Facility Location

Where should a plant or service facility be located?

• Need to produce close to supplier as well as customer due to time-based

competition, trade agreements and shipping costs

• Need to locate near the appropriate labor pool to take advantage of low wage
and high technical skills

Profit-oriented organization Make decision on profit potential

Balance between cost and
Non-profit organization
level of customer service
 Facility Location
Factors Affecting Location Decisions
• Proximity to customers and suppliers

• Labor pool

• Business climate

• Total costs

• Infrastructure

• Government barriers

• Trade blocks
 Facility Location
Plant Location Methods
• Factor Rating System: most widely used -- can provide a
mechanism to combine diverse factors

• Center of Gravity Method: locating a single facility that

considers the existing facility, distance
between them and the volume of goods to be shipped

Service Location Method

Have multiple sites to maintain close contact with customers
Location decision is closely tied to the market selection decision
 Facility Location
Center of Gravity Method

A company needs to locate an intermediate holding facility

between its plant and major distributors. Locations and
amounts of product are as follows:

Location Amount
Plant (325, 75) 1500
Distributor A (25, 240) 450
Distributor B (350, 400) 350
Distributor C (400, 150) 250
Distributor D (450, 350) 450
 Facility Location

500
A
400 B
D
Plant : (325,75) 1500
300
Dist A: (25,450) 450
Dist B: (350,400) 350
200
Dist C: (400,150) 250
C
Dist D: (450,350) 450
100
Plant

0
0 100 200 300 400 500 600
 Facility Location

Cx 
 d ixVi
Cy 
 d iyVi
Vi Vi

Location of Intermediate holding facility

325 * 1500  25 * 450  350 * 350  400 * 250  450 * 450

Cx   307.9
1500  450  350  250  450

75 * 1500  450 * 450  400 * 350  150 * 250  350 * 450

Cy   216.7
1500  450  350  250  450
 Facility Location

500
A
400 B
D
Plant : (325,75)
300 Dist A: (25,450)
Dist B: (350,400)
200 Dist C: (400,150)
C Dist D: (450,350)
100
Plant Facility : (308,217)
0
0 100 200 300 400 500 600
 Determining the Coordinates
Y

Cx =
d V ix i
Cy =
 d iy Vi Q
(790,900)

V i V i D
(250,580)

A
Cx = X coordinate of center of gravity (100,200)

(0,0) X
Cy = X coordinate of center of gravity
S ho wro o m No o f Z-Mo b ile s
s o ld p e r mo nth
dix = X coordinate of the ith location
A 1250
diy = Y coordinate of the ith location
D 1900
Vi = volume of goods moved to or from ith
location Q 2300
12
 Determining the Coordinates
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

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

D A 1250
(250,580)

A D 1900
(100,200)

(0,0) X Q 2300
13
 Ardalan Heuristic (Example 9.3)
Miles to Clinic
From Pop. Relative
Community A B C D (000s) Weight
A 0 11 8 12 10 1.1
B 11 0 10 7 8 1.4
C 8 10 0 9 20 0.7
D 9.5 7 9 0 12 1.0

(11)(10)(1.1)
Step 1 Miles to Clinic
From
Community A B C D
A 0 121 88 132
B 123.2 0 112 78.4
C 112 140 0 126
D 114 84 108 0
16
Selecting the First-Choice
Location
Miles to Clinic ho i ce
C
From First
Community A B C D
A 0 121 88 132
B 123.2 0 112 78.4
C 112 140 0 126
D 114 84 108 0

349.2 345 308 336.4

Choose the community with the lowest cost

17
 Selecting the Second-Choice
Location
Miles to Clinic
From
Community A B C D
A 0 121 88 132 Cost > Selected Site Cost?
B
C
123.2
112
0
140
112
0
78.4
126
If yes, replace.
D 114 84 108 0

349.2 345 308 336.4

Miles to Clinic
Ch oi ce
d
From Secon
Community A B C D
A 0 88 88 88 Replaced
B 112 0 112 78.4 Not Replaced
C 0 0 0 0
D 108 84 108 0

220 172 308 166.4

18
 Selecting the Third-Choice
Location
Miles to Clinic
From
Community A B C D
A 0 88 88 88
B 112 0 112 78.4
C 0 0 0 0
D 108 84 108 0

220 172 308 166.4

Miles to Clinic
From
Community A B D
A 0 88 88
B 78.4 0 78.4
C 0 0 0
D 0 0 0

hoi ce
Thi rd C 78.4 88 166.4 19
 And the least desirable
alternative is
M iles to C lin ic
F rom
C om m u n ity A B D
A 0 88 88
B 78.4 0 78.4
C 0 0 0 i rable
D 0 0 0
Leas t Des
78.4 88 166.4 Miles to Clinic
From
Community A B
A 0 0
B 78.4 0
C 0 0
D 0 0

78.4 0
20
 Facility Location
Locating Service Facility

From Miles to Clinic Population Relative

Community A B C D (in thousand) Weight
A 0 11 8 12 10 1.1
B 11 0 10 7 8 1.4
C 8 10 0 9 20 0.7
D 9.5 7 9 0 12 1.0

Find the locations of two clinics at the lowest weighted travel-distance cost