Facility Location Models

Facility Location Issues

Proximity to customers – makes rapid delivery easier

Factors
Business climate – can include presence of similar-sized businesses,
businesses in the same industry, and other foreign companies
Total costs – object is to minimize overall cost

Infrastructure – adequate road, rail, air, and sea transportation along with
energy and telecommunications
Quality of labor – educational and skill levels must match needs

Suppliers – proximity of important suppliers supports lean production

Other facilities – location of other facilities can influence a location

decision
 Facility Location Issues

Free trade zones – a closed facility into which foreign goods can be
Factors brought without being subject to the normal customers requirements
Political risk – risks in both the country of location and the host country
influence the decision
Government barriers – barriers in many countries are being removed

Trading blocs – firms locate within a block to take advantage of new

markets or lower total cost
Environmental regulation – these affect a certain industry in a given
location and must be included in the decision
Host community – host community’s interest is part of the evaluation
process
Competitive advantage – the location should provide the company with a
competitive advantage
 Location Analysis Techniques

Location Analysis
Techniques

Center of Load Transportation

Factor Rating
Gravity Distance
 Location Factor Rating

• Identify important factors

• Weight factors (0.00 - 1.00)
• Subjectively score each factor (0 - 100)
• Sum weighted scores
The Dynaco Manufacturing Company is going to build a
new plant to manufacture ring bearings (used in
automobiles and trucks). The site selection team is
evaluating three sites, and they have scored the important
factors for each as follows. They want to use these ratings
to compare the locations
 Location Factor Rating
SCORES (0 TO 100)
LOCATION FACTOR WEIGHT Site 1 Site 2 Site 3
Labor pool and climate .30 80 65 90
Proximity to suppliers .20 100 91 75
Wage rates .15 60 95 72
Community environment .15 75 80 80
Proximity to customers .10 65 90 95
Shipping modes .05 85 92 65
Air service .05 50 65 90

Weighted Score for “Labor pool and climate” for

Site 1 = (0.30)(80) = 24
Location Factor Rating

WEIGHTED SCORES
Site 1 Site 2 Site 3
24.00 19.50 27.00
20.00 18.20 15.00
Site 3 has the
9.00 14.25 10.80
highest factor rating
11.25 12.00 12.00
6.50 9.00 9.50
4.25 4.60 3.25
2.50 3.25 4.50
77.50 80.80 82.05
Balston Healthcare operates three hospitals and a number of
clinics in its citywide network. It is planning to open a new
wellness center and clinic facility that focuses on geriatric
clients in one of four suburbs. The following table shows the
weighted criteria for each location:
 Center-of-Gravity Technique

• Locate facility at center of movement in

geographic area
• Based on weight and distance traveled;
establishes grid-map of area
• Identify coordinates and weights shipped for
each location
 Grid-Map Coordinates
y n n
 xiWi  yiWi
2 (x2, y2), W2 i=1 i=1
y2 x= n y= n
 Wi  Wi
1 (x1, y1), W1 i=1 i=1
y1
where,
x, y = coordinates of new facility at
3 (x3, y3), W3 center of gravity
y3 xi, yi = coordinates of existing facility i
Wi = annual weight shipped from
facility i

x1 x2 x3 x
The Burger Doodle restaurant chain purchases ingredients from
four different food suppliers. The company wants to construct a
new central distribution center to process and package the
ingredients before shipping them to its various restaurants. The
suppliers transport ingredient items in 40-foot truck trailers,
each with a capacity of 38,000 lbs. The locations of the four
suppliers, A, B, C, and D, and the annual number of trailer
loads that will be transported to the distribution center, are
shown in the following figure:
 Center-of-Gravity Technique
y
A B C D
700
C x 200 100 250 500
600 (135) y 200 500 600 300
B
W 75 105 135 60
500 (105)
Miles

400
D
300
A (60)
200 (75)
100

0 100 200 300 400 500 600 700 x

Miles
 Center-of-Gravity Technique
n
 xiWi
i=1
x= =
n
 Wi
i=1

n
 yiWi
i=1
y= =
n
 Wi
i=1
 Center-of-Gravity Technique
n
 xiWi
i=1 (200)(75) + (100)(105) + (250)(135) + (500)(60)
x= = = 238
n 75 + 105 + 135 + 60
 Wi
i=1

n
 yiWi
i=1 (200)(75) + (500)(105) + (600)(135) + (300)(60)
y= = = 444
n 75 + 105 + 135 + 60
 Wi
i=1
 Center-of-Gravity Technique
y
A B C D
700
C x 200 100 250 500
600 (135) y 200 500 600 300
B
W 75 105 135 60
500 (105)
Center of gravity (238, 444)
Miles

400
D
300
A (60)
200 (75)
100

0 100 200 300 400 500 600 700 x

Miles
The Burger Doodle restaurant chain uses a distribution center
to prepare the food ingredients it provides its individual
restaurants. The company is attempting to determine the
location for a new distribution center that will service five
restaurants. The grid-map coordinates of the five restaurants
and the annual number of 40-foot trailer trucks transported to
each restaurant are as follows:

Determine the least-cost location using the center-of-gravity

method.
 Load Distance Technique
• A variation of the center-of-gravity method for
determining the coordinates of a facility location
is the load-distance technique.

• In this method, a single set of location

coordinates is not identified.

• Instead, various locations are evaluated using a

load-distance value that is a measure of weight
and distance.
 Load-Distance Technique

• Compute (Load x Distance) for each site

• Choose site with lowest (Load x Distance)
• Distance can be actual or straight-line
 Load-Distance Calculations
n
LD =  ld i i
i=1
where,
LD = load-distance value
li = load expressed as a weight, number of trips or units
being shipped from proposed site and location i
di = distance between proposed site and location i
di = (xi - x)2 + (yi - y)2
where,
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility
Burger Doodle wants to evaluate three different sites it has
identified for its new distribution center relative to the four
suppliers identified in previous example. The coordinates of the
three sites under consideration are as follows:
Site 1: x1 = 360, y1 = 180
Site 2: x2 = 420, y2 = 450
Site 3: x3 = 250, y3 = 400
 Load-Distance

Potential Sites Suppliers

Site X Y A B C D
1 360 180 X 200 100 250 500
2 420 450 Y 200 500 600 300
3 250 400 Wt 75 105 135 60

Compute distance from each site to each supplier

Site 1 dA = (xA - x1)2 + (yA - y1)2

dB = (xB - x1)2 + (yB - y1)2

dC = dD =
 Load-Distance

Potential Sites Suppliers

Site X Y A B C D
1 360 180 X 200 100 250 500
2 420 450 Y 200 500 600 300
3 250 400 Wt 75 105 135 60

Compute distance from each site to each supplier

Site 1 dA = (xA - x1)2 + (yA - y1)2 = (200-360)2 + (200-180)2 = 161.2

dB = (xB - x1)2 + (yB - y1)2 = (100-360)2 + (500-180)2 = 412.3

dC = 434.2 dD = 184.4
 Load-Distance
Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170
Site 3 dA = 206.2 dB = 180.3 dC = 200 dD = 269.3

Compute load-distance
n
LD =  ld i i
i=1
Site 1 =
Site 2 =
Site 3 =
 Load-Distance
Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170
Site 3 dA = 206.2 dB = 180.3 dC = 200 dD = 269.3

Compute load-distance
n
LD =  ld i i
i=1
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) = 99,789
Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*

* Choose site 3
An army division in Iraq has five troop encampments in the
desert, and the division leaders want to determine the best
location for a supply depot to serve the camps. The (x, y)
coordinates (in miles) of the camps, A, B, C, D, and E, and
the daily amount of supplies (in tons) required at each
camp are as follows:

Determine the best site for the supply depot using the
center-of-gravity technique.
Suppose the division commanders are limited to three possible
sites for the supply depot because of airfield locations and enemy
troop concentrations. The coordinates (in miles) of these three
potential sites are site 1 (400, 250), site 2 (100, 200), and site 3
(200, 500). Using the load-distance technique, determine the best
site for the supply depot.
 Linear Programming –
Transportation Method
• Transportation method is a special linear programming
method.
• Seeks to minimize costs of shipping n units to m
destinations, or it seeks to maximize profit of shipping n
units to m destinations.

1
5
A 7
9 Min 5xA1 + 7xA2 + 9xA3 +
8 2 8xB1 + 6xB2 + 4xB3
B 6
4
3
 Example 15.1

• Suppose the U.S. Pharmaceutical Company has

four factories supplying the warehouses of four
major customers and its management wants to
determine the minimum-cost shipping schedule
for its monthly output to these customers.
Factory supply, warehouse demands, and
shipping costs per case for these drugs are
given in the table in the next slide.
 Example 15.1

Formulation of the problem: