FACILITY LOCATION

Prof. Kaushik Paul

Associate Professor
Operations Area
E-Mail: kaushik.paul@igsm.in
Phone: 43559308
 OBJECTIVES

 Issues in Facility Location

 Various Plant Location Methods

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COMPETITIVE IMPERATIVES IMPACTING
LOCATION

 The need to produce close to the customer due to

time-based competition, trade agreements, and
shipping costs

 The need to locate near the appropriate labor pool to

take advantage of low wage costs and/or high
technical skills

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 ISSUES IN FACILITY LOCATION

 Proximity to Customers

 Business Climate

 Total Costs

 Infrastructure

 Quality of Labor

 Suppliers

 Other Facilities

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 ISSUES IN FACILITY LOCATION

 Free Trade Zones

 Political Risk

 Government Barriers

 Trading Blocs

 Environmental Regulation

 Host Community

 Competitive Advantage

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 PLANT LOCATION METHODOLOGY:
FACTOR RATING METHOD EXAMPLE
Two refineries sites (A and B) are assigned the following
range of point values and respective points, where the
more points the better for the site location.
Sites
Major factors for site Pt. A
location Range B
Fuels in region 0 to 330 12 15
Power availability and reliability 0 to 200 3 6
Labor climate 0 to 100 15 10
Living conditions 0 to 100 0 0
Transportation 0 to 50 54 63
Water supply 0 to 10 24 96
Climate 0 to 50 45 50
Supplies 0 to 60 4 5
Tax policies and laws 0 to 20 Best Site
8 4 is B
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Total pts. 418 50 6
 PLANT LOCATION METHODOLOGY:
TRANSPORTATION
METHOD OF LINEAR PROGRAMMING

 Transportation method of linear programming

seeks to minimize costs of shipping from n units
to m destinations or its seeks to maximize profit
of shipping n units to m destinations

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 PLANT LOCATION METHODOLOGY:
CENTROID METHOD

 The centroid method is used for locating single

facilities that considers existing facilities, the
distances between them, and the volumes of goods
to be shipped between them

 This methodology involves formulas used to compute

the coordinates of the two-dimensional point that
meets the distance and volume criteria stated above

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 PLANT LOCATION
METHODOLOGY: CENTROID
METHOD FORMULAS

Cx =
∑d V ix i
Cy =
∑d V iy i

∑V i ∑V i

Where:
Cx = X coordinate of centroid
Cy = X coordinate of centroid
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith
location

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 PLANT LOCATION METHODOLOGY:
EXAMPLE OF CENTROID METHOD
 Centroid method example
 Several automobile showrooms are located

according to the following grid which represents

coordinate locations for each showroom
Y S ho wro o m No o f Z-Mo b ile s
Q s o ld p e r mo nth
(790,900)

D A 1250
(250,580)

D 1900
A
(100,200)
Q 2300
(0,0) X

Question: What is the best location for a new Z-Mobile

warehouse/temporary storage facility considering only
distances and quantities sold per month?
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 EXAMPLE OF CENTROID METHOD
(CONTINUED): DETERMINING THE
COORDINATES OF THE EXISTING
FACILITY
Y
To begin, you must identify the Q
existing facilities on a two- (790,900)

dimensional plane or grid and D

(250,580)
determine their coordinates.
A
(100,200)

(0,0) X
S ho wro o m No o f Z-Mo b ile s
You must also have the s o ld p e r mo nth
volume information on the
A 1250
business activity at the
existing facilities. D 1900

Q 2300
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EXAMPLE OF CENTROID METHOD (CONTINUED):
DETERMINING THE COORDINATES OF THE NEW
FACILITY
You then compute the new coordinates using the formulas:
100(1250) + 250(1900) + 790(2300) 2,417,000
Cx = = = 443.49
1250 + 1900 + 2300 5,450
200(1250) + 580(1900) + 900(2300) 3,422,000
Cy = = = 627.89
1250 + 1900 + 2300 5,450

You then take the coordinates and place them on the map:
Y
S ho wro o m No o f Z-Mo b ile s
Q New s o ld p e r mo nth
(790,900)
location
Z
D
(250,580) of facility A 1250
Z about
A D 1900
(100,200) (443,627)
(0,0) X Q 2300
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Reference: Operations Management for
Competitive Advantage
By Chase, Jacobs & Aquilano, 10e

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