The document discusses factors to consider when locating facilities, including proximity to suppliers and customers, available labor pool, costs, and infrastructure. It also describes methods for analyzing location options, such as using a factor rating system to combine various criteria or a center of gravity method to find a central location based on existing sites and shipping volumes. The document provides an example of using the center of gravity method to determine the optimal location for an intermediate holding facility between a plant and its distributors.

1. Facility Location
Where should a plant or service facility be located?
• Need to produce close to supplier as well as customer due to time-based
competition, trade agreements and shipping costs
• Need to locate near the appropriate labor pool to take advantage of low
wage and high technical skills
Profit-oriented organization Make decision on profit potential
Non-profit organization Balance between cost and
level of customer service

2. Facility Location
Factors Affecting Location Decisions
• Labor pool
• Total costs
• Proximity to customers and suppliers
• Business climate
• Infrastructure
• Government barriers
• Trade blocks

3. Facility Location
Plant Location Methods
• Factor Rating System: most widely used -- can provide a
mechanism to combine diverse factors
• Center of Gravity Method: locating a single facility that
considers the existing facility, distance
between them and the volume of goods to be shipped
Service Location Method
Have multiple sites to maintain close contact with customers
Location decision is closely tied to the market selection decision

4. Facility Location
Factor Rating Scale
Criteria and Weights for Location Decision
Criteria Weight
Proximity 10
Labor Pool 8
Business Climate 6
Total Cost 4
Infrastructure 3

5. Facility Location
Factor Rating Scale
Assessed Values of Locations using Decision Criteria
Proximity Labor Pool Climate Total Cost Infrastructure
Location A 10 3 10 8 5
Location B 8 7 7 8 7
Location C 8 5 7 10 10
Location D 8 7 7 8 7
Location E 7 8 7 8 7
Location F 8 3 6 10 8
Location G 10 7 8 6 7
Location H 4 10 4 8 10

6. Facility Location
Factor Rating Scale
Evaluation of Location Alternatives against Weighted Criteria
Proximity Labor Pool Climate Total Cost
Infra-
structure
Total Score
Location A 100 24 60 32 15 231
Location B 80 56 42 32 21 231
Location C 80 40 42 40 30 232
Location D 80 56 42 32 21 231
Location E 70 64 42 32 21 229
Location F 80 24 36 40 24 204
Location G 100 56 48 24 21 249
Location H 40 80 24 32 30 206

7. Facility Location
A company needs to locate an intermediate holding facility
between its plant and major distributors. Locations and
amounts of product are as follows:
Center of Gravity Method
Location Amount
Plant (325, 75) 1500
Distributor A (25, 240) 350
Distributor B (350, 400) 250
Distributor C (400, 150) 450
Distributor D (450, 350) 450

8. Facility Location
0
100
200
300
400
500
0 100 200 300 400 500 600
Plant
A
B
C
D
Plant : (325,75) 1500
Dist A: (25,450) 350
Dist B: (350,400) 250
Dist C: (400,150) 450
Dist D: (450,350) 450

9. Facility Location
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Location of Intermediate holding facility

10. Facility Location
0
100
200
300
400
500
0 100 200 300 400 500 600
Plant
A
B
C
D
Plant : (325,75)
Dist A: (25,450)
Dist B: (350,400)
Dist C: (400,150)
Dist D: (450,350)
Facility : (322,198)

11. Facility Location
Locating Service Facility
Find the locations of two clinics at the lowest weighted travel-distance cost
From
Community
Miles to Clinic Population
(thousand)
Relative
Weight
A B C D
A 0 11 8 12 10 1.1
B 11 0 10 7 8 1.4
C 8 10 0 9 20 0.7
D 9.5 7 9 0 12 1.0