Chapter 7 Supplement
Facility Location Models
Lecture Outline
•
•
•
•
Types of Facilities
Site Selection: Where to Locate
Global Supply Chain Factors
Location Analysis Techniques
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-2
Types of Facilities
• Heavy-manufacturing facilities
• large, require a lot of space, and are expensive
• Light-industry facilities
• smaller, cleaner plants and usually less costly
• Retail and service facilities
• smallest and least costly
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Supplement 7-3
Factors in Heavy
Manufacturing Location
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•
•
Construction costs
Land costs
Raw material & finished goods shipment modes
Proximity to raw materials
Utilities
Means of waste disposal
Labor availability
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-4
Factors in Light Industry Location
• Land costs
• Transportation costs
• Proximity to markets
• depending on delivery requirements
including frequency of delivery required by
customer
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Supplement 7-5
Factors in Retail Location
• Proximity to customers
• Location is everything
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Supplement 7-6
Site Selection: Where to Locate
• Location criteria for
• being “in the right place at the
manufacturing facility
• Infrequent but important
right time”
• Must consider other factors,
especially financial
considerations
• Location decisions made more
often for service operations
than manufacturing facilities
• Location criteria for service
• access to customers
Copyright 2011 John Wiley & Sons, Inc.
• nature of labor force
• labor costs
• proximity to suppliers and
markets
• distribution and transportation
costs
• energy availability and cost
• community infrastructure
• quality of life in community
• government regulations and
taxes
Supplement 7-7
Global Supply Chain Factors
•
Government stability
•
Government regulations
Political & economic systems
•
Economic stability & growth
Exchange rates
•
Culture
•
Export/import regulations, •
duties & tariffs
•
• Raw material availability
•
•
•
•
•
•
•
•
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Climate
Number & proximity of
suppliers
Transportation & distribution
system
Labor cost & education
Available technology
Commercial travel
Technical expertise
Cross-border trade
regulations
• Group trade agreements
Supplement 7-8
Regional and Community
Location Factors in U.S.
• Labor (availability,
•
education, cost, and unions)
• Proximity of customers
•
• Number of customers
•
• Construction/leasing costs
•
• Land cost
Copyright 2011 John Wiley & Sons, Inc.
Modes and quality of
transportation
Transportation costs
Community government
Local business regulations
Government services (e.g.,
Chamber of Commerce)
Supplement 7-9
Regional and Community
Location Factors in U.S.
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Business climate
Community services
Incentive packages
Government regulations
Environmental regs.
Raw material availability
Commercial travel
Climate
Copyright 2011 John Wiley & Sons, Inc.
• Infrastructure (road &
utilities)
• Quality of life
• Taxes
• Availability of sites
• Financial services
• Community inducements
• Proximity of suppliers
• Education system
Supplement 7-10
Location Incentives
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•
•
•
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Tax credits
Relaxed government regulation
Job training
Infrastructure improvement
Money
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-11
Geographic Information Systems (GIS)
• Computerized system for storing, managing,
creating, analyzing, integrating, and digitally
displaying geographic, i.e., spatial, data
• Specifically used for site selection
• Enables users to integrate large quantities of
information about potential sites and analyze
these data with many different, powerful
analytical tools
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Supplement 7-12
GIS Diagram
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Supplement 7-13
Location Analysis Techniques
• Location factor rating
• Center-of-gravity
• Load-distance
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-14
Location Factor Rating
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•
•
•
Identify important factors
Weight factors (0.00 - 1.00)
Subjectively score each factor (0 - 100)
Sum weighted scores
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-15
Location Factor Rating
SCORES (0 TO 100)
LOCATION FACTOR
Labor pool and climate
Proximity to suppliers
Wage rates
Community environment
Proximity to customers
Shipping modes
Air service
WEIGHT
Site 1
Site 2
Site 3
.30
.20
.15
.15
.10
.05
.05
80
100
60
75
65
85
50
65
91
95
80
90
92
65
90
75
72
80
95
65
90
Weighted Score for “Labor pool and climate” for
Site 1 = (0.30)(80) = 24
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Supplement 7-16
Location Factor Rating
WEIGHTED SCORES
Site 1
Site 2
Site 3
24.00
20.00
9.00
11.25
6.50
4.25
2.50
77.50
19.50
18.20
14.25
12.00
9.00
4.60
3.25
80.80
27.00
15.00
10.80
12.00
9.50
3.25
4.50
82.05
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Site 3 has the
highest factor rating
Supplement 7-17
Location Factor Rating With Excel
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-18
Location Factor Rating With OM Tools
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-19
Center-of-Gravity Technique
• Locate facility at center of movement in
geographic area
• Based on weight and distance traveled;
establishes grid-map of area
• Identify coordinates and weights shipped for
each location
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-20
Grid-Map Coordinates
y
n

x=
i=1
1 (x1, y1), W1
yiWi
i=1
y=
n

y1

xiWi
i=1
2 (x2, y2), W2
y2
n
Wi
n

Wi
i=1
where,
x, y = coordinates of new facility at
3 (x3, y3), W3
center of gravity
xi, yi = coordinates of existing facility i
Wi = annual weight shipped from
facility i
y3
x1
x2
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x3
x
Supplement 7-21
Center-of-Gravity Technique
y
700
x
y
W
C
600
Miles
500
(135)
B
(105)
400
300
200
A
200
200
75
B
100
500
105
C
250
600
135
D
500
300
60
D
(60)
A
(75)
100
0
100 200 300 400 500 600 700 x
Miles
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Supplement 7-22
Center-of-Gravity Technique
n
 xiWi
x=
i=1
n
 Wi
(200)(75) + (100)(105) + (250)(135) + (500)(60)
=
= 238
75 + 105 + 135 + 60
i=1
n

y=
i=1
yiWi
n
 Wi
(200)(75) + (500)(105) + (600)(135) + (300)(60)
=
= 444
75 + 105 + 135 + 60
i=1
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-23
Center-of-Gravity Technique
y
700
C
600
Miles
500
(135)
B
(105)
400
300
200
A
x
y
W
A
200
200
75
B
100
500
105
C
250
600
135
D
500
300
60
Center of gravity (238, 444)
D
(60)
(75)
100
0
100 200 300 400 500 600 700 x
Miles
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Supplement 7-24
Center-of-Gravity With Excel
Formula for
x coordinate
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Supplement 7-25
Center-of-Gravity With OM Tools
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Supplement 7-26
Load-Distance Technique
• Compute (Load x Distance) for each site
• Choose site with lowest (Load x Distance)
• Distance can be actual or straight-line
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-27
Load-Distance Calculations
n
LD =
 ld
i
i
i=1
where,
LD =
load-distance value
li =
load expressed as a weight, number of trips or units
being shipped from proposed site and location i
distance between proposed site and location i
di
=
di
=
(xi - x)2 + (yi - y)2
where,
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-28
Load-Distance
Potential Sites
Site
X
1
360
2
420
3
250
Y
180
450
400
A
200
200
75
X
Y
Wt
Suppliers
B
C
100
250
500
600
105
135
D
500
300
60
Compute distance from each site to each supplier
Site 1 dA =
(xA - x1)2 + (yA - y1)2
=
(200-360)2 + (200-180)2 = 161.2
dB =
(xB - x1)2 + (yB - y1)2
=
(100-360)2 + (500-180)2 = 412.3
dC = 434.2
Copyright 2011 John Wiley & Sons, Inc.
dD = 184.4
Supplement 7-29
Load-Distance
Site 2 dA = 333
dB = 323.9 dC = 226.7 dD = 170
Site 3 dA = 206.2 dB = 180.3 dC = 200
Compute load-distance
dD = 269.3
n
LD =
 ld
i
i
i=1
Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063
Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789
Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*
* Choose site 3
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-30
Load-Distance With Excel
=B7*C11+C7*C12+D7*C13+E7*C14
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Supplement 7-31
Load-Distance With OM Tools
Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-32
Copyright 2011 John Wiley & Sons, Inc.
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Copyright 2011 John Wiley & Sons, Inc.
Supplement 7-33