FACILITY LOCATION

T YPES OF FACILITIES

Heavy-manufacturing facilities

large, require a lot of space, and are expensive

Light-industr y facilities

smaller, cleaner plants and usually less costly

Retail and service facilities

smallest and least costly

FACTORS INFLUENCING FACILIT Y

LOCATION DECISION-SELECTION OF SITE

Strategic factors-Low cost leadership

Cost of land
Nature of labor force
Labor costs
Proximity to suppliers and markets
Availability transportation and its cost
Energy availability and cost
Overall infrastructure
Quality of life in community
Government regulations and taxes
Socio-economic factors
Competition
Technological factors
Climatic conditions
Environmental regulations

FACTORS IN HEAVY
MANUFACTURING LOCATION

Construction costs
Land costs
Raw material & finished goods shipment modes
Proximity to raw materials
Utilities
Means of waste disposal
Labor availability

LOCATION INCENTIVES

Tax credits
Relaxed government regulation
Job training
Infrastructure improvement
Money

FACILIT Y LOCATION MODELS

MODELS/TECHNIQUES

Location factor rating

Center-of-gravity
Load-distance

LOCATION FACTOR RATING

Identify important factors

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

LOCATION FACTOR RATING

SCORES (0 TO 100)
LOCATION FACTOR
Labor pool and climate
Proximity to suppliers
Wage rates
Community environment
Proximity to customers
Shipping modes
Air service

WEIGHT

Site 1

Site 2

Site 3

.30
.20
.15
.15
.10
.05
.05

80
100
60
75
65
85
50

65
91
95
80
90
92
65

90
75
72
80
95
65
90

Weighted Score for Labor pool and climate for

Site 1 = (0.30)(80) = 24

LOCATION FACTOR RATING

WEIGHTED SCORES
Site 1

Site 2

Site 3

24.00
20.00
9.00
11.25
6.50
4.25
2.50
77.50

19.50
18.20
14.25
12.00
9.00
4.60
3.25
80.80

27.00
15.00
10.80
12.00
9.50
3.25
4.50
82.05

Site 3 has the

highest factor rating

LOCATION FACTOR RATING WITH

EXCEL

LOCATION FACTOR RATING WITH OM

TOOLS

CENTER-OF-GRAVITY
TECHNIQUE
Locate facility at center of movement in
geographic area
Based on weight and distance traveled;
establishes grid-map of area
Identify coordinates and weights shipped for
each location

GRID-MAP COORDINATES
y

x=

i=1

1 (x1, y1), W1

yiWi

i=1
y=

y1

xiWi

i=1

2 (x2, y2), W2

y2

Wi

Wi

i=1

where,
x, y = coordinates of new facility at
3 (x3, y3), W3
center of gravity
xi, yi = coordinates of existing facility i
Wi = annual weight shipped from
facility i

y3

x1

x2

x3

CENTER-OF-GRAVIT Y TECHNIQUE
y
700

x
y
W

C
600

Miles

500

(135)

B
(105)

400
300
200

D
(60)

A
(75)

100
0

100 200 300 400 500 600 700 x

Miles

A
200
200
75

B
100
500
105

C
250
600
135

D
500
300
60

CENTER-OF-GRAVIT Y TECHNIQUE

xW
i i

x=

i=1
n

W
i

(200)(75) + (100)(105) + (250)(135) + (500)(60)

=
= 238
75 + 105 + 135 + 60

i=1
n

yW
i i

y=

i=1
n

W
i

i=1

(200)(75) + (500)(105) + (600)(135) + (300)(60)

=
= 444
75 + 105 + 135 + 60

CENTER-OF-GRAVIT Y TECHNIQUE
y
700

C
600

Miles

500

(135)

B
(105)

400
300
200

x
y
W

B
100
500
105

Center of gravity (238, 444)

D
(60)

(75)

100
0

A
200
200
75

100 200 300 400 500 600 700 x

Miles

C
250
600
135

D
500
300
60

CENTER-OF-GRAVIT Y WITH EXCEL

Formula for
x coordinate

CENTER-OF-GRAVIT Y WITH OM TOOLS

LOAD-DISTANCE TECHNIQUE

Compute (Load x Distance) for each site

Choose site with lowest (Load x Distance)
Distance can be actual or straight-line

LOAD-DISTANCE CALCULATIONS
n

LD =

ld
i

i=1
where,
LD =

load-distance value

li =

load expressed as a weight, number of trips or units

being shipped from proposed site and location i
distance between proposed site and location i

di

di

(xi - x)2 + (yi - y)2

where,
(x,y) = coordinates of proposed site
(xi , yi) = coordinates of existing facility

LOAD-DISTANCE
Potential Sites
Site
X
1
360
2
420
3
250

Y
180
450
400

A
200
200
75

X
Y
Wt

Suppliers
B
C
100
250
500
600
105
135

D
500
300
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

LOAD-DISTANCE
Site 2 dA = 333

dB = 323.9 dC = 226.7 dD = 170

Site 3 dA = 206.2 dB = 180.3 dC = 200

Compute load-distance

dD = 269.3

LD =

ld
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*

* Choose site 3

LOAD-DISTANCE WITH EXCEL

=B7*C11+C7*C12+D7*C13+E7*C14

LOAD-DISTANCE WITH OM TOOLS

EXAMPLE-SELECT THE LOCATION

Location factor

Weight

Shanghai

Hong Kong

Singapore

Political stability 0.25

50

80

90

Economic
growth

0.18

90

80

75

Port facilities

0.15

60

95

90

Container
support

0.10

50

80

90

Land cost

0.08

90

50

30

Transportation

0.08

50

80

70

Trade Duties

0.07

70

90

90

Trade
regulations

0.05

70

95

95

Airline services

0.02

60

80

70

Area roads

0.02

60

70

80

EXAMPLE DECIDE ABOUT THE

DISTRIBUTION LOCATION
Federal parcel service wants to build a new
distribution centre. The centre needs to be in the
vicinity of uncongested interstate-77, interstate -85
and international airport. The co-ordinates are given
below. Determine the best site
1-77

1-85

Airport

X=14

X=20

X=30

Y=30

Y=8

Y=14

W=17000

W=12000

W=9000

EXAMPLE-IDENTIFY THE SITE FOR SUPPLY

DEPOT
Division commanders are limited to three possible sites for
the supply depot . The co-ordinates are site 1(400,250),
site2(100,200) and site 3(200,500). Determine the best site
1-77

1-85

Airport

X=14

X=20

X=30

Y=30

Y=8

Y=14

W=17000

W=12000

W=9000