Facility Location

Logistics Management

Factors that Affect Location Decisions

Distance Measures

Classification of Planar Facility Location Problems

Planar Single-Facility Location Problems

Minisum Location Problem with Rectilinear Distances
Minisum Location Problem with Euclidean Distances
Minimax Location Problem with Rectilinear Distances
Minimax Location Problem with Euclidean Distances

Planar Multi-Facility Location Problems

Minisum Location Problem with Rectilinear Distances

Logistics Management

Logistics Management can be defined as the management of the transportation and

distribution of goods. The term goods includes raw materials or subassemblies obtained
from suppliers as well as finished goods shipped from plants to warehouses or
customers.

Logistics management problems can be classified into three categories:

Location Problems: involve determining the location of one or more new facilities
in one or more of several potential sites. The cost of locating each new facility at
each of the potential sites is assumed to be known. It is the fixed cost of locating a
new facility at a particular site plus the operating and transportation cost of serving
customers from this facility-site combination.
Allocation Problems: assume that the number and location of facilities are known a
priori and attempt to determine how each customer is to be served. In other words,
given the demand for goods at each customer center, the production or supply
capacities at each facility, and the cost of serving each customer from each facility,
the allocation problem determines how much each facility is to supply to each
customer center.
Location-Allocation Problems:involve determining not only how much each
customer is to receive from each facility but also the number of facilities along with
their locations and capacities.

Factors that Affect Location Decisions

Proximity to source of raw materials.

Cost and availability of energy and utilities.
Cost, availability, skill, and productivity of labor.
Government regulations at the federal, state, county, and local levels.
Taxes at the federal, state, county, and local levels.
Insurance.
Construction costs and land price.
Government and political stability.
Exchange rate fluctuation.
Export and import regulations, duties, and tariffs.
Transportation system.
Technical expertise.
Environmental regulations at the federal, state, county and local levels.
Support services.
Community services - schools, hospitals, recreation, and so on.
Weather.
Proximity to customers.
Business climate.
Competition-related factors.

Distance Measures

Rectilinear distance (L1 norm)

Pi = (ai, bi)

d(X, Pi) = |x - ai| + |y - bi|

X = (x, y)

Straight line or Euclidean distance (L2 norm)

d(X, Pi) =

Pi = (ai, bi)

(x - a i) 2 + (y - b i)2
X = (x, y)

Tchebyshev distance (L norm)

Pi = (ai, bi)

d(X, Pi) = max{|x - ai|, |y - bi|}

X = (x, y)

Classification of Planar Facility Location Problems

# of facilities

Objectives

Distance measures
Rectilinear

Minisum

Euclidean
Tchebyshev

SingleFacility

Rectilinear
Minimax

Euclidean
Tchebyshev

Facility
Location

Rectilinear
Minisum

Euclidean
Tchebyshev

MultiFacility

Rectilinear
Minimax

Euclidean
Tchebyshev

Planar Single-Facility Location

Formulations
Minisum Formulation :
Min f(x) = m

w i d X, Pi
i 1: location of the new facility
where X = (x, y)
Pi = (ai, bi) : location of the i-th existing facility, i = 1, , m
wi : weight associated to the i-th existing facility
For example, wi =

t i,
ci
vi

where ci : cost per hour of travel,

ti : number of trips per month,

vi : average velocity.
Minimax Formulation :
Min f(x) = Max

s. t.

{w i d(X, Pi)}

wi d(X,i =P1,i),mz, i = 1, , m

Min

Insights for the Minisum Problem with

Euclidean Distance
Hole
P2

P1
Horizontal
pegboard

P3

P5
P4

w5

w1

w2

w3
w4

String

Weight proportional
to wi

Majority Theorem :
When one weight constitutes a majority of the total weight, an optimal new facility
location coincides with the existing facility which has the majority weight.

Minisum Location Problem with

Rectilinear Distances
Min f(x, y) =
Note that
where
f2(y) =

i= 1

[ | x a i | | y b i |]

f(x, y) = f1(x) + f2(y)

m

f1(x) = i= 1 w i | x a i |
m

w i |y b i|

i= 1

The cost of movement in the x direction is independent of the cost of

movement in the y direction, and viceversa.
Now, we look at the x direction.
f1(x) is convex a local min is a global min.

Minisum Location Problem with

Rectilinear Distances (cont.)
The coordinates of the existing facilities are sorted so that
a1 a2 a3 .

Now, we consider the case of m = 3.

Case x a1 :
f1(x) = w1 |a1 - x| + w2 |a2 - x| + w3 |a3 - x|
= - (w1 + w2 + w3)x + w1 a1 + w2 a2 + w3 a3
= - W x + w1 a1 + w2 a2 + w3 a3, where W = w1 + w2 + w3
Case a1 x a2 :
f1(x) = w1 |a1 - x| + w2 |a2 - x| + w3 |a3 - x|
= (w1 - w2 - w3)x - w1 a1 + w2 a2 + w3 a3
= (- W + 2 w1) x - w1 a1 + w2 a2 + w3 a3

Objective Function f1(x)

f1(x)

- w1 - w2 - w3

The slope changes sign

w1 + w2 + w3

w1 - w2 - w3
w1 + w2 - w3

w1

w2
w3

a1

a2

a3

Minisum Location Problem with

Rectilinear Distances (cont.)
Slopes of f1(x) :
M0 = - (w1 + w2 + w3) = - W
M1 = 2 w 1 + M 0
M2 = 2 w 2 + M 1
M3 = 2 w 3 + M 2 = w 1 + w 2 + w 3 = W
Median conditions :
f1(x) is minimized at the point where the slope changes from nonpositive
to nonnegative.
M1 = w1 - w2 - w3 < 0 2 w1 < (w1 + w2 + w3) = W
w1 < W/2
M2 = w1 + w2 - w3 0 2 (w1 + w2) (w1 + w2 + w3) = W
(w1 + w2) W/2

Example 1
Problem Data :
m=3
a1 = 10

a2 = 20 a3 = 40

w1 = 5

w2 = 6

w3 = 4

Solution :
W = w1 + w2 + w3 = 15
W/2 = 7.5
w1 = 5 < 7.5
w1 + w2 = 11 > 7.5

Minimizing point : a2 = 20

Linear Programming Formulation

Min f1(x) = w1 |a1 - x| + w2 |a2 - x| + w3 |a3 - x|

Min z = w1 (r1+ s1) + w2 (r2+ s2) + w3 (r3+ s3),

Dual variables

s. t. x - r1+ s1

- r 2 + s2 = a 2 ,

- r 3 + s 3 = a 3,

= a1 ,

: y1 x

: y2

: y3

rj, sj 0, j = 1, 2, 3.
Relationships among variables :

aj - x = rj - sj , |aj - x| = rj + sj, rj, sj

0.
If both rj, sj > 0, we can reduce each by j = min {rj, sj}.
This maintains feasibility and reduces z
In an optimal solution, at least one of the r j and sj is 0, i. e., rj sj = 0.

Linear Programming Formulation (cont.)

Dual Problem :
Max g = - a1y1 - a2 y2 - a3 y3 + (w1 a1 + w2 a2 + w3 a3)
s. t. y1 + y2 + y3 = w1 + w2 + w3 = W
0 yj 2 wj, j = 1, 2, 3
Min a1y1 + a2 y2 + a3 y3
s. t. y1 + y2 + y3 = W
0 yj 2 wj, j = 1, 2, 3
0 y1 2 w1
a1

Complementary slackness conditions :

0 < yj* < 2 wj x* = aj

0 y2 2 w2
a2
a3
0 y3 2 w3

a1 a2 a3

Example 1 : Dual Solution

f1(x) = 5 |x - 10| + 6 |x - 20| + 4 |x - 40|
W = 15
0 y1 10
10

15

0 y2 12
20
40
0 y3 8

y1* = 10
y 2* = 5
y 3* = 0
0 < y2* < 12

x* = a2 = 20

15

Minisum Location Problem with Euclidean

Distances
m

Min f(x, y) = w
i= 1

[(x a i) (y b i) ]
2

1
2

(ai, bi)

The optimum location

is always in the convex
hull of
{(a1, b1), , (am, bm)}

Colinear case : all the points are in a line

(ai, bi)

The problem reduces to minimizing f1(x), which is the rectilinear distance

problem.

Non-colinear Case

The graph of [ ( x a i ) ( y b i ) ]
2

1
2

is a cone (strictly convex function).

1
2 2

[(x a i) (y b i) ]
2

contours
(ai, bi)

x
(ai, bi, 0)

f(x, y) = i= 1 w

[(x a i) (y b i) ]
2

convex hull is a line segment.

1
2

is strictly convex unless the

Non-colinear Case (cont.)

First order optimality conditions :

f(x , y )
x
f(x , y )
y

0
x

(x0, y0) is optimal

0
y

Any point where the partial derivatives are zero is optimal.

Let

i(x , y )

[(x a i) (y b i) ]
2

and

(x , y ) i(x , y )
i1

1
2

Non-colinear Case (cont.)

f(x , y ) m
i(x , y ) (x - a i) = 0
i= 1
x
f(x , y ) m
i(x , y ) (y - b i) = 0
i= 1
y
m

a i i(x , y )

i= 1

(x , y )
m

b i i(x , y )

i= 1

(x , y )

No-colinear Case (cont.)

If the optimal solution is in an exiting facility (a i, bi), then

i ( x , y ).

A simple way to avoid the problem of division by zero is to perturb the

problem as follows :
m

M in f(x , y ) w i [(x a i ) (y b i ) ]
2

1
2

i1

where > 0 and small.

f(x,y)

f(x,y) is flat near the optimum.

(x*,y*)
y

Weiszfelds Algorithm
1 m
Initialization : ( i ) ( x , y ) ( a i , b i )
m i1
0

or

1 m
w (a i, b i),
(ii) (x , y )
W i1 i
0

w h e re

Iterative step (k = 1, 2, ) :

a i i (x

i= 1

(x

k -1

Terminating conditions :

b i i (x

k -1

,y
k -1

i= 1

(x

(i) (x k , y k ) - (x

or ( i i ) f ( x

k -1

,y

k -1

k -1

k -1

,y

,y
k -1

,y
k -1

k -1

k -1

,y
k -1

) - f(x k , y k )

= w 1 + ... + w

Example 2
Problem Data :
m=4
P1 = (0, 0)

w1 = 1

P3 = (5, 0)

w3 = 1

P2 = (0, 10)
P4 = (12, 6)

w2 = 1

w4 = 1

Solution :
x0 = (5+12)/4 = 4.25

y0 = (10+6)/4 = 4

(x, y)

f(x, y)

4.023, 3.116

24.808

3.949, 2.647

24.665

3.958, 2.124

24.600

10

3.995, 2.011

24.597

Optimum

4.000, 2.000

Minimax Location Problem with

Rectilinear Distances

Possible example : locating an ambulance with the existing facilities

being the locations of possible accidents.
Hospital
Hospital

P1
h1

h3
P3

X
P2

P4

h4

Hospital :

h2
Hospital

Poss. Accident :
Ambulance :

Minimax Location Problem with

Rectilinear Distances (cont.)
Notation
EF (existing facilities) locations : Pi = (ai, bi), i = 1, , m
NF (new facility = ambulance) location : X = (x, y)
Travel distance from EF i to the nearest hospital = h i, i = 1, , m
Travel distance from NF to EF i = |x - ai| + |y - bi|
Formulation :
Min g(x, y)
where
g(x, y) = max {|x - ai| + |y - bi| + hi : i = 1, , m}

Min z
s. t. |x - ai| + |y - bi| + hi z,

i = 1, , m

Minimax Location Problem with

Rectilinear Distances (cont.)
Make the
intersection as small
as possible with the
largest diamond as
small as possible.

We want to make the inequalities linear

|x - ai| + |y - bi| z - hi
(3)

(2)

(1)

(4)

x - ai + y - b i z - h i
ai - x + bi - y z - hi
ai - x + y - bi z - hi
x - ai + b i - y z - h i

(1)
(2)
(3)
(4)

Minimax Location Problem with

Rectilinear Distances (cont.)
Min z
s. t.

x + y - z a i + b i - hi ,

i = 1, ..., m

x + y + z a i + bi + hi ,

i = 1, ..., m

- x + y - z - ai + b i - h i,

i = 1, ..., m

- x + y + z - a i + bi + hi ,

i = 1, ..., m

Min z
s. t.

x + y - z c1

x + y + z c2

where

c1 = Min {ai + bi - hi}

c2 = Max {ai + bi + hi}

i = 1, ..., m

i = 1, ..., m

- x + y - z c3

c3 = Min {- ai + bi - hi} i = 1, ..., m

- x + y + z c4

c4 = Max {- ai + bi + hi}i = 1, ..., m

Minimax Location Problem with

Rectilinear Distances (cont.)
Min z
s. t. - x - y + z - c1
x + y + z c2
x - y + z - c3
- x + y + z c4
c5 = Max {c2 - c1, c4 - c3}

z (c2 - c1)/2

(lower bound)

z (c4 - c3)/2

(lower bound)

z = c5/2

Optimal solution :
(x1, y1, z1) = 1/2 (c1 - c3, c1 + c3 + c5, c5)
(x2, y2, z2) = 1/2 (c2 - c4, c2 + c4 - c5, c5)
The line segment joining (x1, y1) and (x2, y2) is the set of optimal NF
locations

Minimax Location Problem with Euclidean

Distances
Examples :

helicopter in an emergency unit,

radio transmitter
EF : (ai, bi), (x,
i =y)1, , m(ai, bi)
NF : (x, y)
min g(x, y)
where

g(x, y) = max {[(x - ai)2 + (y - bi)2]1/2, i = 1, , m}

min z
s. t. [(x - ai)2 + (y - bi)2]1/2 z, i = 1, , m
min z
s. t.

(x - ai)2 + (y - bi)2 z ,

i = 1, , m

Elzinga-Hearn Algorithm (1971)

Step 1. Choose any two points and go to Step 2.
Step 2. Find the minimum covering circle for the chosen points*. Discard from the set
of chosen points those points not defining the minimum covering circle, and go
to Step 3.
Step 3. If the constructed circle contains all the points, then the center of the circle is a
minimax location, so stop. Otherwise, choose some point outside the circle,
add it to the set of points defining the circle, and go to Step 2.
* Find the minimum covering circle for the chosen points :
A.

If there are two points, let the two points define the diameter of the circle.

B.

If there are three points defining a right or obtuse triangle, let the two points
opposite to the right or obtuse angle define the diameter of the circle.
Otherwise, construct a circle through the three points (see Figure 1).

C.

If there are four points, construct a circle using as defining points those
indicated in Figure 2.

Elzinga-Hearn Algorithm (cont.)

Defining points :

Defining points :

Defining points :

ABD

BCD

CD

Defining points :

BD

Defining points :

B
Defining points :

Defining points :

Defining points :
B

BD

ACD

A
C

AD

Defining points :

ABD
Defining points :

AD

ABD

Figure 1. Alternative B

Figure 2. Alternative C

Planar Multi-Facility Location Problems

P1

P4
w24

w11
X2
X1
v12
w23

P2

w12

P3
Old Facility :
New Facility :

Minisum Multi-Facility Location Problem

with Rectilinear Distances
Location of new facilities:

Xj = (xj, yj), j = 1, , n.

Location of existing facilities:

Pi = (ai, bi), i = 1, , m.

Weight between new facilities j and k: vjk,

where k > j.

Weight between new facility j and existing facility i: w ji.

Problem formulation:
Min f((x1,y1), , (xn, yn)) = f1(x1, , xn) + f2(y1, , yn)
where
f1(x1, , xn) =
f2(y1, , yn) =

1 j k n

1 j k n

jk

jk

x j x k w ji x j a i
j1 i 1
n m

y j y k w ji y j b i
j1 i 1

Example 3

Problem Data : n = 2 (NF)

0
0

m = 3 (EF)

v = [vjk] =

2
4

w = [wji] =

x = [xj] = (x1, x2)

Min f1(x1, x2) = 2 |x1 - x2|

a = [aj] = (10, 20, 40)

+ 2 |x1 - 10|

+ |x1 - 20|

Min f1(x1, x2) = 2 (p12 + q12) + 2 (r11 + s11) + (r12 + s12)

s. t.

1
0

+ 4 |x2 - 20|

+ 4 (r21 + s21) + 5 (r23 + s23)

x1 - x2 - p12 + q12
x1

=0
- r11 + s11

x1

= 10
- r12 + s12

x2

= 20
- r21 + s21

x2

+ 5 |x2 - 40|

= 10
- r23 + s23 = 40

Relationships among variables :

x1 - x2 = p12 - q12,

|x1 - x2| = p12 + q12,

xi - aj = rij - sij,

|xi - aj| = rij + sij,

p12, q12 0
rij, sij 0

Example 3 (Dual Problem)

Max (- 10 u11 - 20 u12 - 10 u21 - 40 u23) + (102 + 201 + 104 + 405)
Min

10 u11

s. t. z12 + u11

+ 20 u12 + 10 u21 + 40 u23

+ u12

- z12

=5
+ u21

+ u23

=7

0 z12 4
0 u11 4
0 u12 2
0 u21 8
v
0w j i u23 10
2 1 0
0

4 0 5
2

jk

ji

5

7
12

jk

Equivalent Network Flow Problem

E1
(0)

(10)

u11 4
4

N1

u12 2

12

(0)

(0)
1

Cap =

z12 4
u21 8

E2

(20)

Cap =

N3

(0)
7

N2
u23 10

(40)

Cap =

(0)

E3

After drawing the network, the solution can be usually obtained by inspection.

12

Equivalent Network Flow Problem (cont.)

Complementary slackness conditions :
1.

xk* xj*

zjk* < 2 vjk

xj* xk*

0 < zjk*
In particular,

0 < zjk* < 2 vjk xj* = xk*

2.

ai xj*

uji* < 2 wji

xj* ai

0 < uji*
In particular,

0 < uji* < 2 wji xj* = ai

In Example 3,
0 < z12* < 2 v12 x1* = x2*,
0 < u12 = 2 w12 x2* = a1 = 10.
If the network is not connected, then the problem decomposes into independent
problems, one for each component.

Example 4
Four hospitals located within a city are cooperating to establish a centralized blood-bank facility that
will serve the hospitals. The new facility is to be located such that the (total) distance traveled is
minimized. The hospitals are located at the following coordinates: P 1=(5,10), P2=(7,6), P3=(4,2), and
P4=(16,3). The number of deliveries to be made per week between the blood-bank facility and each
hospital is estimated to be 3, 8, 2, and 10, respectively. Assuming rectilinear travel, determine the
optimum location.
m=4

P1 = (5, 10)

P3 = (4, 2)

w1 = 3

P2 = (7, 6)

w3 = 2

P4 = (16, 3)

w3 = 2

w3 = 2

a1 = 5

w1 = 3

w3 + w1 = 5

a2 = 7

w2 = 8

w3 + w1 + w2 = 13

a4 = 16

w4 = 10

Computation of x*:
a3 = 4

Computation of y*:
b3 = 2

w3 = 2

w3 = 2

b4 = 3

w4 = 10

w3 + w4 = 12

b2 = 6

w2 = 8

b1 = 10

w1 = 3

w2 = 8
w4 = 10

x* =

y* =

W=

Example 5
(10, 16)

16

Find the optimal location of an ambulance

with respect to four (known) possible
accident locations which coordinates are

h4 = 11
14

P1=(6,11), P2=(12,5), P3=(14,7), and

P4=(10,16). The objective is to minimize

12
(6, 11)

the maximum distance from the ambulance

location to an accident location and from

10

h1 = 10

the accident location to its closest hospital.

The distances from the accident locations to
their closest hospitals are h1=10, h2=16,

(12, 9)
8
(14, 7)

h3=14, and h4=11. Assume that distances

are rectilinear. If multiple optima exist,

(10, 7)

h3 = 14
(12, 5)

find all optimal solutions.

h2 = 16
(5, 4)

10

12

14

Example 5 Solution
m=4

P1 = (6, 11)

P3 = (14, 7)

h1 = 10

h3 = 14

P2 = (12, 5)
P4 = (10, 16)

h2 = 16

h4 = 11

c1 = min {ai + bi - hi} = min {6+11-10, 12+5-16, 14+7-14, 10+16-11} =

c2 = max {ai + bi + hi} = max {6+11+10, 12+5+16, 14+7+14, 10+16+11} =
c3 = min {-ai + bi - hi} = min {-6+11-10, -12+5-16, -14+7-14, -10+16-11} =
c4 = max {-ai + bi + hi} = max {-6+11+10, -12+5+16, -14+7+14, -10+16+11} =
c5 = max (c2 - c1, c4 - c3}= max {

}=

Optimal objective value:

c5

z* = 2
Set of optimal solutions: line segment defined by the following end points:

1
(x1*, y1*) = 2 (c1 - c3, c1 + c3 + c5) =
1
(x2*, y2*) = 2 (c2 - c4, c2 + c4 - c5) =

1
2 (
1
2(

)=(
)=(

,
,

)
)

Example 6
Given five existing facilities located at points P1, P2, P3, P4, and P5 as shown below, determine the
optimum location for a new facility which will minimize the maximum distance to the existing
facilities. Assume that distances are Euclidean.
Elzinga-Hearn algorithm:
Figure 1 : Initial set of points = {P1, P2, P3}; center = C1.
Figure 2 : 2nd set of points = {P1, P2, P4}; center = C2.
Figure 3 : 3rd set of points = {P2, P4, P5}; center = C3 (optimal location).

Figure 1

P3
P5

P2
P1

C1
P1

P2
P3
P4

Figure 2
P4
P5

P2

P1

C2
P3

P2

P1
P4

Figure 3

P4
P5

P2
P1

C3

P3

P1

P4

P5