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Facility Location - Opreation Management
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Facility Location - Opreation Management

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  • 1. FacilityLocation
  • 2. Lecture Outline• Types of facilities• Site selection: where to locate• Location analysis techniques
  • 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
  • 4. Factors in Heavy Manufacturing Location• Construction costs• Land costs• Raw material and finished goods shipment modes• Proximity to raw materials• Utilities• Labor availability• E.g. machines, engines parts
  • 5. Factors in Light Industry Location• Transportation costs• Proximity to markets• Frequency of delivery required by customer• Land costs• Easily accessible geographic region• Education and training capabilities• E.g. Manufacture of clothes, furniture, consumer electronics and home appliances
  • 6. Factors in Retail Location• Proximity to customers• Location is everything
  • 7. Global Location Factors • Raw material availability• Government stability • Number and proximity of• Government regulations suppliers• Political and economic • Transportation and systems distribution system• Economic stability and • Labor cost and education growth • Available technology• Exchange rates • Commercial travel• Culture • Technical expertise• Climate • Cross-border trade• Export import regulations, regulations duties and tariffs • Group trade agreements
  • 8. Regional Location Factors• Labor (availability, • Modes and quality of education, cost, and transportation unions) • Transportation costs• Proximity of customers • Community• Number of customers government Local• Construction/leasing business regulations costs • Government services• Land cost (e.g., Chamber of Commerce)
  • 9. Regional Location Factors (cont.)• Business climate • Infrastructure (e.g., roads,• Community services water, sewers)• Incentive packages • Quality of life• Government regulations • Taxes• Environmental regulations • Availability of sites• Raw material availability • Financial services• Commercial travel • Community inducements• Climate • Proximity of suppliers • Education system
  • 10. Location Incentives• Tax credits• Relaxed government regulation• Job training• Infrastructure improvement• Monitory support by Government
  • 11. Location Analysis Techniques• Location rating factor• Center-of-gravity• Load-distance
  • 12. Location Rating Factor Identify important factors Weight factors (0.00 - 1.00) Subjectively score each factor (0 - 100) Sum weighted scores
  • 13. Location Factor Rating: Example SCORES (0 TO 100)LOCATION FACTOR WEIGHT Site 1 Site 2 Site 3Labor pool and climate .30 80 65 90Proximity to suppliers .20 100 91 75Wage rates .15 60 95 72Community environment .15 75 80 80Proximity to customers .10 65 90 95Shipping modes .05 85 92 65Air service .05 50 65 90 Weighted Score for “Labor pool and climate” for Site 1 = (0.30)(80) = 24
  • 14. Location Factor Rating WEIGHTED SCORESSite 1 Site 2 Site 324.00 19.50 27.00 Site 3 has the20.00 18.20 15.00 highest factor rating 9.00 14.25 10.8011.25 12.00 12.00 6.50 9.00 9.50 4.25 4.60 3.25 2.50 3.25 4.5077.50 80.80 82.05
  • 15. Center-of-Gravity Technique Locate facility at center of geographic area Based on weight and distance traveled establish grid-map of area Identify coordinates and weights shipped for each location
  • 16. Grid-Map Coordinatesy n n ∑ xiWi ∑ yiWi 2 (x2, y2), W2 i=1 i=1y2 x= n y= n ∑W i ∑W i 1 (x1, y1), W1 i=1 i=1y1 where, x, y = coordinates of new 3 (x3, y3), W3 facility at center of gravityy3 xi, yi = coordinates of existing facility i Wi = annual weight shipped from facility i x1 x2 x3 x
  • 17. Center-of-Gravity Technique: Example y A B C D 700 x 200 100 250 500 C y 200 500 600 300 600 (135) B Wt 75 105 135 60 500 (105)Miles 400 D 300 A (60) 200 (75) 100 0 100 200 300 400 500 600 700 x Miles
  • 18. Center-of-Gravity Technique: Example (cont.) n ∑ xiWi i=1 (200)(75) + (100)(105) + (250)(135) + (500)(60)x= = = 238 n 75 + 105 + 135 + 60 ∑ Wi i=1 n ∑ yiWi i=1 (200)(75) + (500)(105) + (600)(135) + (300)(60)y= n = = 444 75 + 105 + 135 + 60 ∑ Wi i=1
  • 19. Center-of-Gravity Technique: Example (cont.) y A B C D 700 x 200 100 250 500 C y 200 500 600 300 600 (135) B Wt 75 105 135 60 500 (105) Center of gravity (238, 444)Miles 400 D 300 A (60) 200 (75) 100 0 100 200 300 400 500 600 700 x Miles
  • 20. Load-Distance Technique• Compute (Load x Distance) for each site• Choose site with lowest (Load x Distance)
  • 21. Load-Distance Calculations n LD = ∑ ld i i i=1where,LD = load-distance valueli = load expressed as a weight, number of trips or units being shipped from proposed site and location idi = distance between proposed site and location idi = (xi - x)2 + (yi - y)2where,(x,y) = coordinates of proposed site(xi , yi) = coordinates of existing facility
  • 22. Load-Distance: Example Potential Sites Suppliers Site X Y A B C D 1 360 180 X 200 100 250 500 2 420 450 Y 200 500 600 300 3 250 400 Wt 75 105 135 60 Compute distance from each site to each supplierSite 1 dA = (xA - x1)2 + (yA - y1)2 = (200-360)2 + (200-180)2 = 161.2 dB = (xB - x1)2 + (yB - y1)2 = (100-360)2 + (500-180)2 = 412.3 dC = 434.2 dD = 184.4
  • 23. Load-Distance: Example (cont.) Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170 Site 3 dA = 206.2 dB = 180.4 dC = 20 dD = 269.3 Compute load-distance n LD = ∑ l i di i=1Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,791Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555* * Choose site 3