Supplement S5

Facility Location
Models
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 Types Of Facilities
 Heavy manufacturing
Auto plants, steel mills, chemical plants
 Light industry
Small components mfg, assembly
 Warehouse & distribution centers
 Retail & service

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 Factors in Heavy
Manufacturing Location
 Construction costs
 Land costs
 Raw material and finished goods
shipment modes
 Proximity to raw materials
 Utilities
 Labor availability
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 Factors in Light
Industry Location

 Construction costs
 Land costs
 Easily accessible
geographic region
 Education & training capabilities

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 Factors in
Warehouse Location

 Transportation costs
 Proximity to markets

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Factors in Retail Location

 Proximity to
customers
 Location is
everything

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 Global Location Factors
 Government stability  Raw material availability
 Government regulations  Number and proximity of
suppliers
 Political and economic
systems  Transportation and
distribution system
 Economic stability and  Labor cost and education
growth
 Available technology
 Exchange rates  Commercial travel
 Culture  Technical expertise
 Climate  Cross-border trade
 Export import regulations, regulations
duties and tariffs  Group trade agreements

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Regional Location Factors
 Labor (availability,  Incentive packages
education, cost and  Governmental
unions) regulations
 Proximity of  Environmental
customers regulations
 Number of customers  Raw material
 Construction/leasing availability
costs  Commercial travel
 Land costs  Climate
 Modes and quality of  Infrastructure
transportation  Quality of life
 Transportation costs
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Regional Location Factors
 Community  Availability of sites
government  Financial Services
 Local business  Community
regulations inducements
 Government services  Proximity of suppliers
 Business climate  Education system
 Community services
 Taxes

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 Site Location Factors
 Customer base  Zoning restrictions
 Construction/  Traffic
leasing cost  Safety/security
 Land cost  Competition
 Site size  Area business
 Transportation climate
 Utilities  Income level

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 Location Incentives
 Tax credits
 Relaxed government
regulation
 Job training
 Infrastructure
improvement
 Money

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Location Analysis
Techniques
Location rating factor

Center-of-gravity

Load-distance

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 Location Rating Factor

 Identify important factors

 Weight factors (0.00 - 1.00)
 Subjectively score each factor (0 - 100)
 Sum weighted scores

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 Location Factor Rating
SCORES (0 TO 100)
LOCATION FACTOR WEIGHT Site 1 Site 2 Site 3
Labor pool and climate .30 80 65 90
Proximity to suppliers .20 100 91 75
Wage rates .15 60 95 72
Community environment .15 75 80 80
Proximity to customers .10 65 90 95
Shipping modes .05 85 92 65
Air service .05 50 65 90

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

Example S5.1
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 Location Factor Rating
WEIGHTED
SCORES SCORES
(0 TO 100)
LOCATION FACTOR WEIGHT Site 1 Site 2 Site 3
Labor pool and climate .30 24.00
80 19.50
65 27.00
90
Proximity to suppliers .20 20.00
100 18.20
91 15.00
75
Wage rates .15 9.00
60 14.25
95 10.80
72
Community environment .15 11.25
75 12.00
80 12.00
80
Proximity to customers .10 6.50
65 9.00
90 9.50
95
Shipping modes .05 4.25
85 4.60
92 3.25
65
Air service .05 2.50
50 3.25
65 4.50
90
77.50 80.80 82.05

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

Example S5.1
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Center-of-Gravity Technique
 Locate facility at center of geographic area
 Based on weight and distance traveled
 Establish grid-map of area
 Identify coordinates
and weights shipped
for each location

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 Grid-Map Coordinates
y n n
 xiWi  yiWi
2 (x2, y2), W2 i=1 i=1
y2 x= n y= n
 Wi  Wi
1 (x1, y1), W1 i=1 i=1
y1
where,
x, y = coordinates of the new
3 (x3, y3), W3 facility at center of gravity
y3 xi, yi = coordinates of existing
facility i
Wi = annual weight shipped from
facility i

x1 x2 x3 x Figure S5.1

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Center-of-Gravity Technique
y A B C D
700 x 200 100 250 500
C y 200 500 600 300
600 (135)
B Wt 75 105 135 60
500 (105)
Miles

400
D
300
A (60)
200 (75)
100

0 100 200 300 400 500 600 700 x

Miles
Example S5.2
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Center-of-Gravity Technique
y A B C D
n
700 x 200 100 250 500
xiWi C
i=1 (200)(75) y + (250)(135)
+ (100)(105) 200 500 600
+ (500)(60) 300
x=600 =
n B
(135) Wt + 135
75 + 105 75+ 60 105 135= 23860
500  Wi (105)
i=1
Miles

400
D
300n (60)
A
 yiWi
200
i=1 (75)
(200)(75) + (500)(105) + (600)(135) + (300)(60)
y= = = 444
100 n 75 + 105 + 135 + 60
 Wi
i=1
0 100 200 300 400 500 600 700 x
Miles
Example S5.2
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Center-of-Gravity Technique
y A B C D
700 x 200 100 250 500
C y 200 500 600 300
600 (135)
B Wt 75 105 135 60
500 (105)
Center of gravity (238, 444)
Miles

400
D
300
A (60)
200 (75)
100

0 100 200 300 400 500 600 700 x

Miles
Example S5.2
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 Load-Distance
Technique
• Compute Load x Distance for each
site
• Choose site with lowest
Load x Distance
• Distance can be actual
or straight-line

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Load-Distance Calculations
n
LD =  ld i i

i=1
where,
LD = the load-distance value
li = the load expressed as a weight, number of trips or units
being shipped from the proposed site and location i
di = the distance between the proposed site and location i
di = (xi - x)2 + (yi - y)2
where,
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility

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Load-Distance Method

• 69 is approx. number of miles per

degree of latitude

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 Load-Distance Example
Potential Sites Suppliers
Site X Y A B C D
1 360 180 X 200 100 250 500
2 420 450 Y 200 500 600 300
3 250 400 Wt 75 105 135 60

Compute distance from each site to each supplier

Site 1 dA = (xA - x1)2 + (yA - y1)2 = (200-360)2 + (200-180)2 = 161.2

dB = (xB - x1)2 + (yB - y1)2 = (100-360)2 + (500-180)2 = 412.3

dC = 434.2 dD = 184.4

Example S5.3
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 Load-Distance Example
Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170
Site 3 dA = 206.2 dB = 180.4 dC = 200 dD = 269.3

Compute load-distance
n
LD =  ld i i
i=1
Site 1 = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063
Site 2 = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789
Site 3 = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555*

Example S5.3 * Choose site 3

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