Various methods of selecting warehouse location. Detailed explanation of Factor Rating method and Centre of Gravity method along with numericals.

1. Navneet Dwivedi
PGDM-Operations and Supply Chain

2.  It includes answering few fundamental
questions like:
◦ How many facilities should be there
◦ Where should they be located
◦ What size should they be

3.  Manufacturing (Plant or warehouse): decisions
are driven by economies. Trade off between
transportation cost, inventory carrying cost,
labour cost, taxes etc.
 Retail: decisions are driven by revenue. Traffic
flow and resulting revenue are primary
location factor.
 Service: decision are driven by service factors.
Response time, accessibility and availability.

4. 1. Factor Rating Method
2. Centre of Gravity Method

5. Factors
Weightage
(1 to 10)
Score
(out of 10)
Weighted Score
(weightage*score)
Proximity to competing stores 8
Space rent/lease considerations 5
Parking space 8
Proximity to complementary stores 7
Modernity of store space 6
Customer accessibility 9
Local taxes 3
Community service 3
Proximity to major transportation 8
Total Score

6.  The centre of gravity (COG) or weighted
centre technique is a quantitative method for
locating a facility such as warehouse, at the
centre of movement in a geographic area
based on weight and distance.

7. COG

8.  Determining the volumes by source and
destination point
 Determining the transportation costs based
on Rs/unit/km
 Overlaying a grid to determine the
coordinates of source and/or destination
points
 Finding the weighted centre of gravity for the
graph

9. 1
4
2
3
g
x
y
𝑋𝑔 =
𝑥1𝑤1 + 𝑥2𝑤2 + 𝑥3𝑤3 + 𝑥4𝑤4
𝑤1 + 𝑤2 + 𝑤3 + 𝑤4
𝑌𝑔 =
𝑦1𝑤1 + 𝑦2𝑤2 + 𝑦3𝑤3 + 𝑦4𝑤4
𝑤1 + 𝑤2 + 𝑤3 + 𝑤4
COG= G(Xg, Yg)
0,0

10. Point PRODUCTS LOCATION
RATE @
(Rs/Unit/Kg)
Xi Yi VOLUME
S1 A MUMBAI 9 2.5 4 8000
S2 B DELHI 9 3.5 6.5 10000
H1 A & B JAIPUR 8 2.75 5.5 5000
H2 A & B VISAKHAPATNAM 7 5 4.25 3000
H3 A & B CHENNAI 8 3 1.5 6000
H4 A & B GUWAHATI 9 7.5 5.5 4000
Suppose a regional medical warehouse is to be
established to serve several hospitals throughout the
country. The supplies originate at S1 and S2 and are
destined for hospitals at H1,H2,H3and H4. The relative
locations are given below.

11. 0
1
2
3
4
5
6
7
8
9
10
0 1 2 3 4 5 6 7 8
S2
S1
H1
H2
H4
H3

12. Point
RATE @
(Rs/Unit/Kg)
Xi Yi VOLUME Wi Xi*Wi Yi*Wi
S1 ₹ 9.00 2.5 4 8000 ₹ 72,000.00 180000 288000
S2 ₹ 9.00 3.5 6.5 10000 ₹ 90,000.00 315000 585000
H1 ₹ 8.00 2.75 5.5 5000 ₹ 40,000.00 110000 220000
H2 ₹ 7.00 5 4.25 3000 ₹ 21,000.00 105000 89250
H3 ₹ 8.00 3 1.5 6000 ₹ 48,000.00 144000 72000
H4 ₹ 9.00 7.5 5.5 4000 ₹ 36,000.00 270000 198000
Total ₹ 3,07,000.00 1124000 1452250

13. Xg=
𝑋1𝑊1+𝑋2𝑊2+𝑋3𝑊3+𝑋4𝑊4+𝑋5𝑊5+𝑋6𝑊6
𝑊1+𝑊2+𝑊3+𝑊4+𝑊5+𝑊6
=
1124000
307000
=3.66
Yg=
𝑌1𝑊1+𝑌2𝑊2+𝑌3𝑊3+𝑌4𝑊4+𝑌5𝑊5+𝑌6𝑊6
𝑊1+𝑊2+𝑊3+𝑊4+𝑊5+𝑊6
=
1452250
307000
=4.73
COG = (Xg,Yg) = (3.66,4.73)

14. 0
1
2
3
4
5
6
7
8
9
10
0 1 2 3 4 5 6 7 8
S2
S1
H1
H2
H4
H3

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