1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 14

13-2 CR (2004) Prentice Hall, Inc. Method appraisal  A continuous location method  Locates on the basis of transportation costs alone The COG method involves  Determining the volumes by source and destination point  Determining the transportation costs based on $/unit/mi.  Overlaying a grid to determine the coordinates of source and/or destination points  Finding the weighted center of gravity for the graph COG Method

13-3 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) where V i = volume flowing from (to) point I R i = transportation rate to ship V i from (to) point i X i,Y i = coordinate points for point i = coordinate points for facility to be located

13-4 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) Example Suppose a regional medical warehouse is to be established to serve several Veterans Administration hospitals throughout the country. The supplies originate at S 1 and S 2 and are destined for hospitals at H 1 through H 4. The relative locations are shown on the map grid. Other data are: Note rate is a per mile cost Point i Prod- uctsLocation Annual volume, cwt. Rate, $/cwt/ mi.X i Y i 1 S 1 ASeattle8, S 2 BAtlanta10, H 1 A & BLos Angeles 5, H 2 A & BDallas3, H 3 A & BChicago4, H 4 A & BNew York6,

13-5 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) Map scaling factor, K

13-6 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) Solve the COG equations in table form iX i Y i V i R i V i R i V i R i X i V i R i Y i , , , , , , , ,5801, , ,180 1,560 1,2607,9015,538

13-7 COG Method (Cont’d) Now, X = 7,901/1,260 = 6.27 Y = 5,538/1,260 = 4.40 This is approximately Columbia, MO. The total cost for this location is found by: whereK is the map scaling factor to convert coordinates into miles. CR (2004) Prentice Hall, Inc.

13-8 CR (2004) Prentice Hall, Inc. COG COG Method (Cont’d)

13-9 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) 2,360,882 Total 660, , , , , , , , , , , , TCRiRi ViVi YiYi XiXi i Calculate total cost at COG

Example The firm is considering 2 alternative sites for its new facility, France and Denmark After evaluating the firm’s Needs, the Managers have Narrowed the list of Important Selection Criteria down into 5 major Factors. – Labor availability and attitude – People to car ratio – Per capita income – Tax structure – Education and Health

Factor Rating Example Since factor weights, selected factors, and assigned scores are all determined subjectively, the managers should be very careful in selecting these items and numbers.