1. 1
Facility Location

2. 2
OBJECTIVES
• Issues in Facility Location
• Various Plant Location Methods

3. 3
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

4. 4
Issues in Facility Location
• Proximity to Customers
• Business Climate
• Total Costs
• Infrastructure
• Quality of Labor
• Suppliers
• Other Facilities

5. 5
Issues in Facility Location
• Free Trade Zones
• Political Risk
• Government Barriers
• Trading Blocs
• Environmental Regulation
• Host Community
• Competitive Advantage

6. Plant Location Methodology: Factor
Rating Method Example
6
Two refineries sites (A and B) are assigned the following range of
point values and respective points, where more the points the
better for the site location.
Sites
A
B
Major factors for site location
Pt. Range
Fuels in region
Power availability and reliability
Labor climate
Living conditions
Transportation
Water supply
Climate
Supplies
Tax policies and laws
0 to 330
0 to 200
0 to 100
0 to 100
0 to 50
0 to 10
0 to 50
0 to 60
0 to 20
123
150
54
24
45
4
8
5
5
Total pts. 418
156
100
63
96
50
5
4
50
Best Site
Best
20 is B Site
544
is B

7. 7
Plant Location Methodology:
Transportation Method of Linear
Programming

Transportation method of linear
programming seeks to minimize costs of
shipping n units to m destinations or it
seeks to maximize profit of shipping n
units to m destinations

8. Plant Location
Methodology: Centroid
Method

The centroid method is used for locating single
facility that considers existing facilities, the
distances between them, and the volumes of
goods to be shipped between them

This methodology involves formulae used to
compute the coordinates of the twodimensional point that meets the distance and
volume criteria stated above
8

9. 9
Plant Location Methodology:
Centroid Method Formulae
Cx =
∑d V
∑V
ix
i
i
Cy =
∑d V
∑V
iy
i
i
Where:
Cx = X coordinate of centroid
Cy = Y coordinate of centroid
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith
location

10. 10
Plant Location Methodology:
Example of Centroid Method

Centroid method example
– Several automobile showrooms are located
according to the following grid which represents
coordinate locations for each showroom
S ho wro o m
Y
Q
No o f Z-Mo b ile s
s o ld p e r mo nth
(790,900)
A
1250
D
D
1900
Q
2300
(250,580)
A
(100,200)
(0,0)
X
Question: What is the best location for a new Model
Question: What is the best location for a new Model
warehouse //temporary storage facility considering only
warehouse temporary storage facility considering only
distances and quantities sold per month?
distances and quantities sold per month?

11. 11
Plant Location Methodology: Example of
Centroid Method (Continued): Determining
Existing Facility Coordinates
To begin, you must identify the
To begin, you must identify the
existing facilities on a twoexisting facilities on a twodimensional plane or grid and
dimensional plane or grid and
determine their coordinates.
determine their coordinates.
Y
Q
(790,900)
D
(250,580)
A
(100,200)
(0,0)
You must also have the
You must also have the
volume information on the
volume information on the
business activity at the
business activity at the
existing facilities.
existing facilities.
S ho wro o m
X
No o f Z-Mo b ile s
s o ld p e r mo nth
A
1250
D
1900
Q
2300

12. 12
Plant Location Methodology: Example of
Centroid Method (Continued): Determining
the Coordinates of the New Facility
You then compute the new coordinates using the formulas:
You then compute the new coordinates using the formulas:
Cx =
100(1250) + 250(1900) + 790(2300)
2,417,000
=
= 443.49
1250 + 1900 + 2300
5,450
Cy =
200(1250) + 580(1900) + 900(2300)
3,422,000
=
= 627.89
1250 + 1900 + 2300
5,450
You then take the coordinates and place them on the map:
You then take the coordinates and place them on the map:
Y
New
New
location
location
of facility
of facility
Z about
Z about
(443,627)
(443,627)
Q
(790,900)
D
(250,580)
Z
Z
A
(100,200)
(0,0)
X
S ho wro o m
No o f Z-Mo b ile s
s o ld p e r mo nth
A
1250
D
1900
Q
2300

13. 13
Question Bowl
Criteria that influences manufacturing plant and
warehouse location planning can include which
of the following?
a.
Proximity to customers
b.
Business climate
c.
Infrastructure
d.
Quality of labor
e.
All of the above
Answer: e. All of the above

14. 14
Question Bowl
Criteria that influences manufacturing plant and
warehouse location planning can include
which of the following?
a.
Political risk
b.
Government barriers
c.
Environmental regulation
d.
All of the above
e.
None of the above
Answer: d. All of the above

15. 15
Question Bowl
Which of the following are plant location methods?
a.
Transportation method of linear programming
b.
Factor-rating systems
c.
Centroid method
d.
All of the above
e.
None of the above
Answer: d. All of the above

16. 16
Question Bowl
Which of the following methods of plant location
analysis considers the existing facilities, the
distances between them, and the volumes of
goods to be shipped?
a.
Transportation method of linear
programming
b.
Factor-rating systems
c.
Centroid method
d.
All of the above
e.
None of the above
Answer: c. Centroid method

17. 17
Question Bowl
Which of the following methods of plant location
analysis is the most widely used general
location technique because it combines
diverse factors in an easy-to-understand
format?
a.
Transportation method of linear programming
b.
Factor-rating systems
c.
Centroid method
d.
All of the above
e.
None of the above
Answer: b. Factor-rating systems

18. 18
Question Bowl
The location decision for service facilities is
closely tied to which of the following?
a.
Market selection decision
b.
Material costs
c.
Nearness to distributors
d.
Nearness to high-skilled labor
e.
None of the above
Answer: a. Market selection decision