1. Facility Location Models
Chapter 7 Supplement
Facility Location Models
Operations Management - 6th Edition
Roberta Russell & Bernard W. Taylor, III
Beni Asllani University of Tennessee at Chattanooga
Copyright 2009 John Wiley & Sons, Inc.

2. Lecture Outline Types of Facilities Site Selection: Where to Locate
Location Analysis Techniques
Copyright 2009 John Wiley & Sons, Inc.

3. Types of Facilities Heavy-manufacturing facilities
large, require a lot of space, and are expensive
Light-industry facilities
smaller, cleaner plants and usually less costly
Retail and service facilities
smallest and least costly
Copyright 2009 John Wiley & Sons, Inc.

4. Factors in Heavy Manufacturing Location
Construction costs
Land costs
Raw material and finished goods shipment modes
Proximity to raw materials
Utilities
Means of waste disposal
Labor availability
Copyright 2009 John Wiley & Sons, Inc.

5. Factors in Light Industry Location
Land costs
Transportation costs
Proximity to markets
depending on delivery requirements including frequency of delivery required by customer
Copyright 2009 John Wiley & Sons, Inc.

6. Factors in Retail Location
Proximity to customers
Location is everything
Copyright 2009 John Wiley & Sons, Inc.

7. Site Selection: Where to Locate
Infrequent but important
being “in the right place at the right time”
Must consider other factors, especially financial considerations
Location decisions made more often for service operations than manufacturing facilities
Location criteria for service
access to customers
Location criteria for manufacturing facility
nature of labor force
labor costs
proximity to suppliers and markets
distribution and transportation costs
energy availability and cost
community infrastructure
quality of life in community
government regulations and taxes
Copyright 2009 John Wiley & Sons, Inc.

8. 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
Copyright 2009 John Wiley & Sons, Inc.

9. Regional and Community Location Factors in U.S.
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)
Copyright 2009 John Wiley & Sons, Inc.

10. Regional and Community Location Factors in U.S. (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
Copyright 2009 John Wiley & Sons, Inc.

11. Location Incentives Tax credits Relaxed government regulation
Job training
Infrastructure improvement
Money
Copyright 2009 John Wiley & Sons, Inc.

12. Geographic Information Systems (GIS)
Computerized system for storing, managing, creating, analyzing, integrating, and digitally displaying geographic, i.e., spatial, data
Specifically used for site selection
enables users to integrate large quantities of information about potential sites and analyze these data with many different, powerful analytical tools
Copyright 2009 John Wiley & Sons, Inc.

13. GIS Diagram
Copyright 2009 John Wiley & Sons, Inc.

14. Location Analysis Techniques
Location factor rating
Center-of-gravity
Load-distance
Copyright 2009 John Wiley & Sons, Inc.

15. Location Factor Rating
Identify important factors
Weight factors ( )
Subjectively score each factor ( )
Sum weighted scores
Copyright 2009 John Wiley & Sons, Inc.

16. 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
.10
.05
WEIGHT 80
100 60 75 65 85 50
Site 1 91 95 90 92
Site 2 72
Site 3
SCORES (0 TO 100)
Weighted Score for “Labor pool and climate” for
Site 1 = (0.30)(80) = 24
Copyright 2009 John Wiley & Sons, Inc.

17. Location Factor Rating: Example (cont.)
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
4.60
3.25
80.80
Site 2
27.00
15.00
10.80
9.50
4.50
82.05
Site 3
WEIGHTED SCORES
Site 3 has the highest factor rating
Copyright 2009 John Wiley & Sons, Inc.

18. Location Factor Rating with Excel and OM Tools
Copyright 2009 John Wiley & Sons, Inc.

19. 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
Copyright 2009 John Wiley & Sons, Inc.

20. Grid-Map Coordinates  x1 x2 x3 x y2 y y1 y3 1 (x1, y1), W1Wi
i = 1
xiWi
x =
yiWi
y =
where,
x, y = coordinates of new facility at center of gravity
xi, yi = coordinates of existing facility i
Wi = annual weight shipped from facility i
Copyright 2009 John Wiley & Sons, Inc.

21. Center-of-Gravity Technique: Example
700
500
600
400
300
200
100 x A B C D
(135)
(105)
(75)
(60)
Miles
A B C D x y Wt
Copyright 2009 John Wiley & Sons, Inc.

22. Center-of-Gravity Technique: Example (cont.) Wi
i = 1
xiWi
yiWi
y = = = 444
(200)(75) + (500)(105) + (600)(135) + (300)(60)
(200)(75) + (100)(105) + (250)(135) + (500)(60)
Copyright 2009 John Wiley & Sons, Inc.

23. Center-of-Gravity Technique: Example (cont.)
A B C D x y Wt y
700
500
600
400
300
200
100 x A B C D
(135)
(105)
(75)
(60)
Miles
Center of gravity (238, 444)
Copyright 2009 John Wiley & Sons, Inc.

24. Center-of-Gravity Technique with Excel and OM Tools
Copyright 2009 John Wiley & Sons, Inc.

25. Load-Distance Technique
Compute (Load x Distance) for each site
Choose site with lowest (Load x Distance)
Distance can be actual or straight-line
Copyright 2009 John Wiley & Sons, Inc.

26. Load-Distance Calculations
li di
i = 1 n
LD =
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
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility
where,
Copyright 2009 John Wiley & Sons, Inc.

27. Load-Distance: Example
Potential Sites
Site X Y
Suppliers
A B C D X Y Wt
Compute distance from each site to each supplier
= ( )2 + ( )2
dA = (xA - x1)2 + (yA - y1)2
Site 1
= 161.2
= ( )2 + ( )2
dB = (xB - x1)2 + (yB - y1)2
= 412.3
dC = 434.2
dD = 184.4
Copyright 2009 John Wiley & Sons, Inc.

28. Load-Distance: Example (cont.)
Site 2
dA = 333
dC = 226.7
dB = 323.9
dD = 170
Site 3
dA = 206.2
dC = 200
dB = 180.3
dD = 269.3
Compute load-distance
i = 1 n 
li di
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) = 99,789
Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*
* Choose site 3
Copyright 2009 John Wiley & Sons, Inc.

29. Load-Distance Technique with Excel and OM Tools
Copyright 2009 John Wiley & Sons, Inc.

30. Copyright 2009 John Wiley & Sons, Inc. All rights reserved
Copyright 2009 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.
Copyright 2009 John Wiley & Sons, Inc.