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Chapter 7 Supplement Facility Location Models: Russell and Taylor Operations Management, 8th Edition
Chapter 7 Supplement Facility Location Models: Russell and Taylor Operations Management, 8th Edition
Chapter 7 Supplement Facility Location Models: Russell and Taylor Operations Management, 8th Edition
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-2
Types of Facilities
• Heavy-manufacturing facilities
• large, require a lot of space, and are expensive
• Light-industry facilities
• smaller, cleaner plants and usually less costly
• Retail and service facilities
• smallest and least costly
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-3
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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-4
Factors in Light Industry Location
• Land costs
• Transportation costs
• Proximity to markets
• depending on delivery requirements including
frequency of delivery required by customer
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-5
Factors in Retail Location
• Proximity to customers
• Location is everything
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-6
Site Selection: Where to Locate
• Infrequent but important • Location criteria for
• being “in the right place at the manufacturing facility
right time” • nature of labor force
• Must consider other factors, • labor costs
especially financial • proximity to suppliers and
considerations markets
• Location decisions made more • distribution and transportation
often for service operations costs
than manufacturing facilities • energy availability and cost
• Location criteria for service • community infrastructure
• access to customers • quality of life in community
• government regulations and
taxes
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-7
Global Supply Chain Factors
• Government stability • Climate
• Government regulations • Number & proximity of
• suppliers
Political & economic systems
• Transportation & distribution
• Economic stability & growth system
• Exchange rates • Labor cost & education
• Culture • Available technology
• Export/import regulations, • Commercial travel
duties & tariffs • Technical expertise
• Raw material availability • Cross-border trade
regulations
• Group trade agreements
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-8
Regional and Community
Location Factors in U.S.
• Labor (availability, • Modes and quality of
education, cost, and unions) transportation
• Proximity of customers • Transportation costs
• Number of customers • Community government
• Construction/leasing costs Local business regulations
• Land cost • Government services (e.g.,
Chamber of Commerce)
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-9
Regional and Community
Location Factors in U.S.
• Business climate • Infrastructure (road &
• Community services utilities)
• Incentive packages • Quality of life
• Government regulations • Taxes
• Environmental regs. • Availability of sites
• Raw material availability • Financial services
• Commercial travel • Community inducements
• Climate • Proximity of suppliers
• Education system
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-10
Location Incentives
• Tax credits
• Relaxed government regulation
• Job training
• Infrastructure improvement
• Money
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-11
Geographic Information Systems (GIS)
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-12
GIS Diagram
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-13
Location Analysis Techniques
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-14
Location Factor Rating
• Identify important factors
• Weight factors (0.00 - 1.00)
• Subjectively score each factor (0 - 100)
• Sum weighted scores
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-15
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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-16
Location Factor Rating
WEIGHTED SCORES
Site 1 Site 2 Site 3
24.00 19.50 27.00
20.00 18.20 15.00
Site 3 has the
9.00 14.25 10.80
highest factor rating
11.25 12.00 12.00
6.50 9.00 9.50
4.25 4.60 3.25
2.50 3.25 4.50
77.50 80.80 82.05
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-17
Location Factor Rating With Excel
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-18
Location Factor Rating With OM Tools
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-19
Center-of-Gravity Technique
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-20
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 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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-21
Center-of-Gravity Technique
y
A B C D
700
C x 200 100 250 500
600 (135) y 200 500 600 300
B
W 75 105 135 60
500 (105)
Miles
400
D
300
A (60)
200 (75)
100
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-22
Center-of-Gravity Technique
n
xiWi
i=1
x= =
n
Wi
i=1
n
yiWi
i=1
y= n
=
Wi
i=1
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-23
Center-of-Gravity Technique
n
xiWi
i=1 (200)(75) + (100)(105) + (250)(135) + (500)(60)
x= = = 238
n 75 + 105 + 135 + 60
Wi
i=1
n
yiWi
i=1 (200)(75) + (500)(105) + (600)(135) + (300)(60)
y= n
= = 444
75 + 105 + 135 + 60
Wi
i=1
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-24
Center-of-Gravity Technique
y
A B C D
700
C x 200 100 250 500
600 (135) y 200 500 600 300
B
W 75 105 135 60
500 (105)
Center of gravity (238,
Miles
400 444) D
300
A (60)
200 (75)
100
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-25
Center-of-Gravity With Excel
Formula for
x coordinate
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-26
Center-of-Gravity With OM Tools
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-27
Load-Distance Technique
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-28
Load-Distance Calculations
n
LD = ld i 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
di = distance between 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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-29
Load-Distance
dC = dD =
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-30
Load-Distance
dC = 434.2 dD = 184.4
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-31
Load-Distance
Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170
Site 3 dA = 206.2 dB = 180.3 dC = 200 dD = 269.3
Compute load-distance
n
LD = l i di
i=1
Site 1 =
Site 2 =
Site 3 =
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-32
Load-Distance
Site 2 dA = 333 dB = 323.9 dC = 226.7 dD = 170
Site 3 dA = 206.2 dB = 180.3 dC = 200 dD = 269.3
Compute load-distance
n
LD = l i di
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
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-33
Load-Distance With Excel
=B7*C11+C7*C12+D7*C13+E7*C14
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-34
Load-Distance With OM Tools
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-35
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© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Supplement 7-36