Facility Location

Facility Location
 Issues in Facility Location

 Various Plant Location Methods

 Locating Service Facilities

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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

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Issues in Facility Location

 Infrastructure

 Quality of Labor

 Suppliers

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Issues in Facility Location

 Other Facilities

 Free Trade Zones

 Political Risk

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Issues in Facility Location

 Government Barriers

 Trading Blocs

 Environmental Regulation

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Issues in Facility Location

 Host Community

 Competitive Advantage

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Plant Location: Factor Rating
A refinery assigned the following range of point values
to major factors affecting a set of possible sites:
Fuels in region 0 to 330
Power 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

 Costs occurring within each factor?

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Linear Programming

 Transportation Method

 Used to minimize total transportation costs

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Facility Location
 Center of gravity method example
– Several automobile showrooms are located according to the following
grid which represents coordinate locations for each showroom.
Y S ho wro o m No o f Z-Mo b ile s
Q s o ld p e r mo nth
(790,900)

D A 1250
(250,580)

A
D 1900
(100,200)
Q 2300
(0,0) X
Determine the best location for a Z-Mobile warehouse/temporary
storage facility considering only distances and quantities sold
per month
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Determining the Coordinates
Y

d V ix i
Cy =
 d iy Vi Q
(790,900)

V
Cx =
V i i D
(250,580)

A
Cx = X coordinate of center of gravity (100,200)

(0,0) X
Cy = X coordinate of center of gravity
S ho wro o m No o f Z-Mo b ile s
dix = X coordinate of the ith location s o ld p e r mo nth

diy = Y coordinate of the ith location A 1250

D 1900
Vi = volume of goods moved to or from ith
location
Q 2300
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Determining the Coordinates

100(1250) + 250(1900) + 790(2300) 2,417,000

Cx = = = 443.49
1250 + 1900 + 2300 5,450

200(1250) + 580(1900) + 900(2300) 3,422,000

Cy = = = 627.89
1250 + 1900 + 2300 5,450

Y
S ho wro o m No o f Z-Mo b ile s
Q
(790,900) s o ld p e r mo nth

D
(250,580)
A 1250

A D 1900
(100,200)

(0,0) X Q 2300
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Analytic Delphi Method

1. Form two Delphi panels.

2. Identify threats and opportunities.

3. Determine direction and strategic goals of the

organization.

4. Develop alternatives.

5. Prioritize alternatives
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Locating Service Facilities

 Regression analysis

 Ardalan Heuristic

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Ardalan Heuristic (Example 9.3)
Miles to Clinic
From Pop. Relative
Community A B C D (000s) Weight
A 0 11 8 12 10 1.1
B 11 0 10 7 8 1.4
C 8 10 0 9 20 0.7
D 9.5 7 9 0 12 1.0

(11)(10)(1.1)
Step 1 Miles to Clinic
From
Community A B C D
A 0 121 88 132
B 123.2 0 112 78.4
C 112 140 0 126
D 114 84 108 0
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Ardalan Heuristic:
Selecting the First-Choice Location

Miles to Clinic
From
Community A B C D
A 0 121 88 132
B 123.2 0 112 78.4
C 112 140 0 126
D 114 84 108 0

349.2 345 308 336.4

Choose the community with the lowest cost

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 Ardalan Heuristic:
Selecting the Second-Choice Location
Miles to Clinic
From
Community A B C D
A 0 121 88 132 Cost > Selected Site Cost?
B
C
123.2
112
0
140
112
0
78.4
126
If yes, replace.
D 114 84 108 0

349.2 345 308 336.4

Miles to Clinic
From
Community A B C D
A 0 88 88 88 Replaced
B 112 0 112 78.4 Not Replaced
C 0 0 0 0
D 108 84 108 0

220 172 308 166.4

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Ardalan Heuristic:
Selecting the Third-Choice Location
Miles to Clinic
From
Community A B C D
A 0 88 88 88
B 112 0 112 78.4
C 0 0 0 0
D 108 84 108 0

220 172 308 166.4

Miles to Clinic
From
Community A B D
A 0 88 88
B 78.4 0 78.4
C 0 0 0
D 0 0 0

78.4 88 166.4 19
Ardalan Heuristic:
And the least desirable alternative is
Miles to Clinic
From
Community A B D
A 0 88 88
B 78.4 0 78.4
C 0 0 0
D 0 0 0

78.4 88 166.4 Miles to Clinic

From
Community A B
A 0 0
B 78.4 0
C 0 0
D 0 0

78.4 0
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