Technical Note 11 Facility Location  Issues in Facility Location  Various Plant Location Methods Slides used in class may be different from slides in student.

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Transcript Technical Note 11 Facility Location  Issues in Facility Location  Various Plant Location Methods Slides used in class may be different from slides in student.

Technical Note 11

Facility Location

 Issues in Facility Location  Various Plant Location Methods Slides used in class may be different from slides in student pack 1

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.

2 Slides used in class may be different from slides in student pack

Issues in Facility Location

       Slides used in class may be different from slides in student pack 3

Issues in Facility Location

       Slides used in class may be different from slides in student pack 4

Characteristics of Location Decisions  Long-term decisions    Very difficult to reverse Affect fixed & variable costs – » – Objective: Slides used in class may be different from slides in student pack 5

Location Decision Sequence

1. Country 2. Region/Community 3. Site

© 1995 Corel Corp.

© 1995 Corel Corp.

Slides used in class may be different from slides in student pack © 1995 Corel Corp.

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Factors Affecting Country Decision      Government Culture & economy Market location & size Labor – – – Infrastructure  Exchange rate  Incentives Slides used in class may be different from slides in student pack © 1995 Corel Corp.

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    Factors Affecting Region/Community Decision    Slides used in class may be different from slides in student pack © 1995 Corel Corp.

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Factors Affecting Site Decision      Site size Site cost Transportation in/out Proximity of services Environmental impact © 1995 Corel Corp.

9 Slides used in class may be different from slides in student pack

Manufacturing Location Strategies 

Cost

focus –  Location is a major cost factor – – © 1995 Corel Corp.

Slides used in class may be different from slides in student pack 10

Service Location Strategies 

Revenue

focus –  Location is a major revenue factor – – © 1995 Corel Corp.

11 Slides used in class may be different from slides in student pack

Some Location Methods  Factor weighting method  Center of gravity method Slides used in class may be different from slides in student pack © 1995 Corel Corp.

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Location Methods: Factor Rating Method  Most widely used location technique   Useful for service & manufacturing locations Rates locations using factors – » Example: – » Example: 13 Slides used in class may be different from slides in student pack

Weighted Factor Rating Method Steps 1. List relevant factors 2. Assign importance weight to each factor (0-1 with all weights adding to 1) 3. Give a score to each location by factor (1-10, etc.) 4. Multiply scores by weights for each factor & total 5. Select location with maximum total score 14 Slides used in class may be different from slides in student pack

Factor Rating Method Example You’re an analyst for John Deere. You’re considering locating a new plant in Omaha (NE) or Denver (CO). Factor Wgt NE CO Mfg. costs Cost of living Labor avail.

.7

.1

8 7 .2 10 6 6 8 Where should you locate?

Slides used in class may be different from slides in student pack © 1995 Corel Corp.

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Factor Rating Method Solution

Factor

Mfg. costs Cost of living

Weight Score

0.7

8 0.1

7 Labor avail.

0.2

1 10

Omaha Weighted Factor

5.6

0.7

2 8.3

Score

6 6 8

Denver Weighted Factor

4.2

0.6

1.6

6.4

16 Slides used in class may be different from slides in student pack

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 Competition Life style .4

.1

.5

10 3 2 5 8 9 Where should you locate?

Slides used in class may be different from slides in student pack © 1995 Corel Corp.

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Solution

Factor

Population Compensation Life Style

TOTAL Weight Score

0.4

0.1

0.5

10 3 2 1

Phoenix Weighted Factor

4 0.3

1 5.3

Score

5 8 9

Santa Fe Weighted Factor

2 0.8

4.5

7.3

Slides used in class may be different from slides in student pack 18

Location Methods: Factor Rating Method +/ + Slides used in class may be different from slides in student pack 19

Location Methods:

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.

+ Slides used in class may be different from slides in student pack 20

Location Methods:

Centroid Method

  The centroid 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 two dimensional point that meets the distance and volume criteria stated above.

21 Slides used in class may be different from slides in student pack

Plant Location Methodology: Centroid Method Formulas

C = x   d V ix i V i C = y   d V iy i V i C x = X coordinate of the centroid C y = X coordinate of the centroid d ix = X coordinate of the ith location d iy = Y coordinate of the ith location V i = volume of goods moved to or from ith location Slides used in class may be different from slides in student pack 22

Plant Location Methodology: Example of Centroid Method

Centroid method example – Y Several automobile showrooms are located according to the following grid which represents coordinate locations for each showroom.

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

(250,580) A 1250 D 1900

A

(100,200) Q 2300 (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? Slides used in class may be different from slides in student pack 23

Plant Location Methodology: Example of Centroid Method: Determining the Coordinates of the New Facility

You then compute the new coordinates using the formulas: Y

Q

(790,900)

D

(250,580)

A

(100,200) (0,0) X Slides used in class may be different from slides in student pack S ho wro o m A D Q No o f Z-Mo b ile s s o ld p e r mo nth 1250 1900 2300 24

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.

Slides used in class may be different from slides in student pack © 1995 Corel Corp.

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Centroid Method Grid

90 Seattle (50,60) 494k units 60 30 Aberdeen (20,35) 18k units 0 0 30 60 90

Slides used in class may be different from slides in student pack

Spokane (160,50) 171k units 120 150

© 1995 Corel Corp.

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C x   i d  ix  W i W i i  Solution C y   i d  iy  W i W i i  Slides used in class may be different from slides in student pack 27

Thinking Challenge Solution

90 Seattle (50,60) 494k units 60 30 Aberdeen (20,35) 18k units 0 0 30 60 90

Slides used in class may be different from slides in student pack

120 Spokane (160,50) 171k units 150

© 1995 Corel Corp.

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