Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Operations Management - 5 th Edition Chapter 7 Supplement Roberta Russell & Bernard W. Taylor, III Facility Location Models

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-2 Lecture Outline  Types of Facilities  Site Selection: Where to Locate  Location Analysis Techniques

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-3 Types of Facilities  Heavy-manufacturing facilities large, require a lot of space, and are expensive large, require a lot of space, and are expensive  Light-industry facilities smaller, cleaner plants and usually less costly smaller, cleaner plants and usually less costly  Retail and service facilities smallest and least costly smallest and least costly

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-4 Factors in Heavy Manufacturing Location  Construction costs  Land costs  Raw material and finished goods shipment modes  Proximity to raw materials  Utilities  Labor availability

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-5 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

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-6 Factors in Retail Location  Proximity to customers  Location is everything

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-7 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

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-8 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)

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-9 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

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-10 Location Incentives  Tax credits  Relaxed government regulation  Job training  Infrastructure improvement  Money

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-11 Location Analysis Techniques  Location rating factor  Center-of-gravity  Load-distance

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-12 Location Rating Factor  Identify important factors  Weight factors ( )  Subjectively score each factor ( )  Sum weighted scores

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-13 Location Factor Rating: Example Labor pool and climate Proximity to suppliers Wage rates Community environment Proximity to customers Shipping modes Air service LOCATION FACTOR WEIGHT Site Site Site 3 SCORES (0 TO 100) Weighted Score for “Labor pool and climate” for Site 1 = (0.30)(80) = 24

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-14 Location Factor Rating Site Site Site 3 WEIGHTED SCORES Site 3 has the highest factor rating

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-15 Factor Rating with Excel

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-16  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 Center-of-Gravity Technique

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-17 Grid-Map Coordinates where, x, y =coordinates of new facility at center of gravity x i, y i =coordinates of existing facility i W i =annual weight shipped from facility i  n WiWiWiWi i = 1  xiWixiWixiWixiWi n x =  n WiWiWiWi i = 1  yiWiyiWiyiWiyiWi n y = x1x1x1x1 x2x2x2x2 x3x3x3x3x y2y2y2y2y y1y1y1y1 y3y3y3y3 1 (x 1, y 1 ), W 1 2 (x 2, y 2 ), W 2 3 (x 3, y 3 ), W 3

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-18 Center-of-Gravity Technique: Example ABCD x y Wt y x A B C D (135) (105) (75) (60) Miles Miles

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-19 Center-of-Gravity Technique: Example (cont.) x = = = 238 n  WiWi i = 1  xiWixiWi n  n WiWi  yiWiyiWi n y = = = 444 (200)(75) + (500)(105) + (600)(135) + (300)(60) (200)(75) + (100)(105) + (250)(135) + (500)(60)

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-20 Center-of-Gravity Technique: Example (cont.) ABCD x y Wt y x A B C D (135) (105) (75) (60) Miles Miles Center of gravity (238, 444)

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-21 Center of Gravity with Excel

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-22 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 2006 John Wiley & Sons, Inc.Supplement 7-23 Load-Distance Calculations  l i d i i = 1 n LD = LD = load-distance value l i = load expressed as a weight, number of trips or units being shipped from proposed site and location i d i = distance between proposed site and location i d i = (x i - x) 2 + (y i - y) 2 (x,y) = coordinates of proposed site (x i, y i ) = coordinates of existing facility where,

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-24 Load-Distance: Example Potential Sites SiteXY Suppliers ABCD X Y Wt Compute distance from each site to each supplier = ( ) 2 + ( ) 2 d A = (x A - x 1 ) 2 + (y A - y 1 ) 2 Site 1 = = ( ) 2 + ( ) 2 d B = (x B - x 1 ) 2 + (y B - y 1 ) 2 = d C = d D = 184.4

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-25 Load-Distance: Example (cont.) Site 2 d A = 333 d C = d B = d D = 170 Site 3 d A = d C = 200 d B = d D = Compute load-distance i = 1 n  l i d i LD = 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

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-26 Load- Distance with Excel

Copyright 2006 John Wiley & Sons, Inc.Supplement 7-27 Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.