Factor Rating – Variable Weights Method

Location Analysis Techniques – Qualitative Models Two refineries sites (A and B) are assigned the
following range of point values and respective points,
where the more points the better for the site location.
 Subjective Techniques Sites
1. Industry Precedence
Major factors for site location Pt. Range A B
2. Preferential Factor
Fuels in region 0 to 330 123 156
3. Dominant Factor
Power availability and reliability 0 to 200 150 100
 Qualitative and Semi Quantitative Techniques 54 63
Labor climate 0 to 100
1. Location rating factor
Living conditions 0 to 100 24 96
2. Equal Weights
3. Variable Weights Transportation 0 to 50 45 50
4. Weight cum-rating Water supply 0 to 10 4 5
5. Factor Point Rating Climate 0 to 50 8 4
6. Composite Measure Supplies 0 to 60 5 50
Tax policies and laws 0 to 20 5 20
Total pts. 418 544 Best Site is B

Factor Rating – Weight cum-Rating Weight cum-Rating

Method Method SCORES (0 TO 100)
LOCATION FACTOR WEIGHT Site 1 Site 2 Site 3
 Identify important factors
Labor pool and climate .30 80 65 90
 Weight factors (0.00 - 1.00) Proximity to suppliers .20 100 91 75
Wage rates .15 60 95 72
 Subjectively score each factor (0 - 100) Community environment .15 75 80 80
Proximity to customers .10 65 90 95
 Sum weighted scores Shipping modes .05 85 92 65
Air service .05 50 65 90

Weighted Score Site 1 = (0.30)(80) = 24

 Weight cum-Rating Method Factor Rating – Composite Measure
Method
SCORES (0 TO 100)
 Develop list of all relevant factors
LOCATION FACTOR Site 1 Site 2 Site 3
 Assign a scale to each factor and designate some minimum
Labor pool and climate 24.00 19.50 27.00  Weigh the factors relative to each other in light of importance
Proximity to suppliers 20.00 18.20 15.00
towards achievement of system goals
Wage rates 9.00 14.25 10.80
Community environment 11.25 12.00 12.00  Score each potential location according to the designated
Proximity to customers 6.50 9.00 9.50 scale and multiply the scores by weight
Shipping modes 4.25 4.60 3.25  Sum the points for each location and
Air service 2.50 3.25 4.50 - Use them in conjunction with separate economic analysis
77.50 80.80 82.05
- Include economic factor in the list of factors and choose
the location on the basis of maximum points

Composite Measure Method Composite Measure Method

Payoff Matrix Decision Matrix

LOCATION FACTOR Site 1 Site 2 Site 3 LOCATION FACTOR Weightage Site 1 Site 2 Site 3
Transportation cost/week (Rs) F1 800 640 580 Combined (F1+F2)
Labor cost/week (Rs) F2 1180 1020 1160 Economic Advantage 1.0 0 32 24

Finishing material supply F3 30 80 70 F3 2.0 30 80 70

Maintenance Facilities F4 60 20 30 F4 0.5 60 20 30
Community Attitude F5 50 80 70 F5 2.5 50 80 70

215 402 354

SCORES (0 TO 100)
Composite Rating Site 1 = (1.0)x0+(2.0)x30+(0.5)x60+(2.5)x50= 215
Weightage of 1 for each Rs 10/- a week
 Evaluating Locations
Location Analysis Techniques - Quantitative Models
 Cost-Profit-Volume Analysis
 Determine fixed and variable costs
Break Even Analysis  Plot total costs
Center-of-gravity - Decision based on minimum  Determine lowest total costs
distribution costs
Load-distance

Transportation Model - Decision based on movement

costs of raw materials or finished
goods

Location Cost-Volume Analysis Cost-Volume Analysis

 Assumptions Fixed and variable costs for
 Fixed costs are constant four potential locations
 Variable costs are linear
Location Fixed Variable
 Output can be closely estimated Cost Cost
 Only one product involved A Rs. 250,000 Rs. 11
B 100,000 30
C 150,000 20
D 200,000 35
 Example Example

Rs(000)
Fixed Variable Total
Costs Costs Costs 800 D
700
600 B
A Rs 250,000 Rs 11(10,000) Rs 360,000 500 C
B 100,000 30(10,000) 400,000 400 A
C 150,000 20(10,000) 350,000 300 A Superior
D 200,000 35(10,000) 550,000 200 C Superior
100 B Superior
0
0 2 4 6 8 10 12 14 16

Annual Output (000)

CG Technique CG Technique
 Locate facility at center of geographic area • The centroid method is used for locating
 Based on weight and distance traveled single facilities that considers existing
facilities, the distances between them, and
 Establish grid-map of area the volumes of goods to be shipped between
 Identify coordinates them
and weights shipped • This methodology involves formulas used to
for each location compute the coordinates of the two-
dimensional point that meets the distance
and volume criteria stated above
 Grid-Map Coordinates CG Technique
y n n
y A B C D
 xiWi  yiWi
700 x 200 100 250 500
2 (x2, y2), W2 i=1 i=1
C y 200 500 600 300
y2 x= n y= n 600 (135) Wt 75 105 135 60
 Wi  Wi
500
B
(105)
1 (x1, y1), W1 i=1 i=1
y1

Miles
where, 400
D
x, y = coordinates of the new 300 (60)
3 (x3, y3), W3 facility at center of gravity A
y3 xi, yi = coordinates of existing 200 (75)
facility i
Wi = annual weight shipped from 100
facility i
0 100 200 300 400 500 600 700 x
Miles
x1 x2 x3 x

CG Technique CG Technique
y A B C D
n
 xiWi 700 x 200 100 250 500
i=1 (200)(75) + (100)(105) + (250)(135) + (500)(60) C y 200 500 600 300
x= = = 238 600 (135)
n 75 + 105 + 135 + 60 B Wt 75 105 135 60
 Wi 500 (105)
i=1 Center of gravity (238, 444)
Miles

400
D
n 300
A (60)
 yiWi
i=1 (200)(75) + (500)(105) + (600)(135) + (300)(60) 200 (75)
y= = = 444
n 75 + 105 + 135 + 60 100
 Wi
i=1
0 100 200 300 400 500 600 700 x
Miles
 Load-Distance Load-Distance Calculations
Technique n
• Compute Load x Distance for each LD =  ld i i

site i=1
where,
• Choose site with lowest LD = the load-distance value

Load x Distance li = the load expressed as a weight, number of trips or units

being shipped from the proposed site and location i
• Distance can be actual di = the distance between the proposed site and location i
di = (xi - x)2 + (yi - y)2
or straight-line
where,
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility

Load-Distance Example Load-Distance Example

Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170
Potential Sites Suppliers
Site X Y A B C D Site 3 dA = 206.2 dB = 180.4 dC = 200 dD = 269.3
1 360 180 X 200 100 250 500
2 420 450 Y 200 500 600 300
Compute load-distance
3 250 400 Wt 75 105 135 60 n
Compute distance from each site to each supplier
LD =  ld i i
i=1
Site 1 dA = (xA - x1)2 + (yA - y1)2 = (200-360)2 + (200-180)2 = 161.2
Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063
dB = (xB - x1)2 + (yB - y1)2 = (100-360)2 + (500-180)2 = 412.3 Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789

dC = 434.2 dD = 184.4 Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*

* Choose site 3
 Quantitative Models - Transportation
Technique

• Transportation method of linear

programming seeks to minimize costs of
shipping n units to m destinations or its
seeks to maximize profit of shipping n
units to m destinations