Layout Planning Problems

(Chapter 6)

Session 6. Unit 2
 Location Planning Methods
. One facility – Multiple Candidates

 Location Factor Rating. A simple methodology to asses Attractiveness of

each potential location

 Centre of Gravity Method : Indicates the ideal Location in a Grid

map which ensures that weighted distance travelled on the whole is
minimum. Also called Load Distance Method. Enables planner to evaluate
02 or more potential locations for locating facility vs-a-vis the
demand/supply points.

 BEP Analysis. Based on Annual Operating Expense in terms of Fixed

Costs & Variable Costs of Locations.

2. Multiple Facility –
Multiple Candidates , when Multiple plants & Multiple demand points,
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the location problem can be solved using Transportation Model
Steps Location Factor Rating
1. Identify & list down all relevant factors for the location
decision.
2. Establish the relative importance of each factor in the final
decision (Assign weightage to each factor).

3. Rate the performance of each candidate location using a

rating Scale (assign a Common scale to Each Factor(eg 0-
100points) & Designate any Minimum).

4. Score Each Location on the designated Scale & Multiply the

Score by weights.
5. Compute total score for each location based on its performance
against each factor & rank them in decreasing order of the
3 score &Management
Operations Choose the location with Maximum Points.
31/01/22 05:44 AM
 Example
A Manufacturer of Garments is Actively Considering Five
Alternative Locations for Setting Up its Factory.
The Locations Vary in Terms of the Advantages that it
Provides to the Firm. Hence Firm Requires a Method of
Identifying the Most Appropriate Location.
Based on a Survey of its Senior Executives the Firm has
Arrived at Six Factors to be Considered for Final Site Selection.
The Ratings of Each Factor on a Scale of 1 to 100 Provide this
Information.
Further, Based on Some Detailed Analysis of Both the
Qualitative & Quantitative Data Available for Each of the
Location, the Rating for the Locations Against Each Factor has
also been Arrived at (On a Scale Of 0 to 100). Using this
Information Obtain A Ranking of the Alternative Locations.
Factor Ratings Rating of each locations against the factors
Factors Rating
Availability of infrastructure 90 Factors Location 1 Location 2 Location 3 Location 4 Location 5
Availability of infrastructure 20 40 60 35 55
Size of the market 60
Size of the market 30 30 40 60 80
Industrial relations climate 50
Industrial relations climate 80 30 50 60 50
Tax benefits and concessions 30 Tax benefits and concessions 80 20 10 20 20
Availability of cheap labour 30 Availability of cheap labour 70 70 45 50 50
Nearness to port 65 Nearness to port 20 40 90 50 60
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 Solution
1. Step 1: Identify and list down all the relevant factors for
the location decision.
2. Step 2: Establish the relative importance of each factor
in the final decision
Relative
Factors Rating weights
Availability of infrastructure 90 0.28
Size of the market 60 0.18
Industrial relations climate 50 0.15
Tax benefits and concessions 30 0.09
Availability of cheap labour 30 0.09
Nearness to port 65 0.20

Sum of all factor ratings 325 1.00

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 1. Step 3: Rate the performance of each candidate location
using a rating mechanism
Relative
Factors weights Location 1 Location 2 Location 3 Location 4 Location 5
Availability of infrastructure 0.28 20 40 60 35 55
Size of the market 0.18 30 30 40 60 80
Industrial relations climate 0.15 80 30 50 60 50
Tax benefits and concessions 0.09 80 20 10 20 20
Availability of cheap labour 0.09 70 70 45 50 50
Nearness to port 0.20 20 40 90 50 60

Overall score for the locations 41.23 37.54 54.77 46.46 56.15
Ranking of the locations 4 5 2 3 1

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 Step 4: Compute a total score for each location based on its
performance against each factor and rank them in the
decreasing order of the score
Relative
Factors weights Location 1 Location 2 Location 3 Location 4 Location 5
Availability of infrastructure 0.28 20 40 60 35 55
Size of the market 0.18 30 30 40 60 80
Industrial relations climate 0.15 80 30 50 60 50
Tax benefits and concessions 0.09 80 20 10 20 20
Availability of cheap labour 0.09 70 70 45 50 50
Nearness to port 0.20 20 40 90 50 60

Overall score for the locations 41.23 37.54 54.77 46.46 56.15
Ranking of the locations 4 5 2 3 1

Overall rating for location 3 = 60*0.28 + 40*0.18 + 50*0.15

+ 10*0.09 + 45*0.09 + 90*0.20 = 54.77
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 Centre of Gravity Method
1. Also called Load –Distance or GRID Method.
2. Helps to Identify location of Plant/Warehouse that minimizes the
costs of Distributing specified Volumes of product to nearby
Markets.
3. Make Use of X-Y coordinates(or Grid/Map) showing relative
Distance Between Locations.
4. Assumes that Distribution Cost a function of Volume shipped in
Rectilinear Distances ( X-Y Coordinates) .
5. Distances of each X & Y Coordinates averaged using Volume of
products to be transported. Resultant Coordinates gives CG of that
Grid.
6. Average X&Y coordinates will be Xc=∑Vi xi/∑Vi &Yc=∑Vi yi/∑Vi
7. Xc& Yc coordinates gives the starting point for the new site .
Locations in that vicinity evaluated , changes suggested and then
8 recalculate before final Decision.
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 Problem 1
Grid shows 08 market locations to which a manufacturer of
Wood Windows expect to ship its products. The Shipment
Volumes in Tones and X-Y coordinates of the locations are
given below and in Grid. Using CG method (a) find the volume
Weighted Xc & Yc coordinates and (b) suggest a possible
WarehouseMarket
Location.Vol xi Vi xi Vi yi
Area Yi
Belfair 8 2.5 10 20 80

Potlach 20 3 5 60 100

Oakland 12 6.5 8 78 96
Atka 10 11 10 110 100

Forks 30 11 8 330 240

Highland 20 10 4 200 80
9
TotalMidvale 40
170 13 520 1678 140896 31/01/22 05:44 AM
Grid Map
Y- in Miles
N
12 Atka(11,10),10
Belair(2.5,10) ,8
10
Oakland(6.5,8) ,12 Fork(11,8),30
8
Distance in Miles

6 Potlach (3,5) ,20 Midvale(13,3.3)

Highland(10,4),20
4
Riverside(12,2) ,30
2

2 4 6 8 10 12 14
X- in Miles
Distance in Miles
 Solution to Problem 1
02 Columns added to provide values for Vi xi & Vi
yi .

Centre of Gravity Coordinates are

Xc=∑Vi xi/∑Vi = 1678/170 =9.9
and Yc=∑Vi yi/∑Vi = 896/170 = 5.3
Referring to the Grid, the coordinates (XC = 9.9 and Yc =
5.3 ) lie close to the city of Highland giving an Indication
that it may be a worthy Location fro the Distribution
Centre.

Other factors like Warehouse availability, Transportation

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Rates Management
Operations etc should then evaluated for that Site. 31/01/22 05:44 AM
 Example 2 C of G Method
1. A manufacturer of certain industrial component is interested in
locating a new facility in a target market &would like to know the
most appropriate place in the target market to locate the proposed
facility. Manufacturer feels that there are no location constraints in
the target market (i.e. any point in the target market is good
enough).
2. There are 04supply points A, B, C and D in the locality that will
provide key inputs to the new facility. A two-dimensional grid
map of the target market in which we would like to locate a new
facility with distance coordinates of the four supply points is
available.
3. Annual supply from these four points to the proposed facility are
200, 450, 175 and 150 tonnes respectively.
4. The situation is graphically shown in the two-dimensional plot in
the figure. While the coordinates in the parentheses show distance
from origin of target map of each of supply point, the number that
follows is the annual shipment (in tonnes) from these points to the
proposed facility.
Grid Map

600
A (125,550), 200
Distance in Kilometres

500
B (350,400), 450
400

300
D (700,300), 150
200
C (450,125), 175
100

100 200 300 400 500 600 700

Distance in Kilometres
Example 10.3
1. Consider example 10.2
2. Suppose the manufacturer came to know that there are constraints in locating the new
facility.
3. Based on an initial survey of possible sites for the proposed facility, the manufacturer
identified four candidates.
4. The figure has the location coordinates of the four candidates (numbered 1 to 4).
5. What is the best location for the proposed new facility?

Existing Supply Points Candidates for proposed facility

xi yi Wi Xj Yj
A 125 550 200 1 300 500
B 350 400 450 2 200 500
C 450 125 175 3 500 350
D 700 300 150 4 400 200
Solution to Example 10.3
Grid Map
Candidate for proposed facility

Existing Demand (or supply) point

600
A (125,550), 200
Distance in Kilometres

500
1 (300,500)
B (350,400), 450
400
2 (200,500) 3 (500,350)
300
D (700,300), 150
200
4 (400,200)
C (450,125), 175
100

100 200 300 400 500 600 700

Distance in Kilometres
 Location Planning Trends ….
1. Recent trends in the international markets point to a shift towards
fewer facilities that could serve markets worldwide
 Example HP Desk Jet Printer, Dell PC
2. These developments point to two areas which could affect the
location planning problem very significantly
 availability of good transportation infrastructure
 use of Internet and IT infrastructure
3. Location planning in the overall context of just-in-time
manufacturing philosophy (suppliers located in the vicinity (20 –
40 Km radius) of the manufacturer)
4. Service quality depends on responsiveness of service delivery
system. Locating service outlets, close to the demand point is an
important requirement in a service system
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 Summary
1. Location issues more prominent in recent years on
account of globalization of markets.
2. Multi-national Corporations have more
opportunities to identify candidate locations for
their manufacturing facilities.
3. Factor cost advantages & expanding market in
developing countries made these nations more
attractive for locating new facilities
4. Simple qualitative methods useful for quick
screening initial set of candidates & narrowing
down to one/two.
5. Location decisions in service systems must
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address requirement of speed of responsiveness.
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Locating service outlets as close to demand points
 Summary

1. Load-Distance method &centre of gravity method helps

evaluate the suitability of candidate solutions from a
perspective of distance & quantum of items to be
transported between a location & the demand points
2. Transportation method helps in optimally identifying a set
of K locations out of N candidate solutions
3. Availability of good transport infrastructure & recent
developments in Internet technology suggests that it is
possible to have fewer locations & still provide better
customer service

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 Movie

PPT(slide.7):Service System
Design & operation: The
Medanta, The Medcity.
Opened with link (12
minutes) Chapter 10

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