Facility Location
• Need to be located close to supplier as well as customer due to
time-based competition, trade agreements and shipping costs
• Need to be located near the appropriate labor pool to take
advantage of low wage and high technical skills
• Banks – Commercial / Residential Area
• Mobile service centers - On Roads
• RMG Plants – Labor intensive, close to labor pool
Profit-oriented organization
Consider revenue & cost
Make decision on profit potential
Non-profit organization
Consider cost & service
Make decision on balance
between cost and level of
customer service
Facility Location
Factors Affecting Location Decisions
• Proximity to customers and suppliers
• Labor pool
• Business climate (helps people to verify)
• Total costs
• Infrastructure (transport, roads, electricity, gas)
• Political risks
• Government barriers (within a country, Hazaribagh)
• Trade blocks (within two different countries, BD
channels not allowed in India)
Facility Location
Plant Location Methods
• Factor Rating System: most widely used -- can provide a
mechanism to combine diverse factors
• Center of Gravity Method: locating a single facility that
considers the existing facility, distance
between them and the volume of goods to be shipped
Service Location Method
Have multiple sites to maintain close contact with customers
Location decision is closely tied to the market selection decision
Facility Location
Center of Gravity Method
A company needs to locate an intermediate holding facility
between its plant and major distributors. Locations and
amounts of product are as follows:
Location Amount
Plant
(325, 75)
1500
Distributor A
Distributor B
Distributor C
Distributor D
(25, 240)
(350, 400)
(400, 150)
(450, 350)
450
350
250
450
Facility Location
500
A
B
400
Plant : (325,75)
Dist A: (25,450)
Dist B: (350,400)
Dist C: (400,150)
Dist D: (450,350)
D
300
200
C
100
Plant
0
0
100
200
300
400
500
600
1500
450
350
250
450
Facility Location
d ixVi

Cx 
Vi
diyVi

Cy 
Vi
Location of Intermediate holding facility
325 *1500  25 * 450  350 * 350  400 * 250  450 * 450
Cx 
 307.9
1500  450  350  250  450
75 *1500  450 * 450  400 * 350  150 * 250  350 * 450
Cy 
 216.7
1500  450  350  250  450
Facility Location
500
A
B
400
Plant : (325,75)
Dist A: (25,450)
Dist B: (350,400)
Dist C: (400,150)
Dist D: (450,350)
D
300
200
C
100
Plant
Facility : (308,217)
0
0
100
200
300
400
500
600
Facility Location
Locating Service Facility (Ardalan Heuristic)
From
Community
A
B
C
D
A
0
11
8
9.5
Miles to Clinic
B
C
11
8
0
10
10
0
7
9
D
12
7
9
0
Population
Relative
(in thousand) Weight
10
1.1
8
1.4
20
0.7
12
1.0
Find the locations of two clinics at the lowest weighted travel-distance cost