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TRANSCRIPT
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McGraw-Hill/Irwin
Technical Note 11
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-basedcompetition, trade agreements, andshipping costs
The need to locate near the
appropriate labor pool to takeadvantage of low wage costs and/orhigh 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 thefollowing range of point values and respective points,
where the more points the better for the site location.
123150
54
24
45
4
8
5
5
Major factors for site location t. Range
156100
63
96
50
5
4
50
20
ites
A B
Total pts. 418 544
Best ite
is B
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Plant Location Methodology:
Transportation Method of Linear
Programming
Transportation method of linearprogramming seeks to minimize
costs of shipping n units to m
destinations or its seeks tomaximize 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 facilities that considers
existing facilities, the distances
between them, and the volumes ofgoods to be shipped between them
This methodology involves formulas
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 Formulas
C =d V
Vx
ix i
i
Where:
Cx = X coordinate of centroid
Cy = X coordinate of centroid
dix = X coordinate oftheith locationdiy = Y coordinate oftheith location
Vi= volume of goods movedto or from ith
location
C d
y
iy i
i
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Plant Location Methodology:
Example ofCentroid Method
Question: What is the best location for a new Z-Mobile
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
Sho room No of Z-Mobile ss old p e 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 ofCentroid
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)
Y
ou must also have thevolume information on the
business activity at the
existing facilities.
Sho room No of Z-Mobile s
s old pe r month
A 1250
D 1900
Q 2300
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Plant Location Methodology: Example ofCentroid
Method (Continued): Determining the Coordinates
of the New Facility
C 100(1250) + 250(1900) + 790(2300)
1250 + 1900 + 2300
2,417,000
5,450x 443.49
C =
200(1250) 580(1900) 900(2300)
1250 1900 2300 =
3,422,000
5,450 =y 627.89
h r f - ile s
s l e r th
1250
1900
2300X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
You then compute the new coordinates using the formulas:
Z
Ne
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 influencesmanufacturing plant and
warehouse location planning can
include which of the following?a. Proximity to customers
b. Business climate
c. Infrastructure
d. Quality of labore. All of the above
Answer:e.All oftheabove
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Question Bowl
Criteria that influencesmanufacturing plant and
warehouse location planning can
include which of the following?a. Political risk
b. Government barriers
c. Environmental regulation
d. All of the abovee. None of the aboveAnswer:d.All oftheabove
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Question Bowl
Which of the following are plantlocation methods?
a. Transportation method of linear
programmingb. Factor-rating systems
c. Centroid method
d. All of the above
e. None of the above
Answer:d.All oftheabove
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Question Bowl
Which of the following methods of plantlocation 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 plantlocation analysis is the most widelyused general location techniquebecause it combines diverse factors
in an easy-to-understand format?a. Transportation method of linearprogramming
b. Factor-rating systemsc. Centroid methodd. All of the abovee. None of the above
Answer:b. Factor-rating systems
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Question Bowl
The location decision for servicefacilities is closely tied to which of
the following?
a. Market selection decision
b. Material costsc. Nearness to distributors
d. Nearness to high-skilled labor
e. None of the aboveAnswer:a. Marketselectiondecision
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End of Technical
Note 11