Chapter 7 Supplement
Operational Decision-Making Tools: Facility Location Models
Operations Management - 5th Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani University of Tennessee at Chattanooga
Lecture Outline
Types of Facilities Site Selection: Where to Locate Location Analysis Techniques
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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 smallest and least costly
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Retail and service facilities
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Factors in Heavy Manufacturing Location
Construction costs Land costs Raw material and finished goods shipment modes Proximity to raw materials Utilities Labor availability
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Factors in Light Industry Location
Transportation costs Proximity to markets Frequency of delivery required by customer Land costs Easily accessible geographic region Education and training capabilities
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Factors in Retail Location
Proximity to customers Location is everything
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Global Location Factors
Government stability Government regulations Political and economic systems Economic stability and growth Exchange rates Culture Climate Export import regulations, duties and tariffs Raw material availability Number and proximity of suppliers Transportation and distribution system Labor cost and education Available technology Commercial travel Technical expertise Cross-border trade regulations Group trade agreements
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Copyright 2006 John Wiley & Sons, Inc.
Regional Location Factors
Labor (availability, education, cost, and unions) Proximity of customers Number of customers Construction/leasing costs Land cost Modes and quality of transportation Transportation costs Community government Local business regulations Government services (e.g., Chamber of Commerce)
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Supplement 7-8
Regional Location Factors (cont.)
Business climate Community services Incentive packages Government regulations Environmental regulations Raw material availability Commercial travel Climate Infrastructure (e.g., roads, water, sewers) Quality of life Taxes Availability of sites Financial services Community inducements Proximity of suppliers Education system
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Location Incentives
Tax credits Relaxed government regulation Job training Infrastructure improvement Money
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Location Analysis Techniques
Location rating factor
Center-of-gravity
Load-distance
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Location Rating Factor
Identify important factors Weight factors (0.00 - 1.00) Subjectively score each factor (0 - 100) Sum weighted scores
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Supplement 7-12
Location Factor Rating: Example
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 .30 .20 .15 .15 .10 .05 .05 Site 1 80 100 60 75 65 85 50 Site 2 65 91 95 80 90 92 65 Site 3 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 7-13
Location Factor Rating
WEIGHTED SCORES
Site 1 24.00 20.00 9.00 11.25 6.50 4.25 2.50 77.50 Site 2 19.50 18.20 14.25 12.00 9.00 4.60 3.25 80.80 Site 3 27.00 15.00 10.80 12.00 9.50 3.25 4.50 82.05
Site 3 has the highest factor rating
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Supplement 7-14
Factor Rating with Excel
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Center-of-Gravity Technique
Locate facility at center of geographic area Based on weight and distance traveled establish grid-map of area Identify coordinates and weights shipped for each location
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Grid-Map Coordinates
y 2 (x2, y2), W2
i=1 x=
xiWi y= Wi
i=1
yiWi
y2 1 (x1, y1), W1
i=1
i=1
Wi
y1
y3
3 (x3, y3), W3
where, x, y = coordinates of new facility at center of gravity xi, yi = coordinates of existing facility i Wi = annual weight shipped from facility i
x1
x2
x3
x
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Center-of-Gravity Technique: Example
y 700
C
600 500 Miles 400 300 200 100 0
B (105)
(135)
x y Wt
A 200 200 75
B 100 500 105
C 250 600 135
D 500 300 60
D A (75) (60)
100 200 300 400 500 600 700 x Miles
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Center-of-Gravity Technique: Example (cont.)
x=
i=1 n
xiWi Wi
(200)(75) + (100)(105) + (250)(135) + (500)(60) = = 238 75 + 105 + 135 + 60
i=1 n
y=
n
i=1
yiWi
i=1
Wi
(200)(75) + (500)(105) + (600)(135) + (300)(60) = = 444 75 + 105 + 135 + 60
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Supplement 7-19
Center-of-Gravity Technique: Example (cont.)
y 700
C
600 500 Miles 400 300 200 100 0
B (105)
(135)
x y Wt
A 200 200 75
B 100 500 105
C 250 600 135
D 500 300 60
Center of gravity (238, 444) D (60)
(75)
100 200 300 400 500 600 700 x Miles
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Center of Gravity with Excel
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Load-Distance Technique
Compute (Load x Distance) for each site Choose site with lowest (Load x Distance) Distance can be actual or straight-line
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Supplement 7-22
Load-Distance Calculations
LD =
where, LD = li di di = = = load-distance value 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 (xi - x)2 + (yi - y)2
ld
i
i=1
where, (x,y) = coordinates of proposed site (xi , yi) = coordinates of existing facility
Copyright 2006 John Wiley & Sons, Inc. Supplement 7-23
Load-Distance: Example
Potential Sites Site X 1 360 2 420 3 250 Y 180 450 400 A 200 200 75 Suppliers B C 100 250 500 600 105 135 D 500 300 60
X Y Wt
Compute distance from each site to each supplier Site 1 dA = dB = (xA - x1)2 + (yA - y1)2 = (200-360)2 + (200-180)2 = 161.2 (100-360)2 + (500-180)2 = 412.3
(xB - x1)2 + (yB - y1)2 =
dC = 434.2
dD = 184.4
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Supplement 7-24
Load-Distance: Example (cont.)
Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170 dD = 269.3 Site 3 dA = 206.2 dB = 180.4 dC = 200
Compute load-distance
LD =
ld
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) = 99,791 Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*
* Choose site 3
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LoadDistance with Excel
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Supplement 7-26
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