1. Factor rating method of location
Dr. Ron Lembke
Factor rating method of location

2. Factor Rating Method Most widely used method?
Useful for service or industrial facilities: can include intangible, qualitative factors
List relevant factors, assign a weight
Develop a scale for each factor
Score each factor using the scale
Multiply scores by weights, add up
Choose location with highest total score
Kind of like “Miss America”
Lots of work for each location, consider small list of candidates
Use Centroid to find an area, Factor Rating for town?

3. Factor Rating Example
We need to decide where to build a new coffee roasting plant. There are two possible locations: Dallas, and Denver.
We consider the following factors
Transp: annual trucking costs in $k
Lease: annual costs in $k
Labor availability: scale 1-10, unemployment, related industries
Quality of life: scale 1-10: outdoor activities, cultural, sports, education

4. Factor Rating Example
Using a scoring system we developed, we have the following.
Factor Weight TX CO
Transportation
Plant Lease Cost
Labor availability
Quality of Life

5. Normalizing Scores
All factors must be scored on the same scale, like 1-10, or 0-1.0, etc.
Costs need to be re-scaled
Lowest cost site gets a 10.
More expensive site gets
Plant Lease: 39/45 * 10 = 8.7
Transportation: 900/1,023 * 10 = 8.8
Multiply these raw scores by the weights for weighted scores

6. Factor Rating Example TX CO Factor Wt Raw Wtd Raw Wtd
Transp
Plant
Labor
Q Life
TOTAL
TX is best, but not by a huge amount

7. Summary Factor Rating Method
Can include non-quantitative considerations
A weight for each category must be assigned
System for awarding points to each candidate has to be worked out
Sum the weighted scores in each category
Coming up with weights and scoring systems can be political