Transcript Production and Operations Management: Manufacturing and

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Chapter 11TN
Facility Location
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Issues in Facility Location
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Various Plant Location Methods
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Competitive Imperatives Impacting
Location
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The need to produce close to the customer
due to time-based competition, trade
agreements, and shipping costs.
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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
•Free Trade Zones
•Political Risk
•Government Barriers
•Trading Blocs
•Environmental Regulation
•Host Community
•Competitive Advantage
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Location Decisions
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Long-term decisions
Difficult to reverse
Affect fixed & variable costs
Objective: Maximize benefit of location to
firm
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Factors Affecting Country
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Factors Affecting Region/Community
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Factors Affecting Site
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Industrial
Location Strategies
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Cost focus
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Location is a major
cost factor
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Service Location Strategies
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Revenue focus
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Location is a major
revenue factor
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Factor Rating Method
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Most widely used location technique
Useful for service & industrial locations
Rates locations using factors
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Weighted Factor Rating Method Steps
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List relevant factors
Assign importance weight to each factor (01 with all weights adding to 1)
Give a score to each location by factor
(1-10, etc.)
Multiply scores by weights for each factor &
total
Select location with maximum total score
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Factor Rating Method Example
You’re an analyst for John
Deere. You’re considering
locating a new mfg. plant in
Omaha (NE) or Denver (CO).
Factor
Wgt NE CO
Mfg. costs
.7 8
6
Cost of living .1 7
6
Labor avail.
.2 10
8
Where should you locate?
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Factor Rating Method Solution
Factor
Mfg. costs
Cost of living
Labor avail.
Omaha
Denver
Weight Score
Weighted Factor Score
Weighted Factor
0.7
8
5.6
6
4.2
0.1
0.2
1
Omaha is best
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10
0.7
2
8.3
6
8
0.6
1.6
6.4
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Factor Rating Method Thinking Challenge
You’re owner of a hot tub
store. You’re considering
relocating to Phoenix (AZ) or
Santa Fe (NM).
Factor
Wgt AZ NM
Population
.4 10
5
Competition
.1 3
8
Life style
.5 2
9
Where should you locate?
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Solution
Phoenix
Weight
Factor
Population
Compensation
Life Style
Santa Fe
Score Weighted Factor Score Weighted Factor
Which location is best: _________________
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Plant Location Methodology: Transportation
Method of Linear Programming
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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 (Centroid)
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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
i
Cy =
d V
V
iy
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
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Center of gravity method example
– Several automobile showrooms are located according to the
following grid which represents coordinate locations for each
showroom.
Showroom
Y
Q
No of Z-Mobiles
sold per month
(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 the Coordinates of
the New Facility
You then compute the new coordinates using the formulas:
Cx =
Cy =
Y
S ho wro o m
Q
(790,900)
D
(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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Thinking Challenge
You’re a planner for Sears.
You want to find the best
location of a warehouse
serving retail stores in:
Seattle (50, 60)
Aberdeen (20, 35)
Spokane (160, 50)
Monthly demand is:
Seattle 494k units
Aberdeen 18k units
Spokane 171k units
respectively.
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Solution:
Center of Gravity Method Grid
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Calculate Cx and Cy.