LOGO

Logistics and
Supply Chain Management

1
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Lecture 2 and 3
Locating Facilities (cont.)

2
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Scoring models
 Scoring models emphasize the factors that are important
for locations, but which cannot easily be costed or
quantified.

 The important factors in location decisions

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Scoring models - factors in location decisions

 IThe region and country

● availability, skills and productivity of workforce
● local and national government policies, regulations, grants
and attitudes
● political stability
● economic strength and trends
● climate and attractiveness of locations
● quality of life – including health, education, welfare and
culture
● location of major suppliers and markets
● infrastructure – particularly transport and communications
● culture and attitudes of people.
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Scoring models - factors in location decisions
 In The city or area

● population and population trends

● availability of sites and development issues
● number, size and location of competitors
● local regulations and restrictions on operations
● community feelings
● local services, including transport and utilities.
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Scoring models - factors in location decisions
 In the site

● amount and type of passing traffic

● ease of access and parking
● access to public transport
● organizations working nearby
● total costs of the site
● potential for expansion or changes.
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Important factors for scoring models
 availability of a workforce with appropriate skills
When decision maker and
labor relations wantcommunity
the facilityattitudes
near to raw material
 environment and quality of life for employees
 closeness of suppliers and services
 quality of infrastructure
 government policies toward industry.
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Important factors for scoring models
Concerning with customers, decisions about location put more
weight on:

 population density
 socio-economic characteristics of the nearby population
 location of competitors and other services
 location of other attractions such as retail shops
 convenience for passing traffic and public transport
 ease of access and convenient parking
 visibility of site.
 Scoring models the basis of scoring LOGO
models,
Five steps:
Step 1
 decide the relevant factors in a decision

Step 2
 give each factor a maximum possible score that shows its
importance (usually 0-100) and weight for each factor (0.00-1.00)

Step 3
 consider each location in turn and give an actual score for each
factor, up to this maximum

Step 4
 add the total weighted score (= Site Score x Factor Weight) for
each location and find the highest

Step 5
 discuss the result and make a final decision.
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Scoring model Example
 Samson Ltd. is considering three alternative sites for its new
facility.

 After evaluating the firm’s needs, the Managers have

narrowed the list of important Selection Criteria down into
three major factors.

- Availability of skilled labor

- Availability of Raw materials, and
- Proximity to the firm’s markets.
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Scoring model Example (cont.)

 Based on these criteria, the three Alternative sites were scored

between 0 and 100 points:
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Scoring model Example (cont.)

 Weights of each factor have been assigned as follows:

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Scoring model Example (cont.)

Now we will multiply each score by its corresponding factor weight

Weighted scores are calculated as: (Site Score) x (Factor Weight)

FACTOR Factor Site A Site B Site C

Weight
(Total=1)
Score Weighted Score Weighted Score Weighted
Score Score Score

Skilled labor 0.5 70 35 70 35 50 25

Raw materials 0.3 60 18 40 12 90 27

Market Prox. 0.2 70 14 95 19 60 13

Total Weighted Score 67 66 64

From these results, the largest total weight is for Site A. It appears to be
the best location.
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NETWORK MODELS
Electronic maps of road networks allow another
approach to location, which is based on actual
road layouts.

 Single median problem

 Covering problem
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Single median problem
 Finds the location of one facility on a network that minimize total
cost is called the single median problem

 The easiest way to find the single median

- Starts with a matrix of the shortest distances between towns.

- To find the shortest average distance, we have to combine these

distances with the loads carried.

- Multiply the distances by the demands at each town, to get a matrix

of the weight-distances.

- Add these for each town, and find the lowest overall value.
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Single median problem
 P-median – 1 facility planar solution, weighted demand

Minimize the average distance to the facility

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Single median problem - Example
 Ian Bruce delivers goods to eight towns, with locations
and demands as shown in next slide. He wants to find
the location for a logistics centre that minimizes the
average delivery time to these towns. Where should he
start looking?
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Single median problem – Example (cont.)
20
10 8 10
15 15 9 DI
AL GO
BE
7 14
8
22 EN
HT
20 5
Distance between CP 6 15
AL and CP

25 6 FR
Facility CP
10
Demand at CP

Map of Ian Bruce’s problem

 Single median problem – Example (cont.) LOGO
20
10 8 10
15 15 9 DI
AL GO
BE
7 14
8
22 EN
HT
20 5
CP 6 15
Ways from AL to EN
25 6 FR
RED= 15+9+7= 31 (smallest)
GREEN= 15+8+6+6= 35 10
YELLOW= 22+6+6= 34

Map of Ian Bruce’s problem

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Single median problem - Example Solution

Weight-distance of a centre at AL = (10 × 0) + (15 × 15) + (25 × 22) +

(20 × 24) + (20 × 31) + (10 × 28) + (10 × 32) + (15 × 36) = 3015.

Town EN has the lowest total cost, and is the single median
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Program on line

http://www.hyuan.com/java/Spots.html
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Covering problem
 Locate facilities that provide some service required by
customers

 If customers are positioned within a certain predefined

critical distance d from any of the facilities, then they are
considered served or ”cover”

 Two types:
1. Look for the single location that gives the best
service to all towns
2. Find the number of facilities needed to achieved a level
of service and their best locations.
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Covering problem - Example
 The following figure shows part of a road network, with
the travel time (in minutes) shown on each link. Where
would you locate a depot to give best customer service?
How many depots would be needed to give a maximum
journey of 15 minutes?
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Covering problem – Example (cont.)
4
E
15 G 3
6
B 10
10
14 J
5 F
A C 3
6
15 I
10
Travel time (min.) D
between A and D 15
10 H
Facility D

Road network showing travel time in minutes between location

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Covering problem – Example (cont.)
4
E
15 G 3
6
B 10
10
14 J
5 F
A C 3
6
15 I
10
Travel time (min.) D
between A and D 15
10 H
Facility D

Road network showing travel time in minutes between location

Covering problem – Example (cont.) LOGO
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LOCATION PLANNING
Step 1
 Identify the features needed in a new location, determined by
the business and logistics strategies, structure of the supply
chain, aims, customers, and other relevant factors. Look for
regions and countries that can best supply these.
Step 2
 Within the identified region, use an infinite set approach –
such as the centre of gravity or similar model – to find the best
area for locations.
Step 3
 Search around this area to find a feasible set of available
locations.
Step 4
 Use a feasible set approach – such as a costing model or
scoring model – to compare these alternatives.
Step 5
 Discuss all available information and come to a decision.
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LOCATION PLANNING (cont.)
We can use the following procedure

 1. Examine the overall aims, looking at the logistics strategy

and other plans to identify the aims and goals of logistics in
terms of customer service, costs, timing, and so on.

 2. Do a logistics audit, describing the details of the current

logistics system, including the location of facilities, network
connecting these, measures of performance, and industry
benchmarks.

 3. Identify mismatches, where there are differences between

the aims (from step 1) and actual performance (from step 2).

 4. Examine alternatives for overcoming the mismatch, looking

in general terms to see where and how the structure of the
supply chain can be improved.
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LOCATION PLANNING (cont.)
 5. Location decisions, having set the general features of the
supply chain, look in detail at the facilities needed. Use
appropriate models to find the best locations and sizes for
these facilities.

 6. Confirm the locations, making sure that the locations

identified in step 5 really are best, and work with the structure
identified in step 4.

 7. Implement and monitor the solutions, doing whatever is

needed to execute the changes and continuing to check
performance.