1. 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

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

3. 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

4. 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

5. 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

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

7. 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

8. 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)

9. 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

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

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

12. Copyright 2006 John Wiley & Sons, Inc.Supplement 7-12 Location Rating Factor  Identify important factors  Weight factors (0.00 - 1.00)  Subjectively score each factor (0 - 100)  Sum weighted scores

13. 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.30.20.15.15.10.05.05 WEIGHT 801006075658550 Site 1 65919580909265 Site 2 90757280956590 Site 3 SCORES (0 TO 100) Weighted Score for “Labor pool and climate” for Site 1 = (0.30)(80) = 24

14. Copyright 2006 John Wiley & Sons, Inc.Supplement 7-14 Location Factor Rating 24.00 20.00 9.00 11.25 6.50 4.25 2.50 77.50 Site 1 19.50 18.20 14.25 12.00 9.00 4.60 3.25 80.80 Site 2 27.00 15.00 10.80 12.00 9.50 3.25 4.50 82.05 Site 3 WEIGHTED SCORES Site 3 has the highest factor rating

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

16. 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

17. 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

18. Copyright 2006 John Wiley & Sons, Inc.Supplement 7-18 Center-of-Gravity Technique: Example ABCD x200100250500 y200500600300 Wt7510513560 y700 500 600 400 300 200 100 0 x 700500600400300200100 A B C D (135) (105) (75) (60) Miles Miles

19. 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) 75 + 105 + 135 + 60 (200)(75) + (100)(105) + (250)(135) + (500)(60) 75 + 105 + 135 + 60

20. Copyright 2006 John Wiley & Sons, Inc.Supplement 7-20 Center-of-Gravity Technique: Example (cont.) ABCD x200100250500 y200500600300 Wt7510513560 y 700 500 600 400 300 200 100 0 x 700500600400300200100 A B C D (135) (105) (75) (60) Miles Miles Center of gravity (238, 444)

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

22. 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

23. 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,

24. Copyright 2006 John Wiley & Sons, Inc.Supplement 7-24 Load-Distance: Example Potential Sites SiteXY 1360180 2420450 3250400 Suppliers ABCD X200100250500 Y200500600300 Wt7510513560 Compute distance from each site to each supplier = (200-360) 2 + (200-180) 2 d A = (x A - x 1 ) 2 + (y A - y 1 ) 2 Site 1 = 161.2 = (100-360) 2 + (500-180) 2 d B = (x B - x 1 ) 2 + (y B - y 1 ) 2 = 412.3 d C = 434.2 d D = 184.4

25. Copyright 2006 John Wiley & Sons, Inc.Supplement 7-25 Load-Distance: Example (cont.) Site 2 d A = 333 d C = 226.7 d B = 323.9 d D = 170 Site 3 d A = 206.2 d C = 200 d B = 180.4 d D = 269.3 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

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

27. 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.