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Davis-location is the function of determining wherethe plant
should be located for max. operatingeconomy and effectiveness.
Facility location is the process of identifying thebest
geographic location for a service or
production facilityFactors affecting location decisions:
1 input related factors: raw materials, humanresources, capital
and technology
2 output related factors: marketing, economicimpacts
3 other factors: climate, political stability,government
regulation
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Proximity to source of supply:Reduce transportation costs of
perishable or
bulky raw materials
Proximity to customers:E.g.: high population areas
Proximity to labor:
Local wage rates, attitude toward unions,
availability of special skills
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Community considerations:
Local communitys attitude toward the facility(e.g.: prisons)
Site considerations:Local zoning & taxes, access to
utilities, etc.
Quality-of-life issues:Climate, cultural attractions, commuting
time,
etc.
Other considerations:Options for future expansion, local
competition, etc.
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Objectives
To expand existing facilityTo add new location while
retaining
existing one.
Shut down at one location and move toanother
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Issues in Facility Location
Free Trade Zones: closed facility into
which foreign goods can be brought
without being subject to custom
requirements. Political Risk Government Barriers
Trading Blocs Environmental Regulation CompetitiveAdvantage
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Plant Location Methodology: Factor Rating
Method Example
Fuels in region 0 to 330Power availability and reliability 0 to
200
Labor climate 0 to 100
Living conditions 0 to 100
Transportation 0 to 50
Water supply 0 to 10
Climate 0 to 50
Supplies 0 to 60
Tax policies and laws 0 to 20
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.
123150
54
24
45
4
8
5
5
Major factors for site location Pt. Range
156100
63
96
50
5
4
50
20
SitesA B
Total pts. 418 544
Best Site
is B
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Plant Location Methodology: Transportation
Method of Linear Programming
Transportation method of linear
programming seeks to minimize
costs of shipping n units to mdestinations or its seeks to
maximize profit of shipping n units
to m destinations
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Plant Location Methodology:
Centroid Method
The centroid method is used for
locating single facilities that considers
existing facilities, the distances
between them, and the volumes ofgoods to be shipped between
them
This methodology involves formulas
used to compute the coordinates of the
two-dimensional point that meets thedistance and volume criteria
stated
above
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Plant Location Methodology: Centroid
Method Formulas
C =d V
Vx
ix i
i
Where:
Cx = X coordinate of centroid
Cy = X 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
C =d V
Vy
iy i
i
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Plant Location Methodology: Example
of Centroid Method
Question: What is the best location for a new Z-Mobile
warehouse/temporary storage facility considering onlydistances
and quantities sold per month?
Centroid method exampleSeveral automobile showrooms are
located according to the following
grid which represents coordinate
locations for each showroomS 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 2300X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
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Plant Location Methodology: Example of Centroid Method
(Continued): Determining Existing Facility CoordinatesTo begin,
you must identify the
existing facilities on a two-
dimensional plane or grid and
determine their coordinates.
X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
You must also have the
volume information on the
business activity at the
existing facilities.
S ho wro om No o f Z-Mo bile s
s old pe r month
A 1250
D 1900
Q 2300
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Plant Location Methodology: Example of Centroid Method
(Continued): Determining the Coordinates of the New
Facility
C =100(1250) + 250(1900) + 790(2300)
1250 + 1900 + 2300=
2,417,000
5,450=x 443.49
C =200(1250) + 580(1900) + 900(2300)
1250 + 1900 + 2300=
3,422,000
5,450=y 627.89
S ho wroom No of Z-Mobile s
s old pe r month
A 1250
D 1900
Q 2300X
Y
A(100,200)
D(250,580)
Q(790,900)
(0,0)
You then compute the new coordinates using the formulas:
Z
New
locationof facility
Z about
(443,627)
You then take the coordinates and place them on the map:
