Facility Location 8
Transcript of Facility Location 8
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Facility Location
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• Issues in Facility Location
• Various Plant Location Methods
OBJECTIVES
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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
• Infrastructure
• Quality of Labor
• Suppliers
• Other Facilities
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Issues in Facility Location
•Free Trade Zones
• Political Risk
• Government Barriers
• Trading Blocs
• Environmental Regulation
• Host Community
• Competitive Advantage
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Plant Location Methodology: Factor Rating
Method Example
Fuels in region 0 to 330Power 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
Two refineries sites (A and B) are assigned the following range of
point values and respective points, where more the points the
better for the site location.
123150
54
24
45
4
8
5
5
Major factors for site location Pt. Range
156100
63
96
50
5
4
50
20
Sites
A B
Total pts. 418 544
Best Site
is B
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Plant Location Methodology:
Transportation Method of Linear
Programming
Transportation method of linear
programming seeks to minimize costs of shipping n units to m destinations or it
seeks to maximize profit of shipping n
units to m destinations
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Plant Location Methodology:
Centroid Method
The centroid method is used for locating single
facility that considers existing facilities, the
distances between them, and the volumes of
goods to be shipped between them
This methodology involves formulae used to
compute the coordinates of the two-
dimensional point that meets the distance and
volume criteria stated above
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Plant Location Methodology:
Centroid Method Formulae
C =d V
V x
ix i
i
Where:
Cx = X coordinate of centroid
Cy = Y coordinate of centroid
dix = X coordinate of the ith locationdiy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith
location
C =d V
Vy
iy i
i
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Plant Location Methodology:
Example of Centroid Method
Question: What is the best location for a new Model
warehouse / temporary storage facility considering only
distances and quantities sold per month?
Centroid method example – Several automobile showrooms are located
according to the following grid which represents
coordinate locations for each showroom
S howroom No of Z-Mobile s
s old pe r month
A 1250
D 1900
Q 2300X
Y
A
(100,200)
D(250,580)
Q(790,900)
(0,0)
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Plant Location Methodology: Example of Centroid
Method (Continued): Determining Existing Facility
Coordinates
To begin, you must identify the
existing facilities on a two-
dimensional plane or grid and
determine their coordinates.
X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
You must also have the
volume information on the
business activity at the
existing facilities.
S howroom No of Z-Mobile s
s old p e r month
A 1250
D 1900
Q 2300
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Plant Location Methodology: Example of Centroid
Method (Continued): Determining the Coordinates
of the New Facility
C =100(1250) + 250(1900) + 790(2300)
1250 + 1900 + 2300=
2,417,000
5,450=x 443.49
C =200(1250) + 580(1900) + 900(2300)
1250 + 1900 + 2300
=3,422,000
5,450
=y 627.89
S ho wroo m No of Z-Mo bile s
s old pe r month
A 1250
D 1900
Q 2300X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
You then compute the new coordinates using the formulas:
Z
New
locationof facility
Z about
(443,627)
You then take the coordinates and place them on the map:
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Question Bowl
Criteria that influences manufacturing plant andwarehouse location planning can include which
of the following?
a. Proximity to customers
b. Business climate
c. Infrastructure
d. Quality of labor
e. All of the above
Answer: e. All of the above
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Question Bowl
Criteria that influences manufacturing plant andwarehouse location planning can include
which of the following?
a. Political risk
b. Government barriers
c. Environmental regulation
d. All of the above
e. None of the above
Answer: d. All of the above
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Question Bowl
Which of the following are plant location methods?a. Transportation method of linear programming
b. Factor-rating systems
c. Centroid method
d. All of the above
e. None of the above
Answer: d. All of the above
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Question Bowl
Which of the following methods of plant location
analysis considers the existing facilities, the
distances between them, and the volumes of
goods to be shipped?
a. Transportation method of linear
programming
b. Factor-rating systems
c. Centroid methodd. All of the above
e. None of the aboveAnswer: c. Centroid method
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Question Bowl
Which of the following methods of plant location
analysis is the most widely used general
location technique because it combines
diverse factors in an easy-to-understand
format?
a. Transportation method of linear programming
b. Factor-rating systems
c. Centroid method
d.
All of the abovee. None of the above
Answer: b. Factor-rating systems
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Question Bowl
The location decision for service facilities is
closely tied to which of the following?
a. Market selection decision
b. Material costs
c. Nearness to distributors
d. Nearness to high-skilled labor
e. None of the above
Answer: a. Market selection decision