The overall objective of an organization is to satisfy and delight customers with its product and services.

2. 18-Mar-20 Dr. Abdulfatah Salem 2
Location planning
The facility location is
Branch of Operations Management and Analytical Geometry .
The right location for the manufacturing facility, it will have sufficient
access to the customers, workers, transportation.
Its decision is very important for big business
The wrong location of facility may lead to failure of the complete project
The overall objective of an organization is to satisfy and delight customers
with its product and services.

3. 18-Mar-20 Dr. Abdulfatah Salem 3
Location planning
Decide on the criteria to use
for evaluating location
alternatives
Identify important factors,
such as location of markets or
raw materials
Develop location alternatives
Evaluate the alternatives and
make a decision
Identifythecountry
orcountriesfor
location
Identifythegeneral
regionforlocation
Identifyasmall
numberof
community
alternatives
Identifythesite
alternativesamong
thecommunity
alternatives

4. 18-Mar-20 Dr. Abdulfatah Salem 4
Location planning
Factors affecting Facility Location Planning

5. 18-Mar-20 Dr. Abdulfatah Salem 5
Location planning
Selection of Location
Need for
Facility
Location
Start a
new
factory.
Cost of
Doing
Business
Depletion
of
Resources
Growth
Marketing
Strategy
Expansion
of existing
Plant.
Plant
Relocatio.
Plant
Relocation

6. 18-Mar-20 Dr. Abdulfatah Salem 6
Location planning
Selection of Location
Selection of
Location
Urban
Area
Rural
Area
Semi Urban
Area

7. 18-Mar-20 Dr. Abdulfatah Salem 7
Location planning
Selection of Urban Area
Advantages
 Good transportation, communication services.
 Banking, Credit and Insurance facilities.
 Storage facilities.
 Availability of skilled, unskilled labor.
 Educational, Medical facilities.
 Disadvantages
High Land Cost.
High Labor Cost
High Attrition Rate.
Municipal Restrictions, High Taxes.
Strong Trade Unions.

8. 18-Mar-20 Dr. Abdulfatah Salem 8
Location planning
Advantages
Cheap Land and Labor
Low Labor attrition rate.
Lesser Taxes, Municipal Restrictions.
Sufficient Land available.
Amicable relations between management and Labor.
Disadvantages
Lack of Transportation.
Warehouse facilities unavailable.
High Distribution Costs.
Shortage of Skilled Labor.
Lack of Banking, Municipal facilities.
Selection of Rural Area

9. 18-Mar-20 Dr. Abdulfatah Salem 9
Location planning
Advantages
Cheap Land compared to Urban areas.
Availability of Adequate Land.
Lesser cost of Distribution as compared to Rural areas.
Disadvantages
Conversion into Urban area with all its merits, demerits.
Selection of Semi Urban Area

10. 18-Mar-20 Dr. Abdulfatah Salem 10
Location planning
Country Decision
Regional Decision
Community Decision
Site Decision
Political, social, economic stability;
Currency exchange rates;
Climate; Customer concentrations; Degree
of unionization
Transportation system availability;
Preference of management;
Site size/cost; Environmental impact;
Zoning restrictions;

11. 18-Mar-20 Dr. Abdulfatah Salem 11
Location planning
Factors
affecting
Identifying
a CountryGovernment
Cultural
differences
Customer
preferences
Labor
Resources
Financial
Technological
Market
Safety

12. 18-Mar-20 Dr. Abdulfatah Salem 12
Location planning
Factors affecting Identifying a Region
Location of raw
materials
Location of
markets
Labor factors Other factors
•Necessity
•Perishability
•Transportation
cost
•As part of a profit-
oriented company’s
competitive
strategy
•So not-for-profits
can meet the needs
of their service
users
•Distribution costs
and perishability
•Cost of labor
•Availability of
skilled workers
•Wage rates
•Labor productivity
•Attitudes toward
work
•Climate
•taxes
•utilities cost and
availability
•input cost and
availability

13. 18-Mar-20 Dr. Abdulfatah Salem 13
Location planning
Factors
affecting
Identifying a
Community
Quality of
life
Services
Attitudes
Taxes
Env.
regulation
Utilities
Develpmnt
support

14. 18-Mar-20 Dr. Abdulfatah Salem 14
Location planning
Factors
affecting
Identifying a
Site
Land
Transportation Zoning
Other
restrictions

15. 18-Mar-20 Dr. Abdulfatah Salem 15
Location planning
Methods of Evaluating Location Alternatives
The
Cost-Profit-
Volume Analysis
The
Factor Rating
Method
The
Transportation
Model
The
Center of Gravity
Method
Determine
fixed and
variable costs
Plot total costs
Determine
lowest total
costs
Decision based
on quantitative
and qualitative
inputs
Decision
based on
movement
costs of raw
materials or
finished goods
Decision based
on minimum
distribution
costs

16. 18-Mar-20 Dr. Abdulfatah Salem 16
Location planning
Manufacturing/Distribution Service/Retail
Cost Focus Revenue focus
Transportation modes/costs Demographics: age,income,etc
Energy availability, costs Population/drawing area
Labor cost/availability/skills Competition
Building/leasing costs Traffic volume/patterns
Customer access/parking

17. 18-Mar-20 Dr. Abdulfatah Salem 17
Location planning
For a cost analysis, compute the total cost for each
alternative location:
Total Cost = Fixed cost + Variable Cost
TC = FC + vQ

18. 18-Mar-20 Dr. Abdulfatah Salem 18
Location planning
Fixed and variable costs for four potential plant
locations are shown below:
Location
Fixed Cost
per Year
Variable Cost
per Unit
A $250,000 $11
B $100,000 $30
C $150,000 $20
D $200,000 $35
Ex

19. 18-Mar-20 Dr. Abdulfatah Salem 19
Location planning
Fixed and variable costs for four potential plant
locations are shown below:
Location
Fixed Cost
per Year
Variable Cost
per Unit
A $250,000 $11
B $100,000 $30
C $150,000 $20
D $200,000 $35

20. 18-Mar-20 Dr. Abdulfatah Salem 20
Location planning
Plot of Location Total Costs
Sol.

21. 18-Mar-20 Dr. Abdulfatah Salem 21
Location planning
B Superior (up to 4,999 units)
C Superior (>5,000 to 11,111 units)
A superior (11,112 units and up)
000,5
10000,50
30000,10020000,150
BofCostTotalCofCostTotal




Q
Q
QQ
11.111,11
9000,100
20000,15011000,250
CofCostTotalAofCostTotal




Q
Q
QQ
Range approximations

22. 18-Mar-20 Dr. Abdulfatah Salem 22
Location planning
– A photo-processing company intends to open a new branch store. The following
table contains information on two potential locations. Which is better?
Factor Weight
Scores
(Out of 100)
Alt 1 Alt 2
Proximity to existing source .10 100 60
Traffic volume .05 80 80
Rental costs .40 70 90
Size .10 86 92
Layout .20 40 70
Operating Cost .15 80 90
1.00
Ex

23. 18-Mar-20 Dr. Abdulfatah Salem 23
Location planning
Scores
(Out of 100) Weighted Scores
Factor Weight Alt 1 Alt 2 Alt 1 Alt 2
Proximity to
existing source
.10 100 60 .10(100) = 10.0 .10(60) = 6.0
Traffic volume .05 80 80 .05(80) = 4.0 .05(80) = 4.0
Rental costs .40 70 90 .40(70) = 28.0 .40(90) = 36.0
Size .10 86 92 .10(86) = 8.6 .10(92) = 9.2
Layout .20 40 70 .20(40) = 8.0 .20(70) = 14.0
Operating Cost .15 80 90 .15(80) = 12.0 .15(90) = 13.5
1.00 70.6 82.7

24. 18-Mar-20 Dr. Abdulfatah Salem 24
Location planning
If quantities to be shipped to every location are equal, you can obtain the
coordinates of the center of gravity by finding the average of the x-coordinates
and the average of the y-coordinates
nsdestinatioofNumber
ndestinatioofcoordinate
ndestinatioofcoordinate
where







n
iyy
ixx
n
y
y
n
x
x
i
i
i
i Destination x y
D1 2 2
D2 3 5
D3 5 4
D4 8 5
18 16
Ex

25. 18-Mar-20 Dr. Abdulfatah Salem 25
Location planning
Here, the center of gravity is (4.5,4). This is slightly west of D3

26. 18-Mar-20 Dr. Abdulfatah Salem 26
Location planning
When the quantities to be shipped to every location are unequal, you can
obtain the coordinates of the center of gravity by finding the weighted average
of the x-coordinates and the average of the y-coordinates
iyy
ixx
iQ
Q
Qy
y
Q
Qx
x
i
i
i
i
ii
i
ii
ndestinatioofcoordinate
ndestinatioofcoordinate
ndestinatiotoshippedbeoQuantity t
where










27. 18-Mar-20 Dr. Abdulfatah Salem 27
Location planning
Destination x y
Weekly
Quantity
D1 2 2 800
D2 3 5 900
D3 5 4 200
D4 8 5 100
18 16 2,000

28. 18-Mar-20 Dr. Abdulfatah Salem 28
Location planning
7.3
000,2
400,7
000,2
)100(5)200(4)900(5)800(2
05.3
000,2
100,6
000,2
)100(8)200(5)900(3)800(2










i
Q
Qy
y
Q
Qx
x
i
ii
i
ii
The coordinates for the center of gravity are (3.05, 3.7). You may
round the x-coordinate down to 3.0, so the coordinates for the center of
gravity are (3.0, 3.7). This south of destination D2 (3, 5).

29. 18-Mar-20 Dr. Abdulfatah Salem 29
Location planning