
Populati
on
2,711
4,161
2,988
Latitude
Longitu
de
n
Latitude
Population
Longitude
80.041
114,225.2
7
216,991.
15
42.129
80.023
175,298.7
7
332,975.
70
42.122
80.055
125,860.5
4
239,204.
34
42.134
105,785.3 11 - 54
Prentice Hall42.112
80.066
201,125.
Solved Problem 3

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Prentice Hall
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
y* =
2,416,462.81
30,190
= 80.0418
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.
Prentice Hall
11 - 56
Solved Problem 4
The Arid Company makes canoe paddles to serve
distribution centers in Worchester, Rochester, and
Dorchester from existing plants in Battle Creek
and Cherry Creek.
Arid is considering locating a plant near the
headwaters of Dee Creek.
Annual capacity for each plant is shown in the
right-hand column of the tableau.
Transportation costs per paddle are shown in the
tableau in the small boxes.
For example, the cost to ship one paddle from
Battle Creak to Worchester is $4.37.
The optimal allocations are also shown. For
example, Battle Creek ships 12,000 units to
Rochester.Copyright 2013 Pearson Education, Inc. publishing as
11 - 57
Prentice Hall
What are the estimated transportation costs
Solved Problem 4
Destination
Source
Worcheste
r
Battle
Creek
Cherry
Creek
Dee Creek
Demand
Rochester
Dorchester
Capaci
ty
$4.3
7
$4.2
5
$4.8
9 12,000
$4.0
0
$5.0
0
$5.2
7 10,000
$4.1
3
$4.5
0
$3.7
5 18,000
6,000
22,000
12,000

Prentice Hall
11 - 58
40,000
Solved Problem 4
Destination
Source
Worcheste
r
Battle
Creek
Cherry
Creek
Dee Creek
Demand
Rochester
Dorchester
Capaci
ty
$4.3
7
$4.2
12,000 5
$4.8
9 12,000
$4.0
6,000
0
$5.0
4,000
0
$5.2
7 10,000
$4.1
3
6,000
$4.5
0
12,000
$3.7
5 18,000
6,000
22,000
12,000

Prentice Hall
11 - 59
40,000
Solved Problem 4
The total cost is $167,000
Ship 12,000 units from Battle
Creek
to Rochester @ $4.25
Cost $51,00
=
0
Ship 6,000 units from Cherry

Creek
to Worchester @ $4.00
Cost $24,00
=
0
Ship 4,000 units from Cherry

Creek
Cost $20,00
=
0
Ship 6,000 units from Dee

Creek
Cost $27,00
=
0
Ship 12,000 units from Dee

Cost $45,00
Creek
0
Copyright 2013
Pearson Education, Inc. publishing=
as
to Dorchester
@
$3.75
11- 60
Prentice Hall
All rights reserved. No part of this publication may be

reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise,
without the prior written permission of the publisher.
Printed in the United States of America.
Prentice Hall
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Supply Chain Location

Copyright 2013 Pearson Education, Inc. publishing as

Favorable labor climate

Locating a Single Facility

Comparing several sites

Selecting a New Facility

Average time per

Total patient miles per

Average time per

Land and construction

The total WS of 340 can be compared with

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Copyright 2013 Pearson Education, Inc. publishing as

Formula for the ld score

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(xA xB)2 + (yA (20

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Center of Gravity Method

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What is the center of

What is the center of

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What is the center of

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

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Copyright 2013 Pearson Education, Inc. publishing as

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(Cost per Unit)(No. of

Copyright 2013 Pearson Education, Inc. publishing as

Annual cost (thousands of dollars)

The figure shows

A is best for low

the end of the range over which B is best and

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The short answer:

Locating a facility within a

Copyright 2013 Pearson Education, Inc. publishing as

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Transportation Method for Location

The sum of the shipments in a row must

Transportation Method for

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Transportation Method for Location

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All warehouse demand is satisfied:

The total optimal cost reported in the

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Variable Costs per

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Location costs (in millions of dollars)

Barrels of lemonade per year (in hundred thousands)

1,200,000 + $15Q =$2,000,000 + $12Q

The break-even point between Denver and Boulder is

3,000,000 + $10Q =$2,000,000 + $12Q

Copyright 2013 Pearson Education, Inc. publishing as

Copyright 2013 Pearson Education, Inc. publishing as

Copyright 2013 Pearson Education, Inc. publishing as

The center of gravity is (42.12 North, 80.04

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