problem in faciltity location

7/27/2019 Problem in Faciltity Location

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FACILITY LOCATION

PROBLEMS


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Factors Affecting Location Selection Labour costs (including wages, unionization, productivity)

Labour availability (including attitudes, age, distribution, and skills)

Proximity to raw materials and suppliers

Utilities (including gas, electric, water, and their costs)

Site costs (including land, expansion, parking, drainage)

Transportation availability (including rail, air, water, and interstate

roads)

Steps in Factor Rating Method Develop a list of relevant factors called critical success factors

Assign a weight to each factor

Develop a scale for each factor Score each location for each factor

Multiply score by weights for each factor for each location

Recommend the location with the highest point score


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Location Break-Even AnalysisMethod of cost-volume analysis used for industrial

locationsThree steps in the method

1. Determine fixed and variable costs for each location

2. Plot the cost for each location

3. Select location with lowest total cost for expectedproduction

volume


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Center of Gravity Method

Finds location of distribution center that minimizes distribution

costsConsiders

1)Location of markets

2)Volume of goods shipped to those markets

3)Shipping cost (or distance)

Place existing locations on a coordinate grid1) Grid origin and scale is arbitrary

2) Maintain relative distances

Calculate X and Y coordinates for center of gravity

1) Assumes cost is directly proportional to distance andvolume shipped

2) Gives location of distribution center

3)Minimizes transportation cost


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A full-service restaurant is considering opening a new facility in a specific city. The table

below shows its ratings of four factors at each of two potential sites.

The score for Gary Mall is _____ and the score for Belt Line is ______.

a. 120; 120

b. 22; 24

c. 18; 120d. 34; 28

e. none of the above

Factor WEIGHT GARY MALL BELTLINE

Affluence of local population 0.20 30 30

Traffic flow 0.40 50 20

Parking availability 0.20 30 40

Growth potential 0.20 10 30


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A washing machine manufacturer is analyzing three

possible locations-Buffalo, New York; Toledo, Ohio; and

Orlando, Florida - to build an additional manufacturingfacility.

Research analyses indicate the annual fixed costs for the

sites are respectively $45,000; $60,000; and $95,000. The

variable unit costs respectively are $235; $205; and $185.The anticipated selling price for the washing machines is

$350.

The company is seeking the most economical location for

an expected volume of 5,000 units annually.The total cost for each city at the expected volume of

5,000 units is calculated using the following formula:

Total cost = Fixed cost + Variable cost x Total volume


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Buffalo:Total cost = $45,000 + $235 x 5,000 = $1,220,000

Toledo:Total cost = $60,000 + $205 x 5,000 = $1,085,000

Orlando:Total cost = $95,000 + $185 x 5,000 = $1,020,000

Expected annual profits for each location can be calculated

using the following formula:

Total revenue =

(Selling price x 5,000) - Total cost (Fixed cost + Variable cost

x total volume)

Buffalo:$1,750,000 - $1,220,000 = $530,000

Toledo: $1,750,000 - $1,085,000 = $665,000Orlando:$1,750,000 - $1,020,000 = $730,000


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Assuming a maximum production of 5,000 units, Orlando

provides the lowest cost location at $1,020,000 and the

highest annual profit of $730,000.

At 500 units Buffalo and Toledo are both cheaper than

Orlando. At 1,500 units Toledo is the cheapest location,

but at 2,000 units of production Orlando becomes thecheapest. Therefore, the crossover points in the

breakeven analysis are 500 and 1,500 units of production.


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East Texas Seasonings is preparing to build one processing center to serve its four sources of

seasonings. The four source locations are at coordinates shown below. Also, the volume from

each source is provided. What is the center of gravity?

a. center of gravity = 28

b. X = 22,000; Y = 24,000

c. X = 27.5; Y = 40

d. X = 28.125; Y = 31.25

e. none of the above

X-coordinate Y-coordinate Volume

Athens, Texas 30 30 150

Beaumont, Texas 20 10 350

Carthage, Texas 10 70 100

Denton, Texas 50 50 200


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The new Health-care facility is targeted to serve seven census tractsin Delhi. The table

given below shows the coordinates for the centre of each census tract,along with the

projected populations, measured in thousands. Customers will travel fromthe seven

census tract centres to the new facility when they need health-care. Two locationsbeing

considered for the new facility are at (5.5, 4.5) and (7, 2), which are the centresof census

tracts C and F. Details of seven census tract centres, co-ordinate distances alongwith thepopulation for each centre are given below. If we use the population as the loadsand use

rectilinear distance, which location is better in terms of its total load-distancescore?

SOLUTION:

Calculate the load-distance score for each location. Using the coordinates fromthe abovetable. Calculate the load-distance score for each tract.Using the formula DISTANCE

SL.NO CENSUS TRACK (X,Y) POPULATION

1 A (2.5, 4.5) 2

2 B (2.5, 2.5) 5

3 C (5.5, 4.5) 10

4 D (5,2) 7

5 E (8 , 5) 10

6 F (7 , 2) 20

7 G (9 , 2.5) 14


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problem in faciltity location

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