Transcript Chapter 9 tn Slides

Operations Management
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For Competitive Advantage
AQUILANO
ninth edition
JACOBS
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Operations Management
For Competitive Advantage
Technical Note 9
Facility Location
CHASE
AQUILANO
JACOBS
ninth edition
©The McGraw-Hill Companies, Inc., 2001
Operations Management
For Competitive Advantage
ninth edition
2
Chapter 9
Facility Location

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
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Proximity to Customers
Business Climate
Total Costs
Infrastructure
Quality of Labor
Suppliers
Other Facilities
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Issues in Facility Location



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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 location
Pt. Range
Fuels in region
Power availability and reliability
Labor climate
Living conditions
Transportation
Water supply
Climate
Supplies
Tax policies and laws
0 to 330
0 to 200
0 to 100
0 to 100
0 to 50
0 to 10
0 to 50
0 to 60
0 to 20
A
123
150
54
24
45
34
8
45
45
Total pts. 528
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B
156
100
63
96
55
14
4
50
Best Site
20 is B
558
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Plant Location Methodology: Transportation
Method of Linear Programming

Transportation method of linear
programming seeks to minimize costs of
shipping 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: Center of
Gravity Method


The center of gravity 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 twodimensional point that meets the distance
and volume criteria stated above.
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Plant Location Methodology: Center of
Gravity Method Formulas
Cx =
d V
V
ix
i
Cy =
d V
V
iy
i
i
i
Cx = X coordinate of center of gravity
Cy = X coordinate of center of gravity
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 Center of Gravity Method

Center of gravity method example
– Several automobile showrooms are located according to the
following grid which represents coordinate locations for each
showroom.
S ho wro o m
Y
Q
No o f Z-Mo b ile s
s o ld p e r mo nth
(790,900)
D
A
1250
D
1900
Q
2300
(250,580)
A
(100,200)
(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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Plant Location Methodology: Example of Center of
Gravity Method: Determining Existing Facility
Coordinates
To begin, you must identify the
existing facilities on a twodimensional plane or grid and
determine their coordinates.
Y
Q
(790,900)
D
(250,580)
A
(100,200)
(0,0)
S ho wro o m
You must also have the
volume information on the
business activity at the
existing facilities.
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X
No o f Z-Mo b ile s
s o ld p e r mo nth
A
1250
D
1900
Q
2300
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Operations Management
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Plant Location Methodology: Example of Center of
Gravity Method: 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
Y
S ho wro o m
Q
(790,900)
D
New
location
Z
(250,580)
A
No o f Z-Mo b ile s
s o ld p e r mo nth
A
1250
D
1900
Q
2300
(100,200)
(0,0)
X
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