Facility Location - Issues (criteria) in Facility location :

A. Proximity to customers B. Business Climate C. Total costs D. Infrastructure E. Quality of labour F. Suppliers G. Other facilities of the same company H. Free trade zone I. Political risks J. Government barriers / restrictions K. Trading blocks L. Environmental regulation M. Host community N. Competitive advantage

Facility Location Evaluation Methods :

1. Factor Rating System 2. Linear Programming Method 3. Centre of Gravity Method 4. Delphi Analytical Method

Plant location evaluation methods

A. Factor Rating System :

>> Most widely used and easy to understand format >> Assign range of point values to major factors affecting a set of site locations. Factors Assigned points for locations A 1. Power availability 2. Water 3. Transport 4. Suppliers 5. Skilled labour 6. Total 80 60 100 50 70 B 100 70 100 60 70 C 120 70 140 60 80

Factor rating system : ( with weight ages )

>> Appropriate weight ages can also be allotted to arrive at location decisions. >> All weight ages add up to 1

B. Linear programming Method :

>> Here Transportation method of L.P is used. >> Basically to test the cost impact of different sites. >> Optimize the total transportation cost of moving materials from m sources to n destinations. >> Application : For locating warehouses and allocation decisions.

Transportation model
>> For cost effective distribution of a product from several sources m (origin or supply) to numerous destinations. n (destination or demand) >> Objective is to minimize the total transportation costs.

LP model of a Transportation problem Formulation : >> Define the objective function >> Spell out the requirements or constraints >> Condition of non-negativity

Transportation models : >> North-west corner method >> Least cost method >> Vogels approximation method

C. Centre of Gravity method : >> Mostly used for locating intermediate (or) distribution warehouses >> For locating single facilities, that consider the existing facilities, the distances between them and the volume of goods to be shipped. >> Place existing locations on a co-ordinate grid system. >> Centre of Gravity (C.G) is found by calculating the X and Y coordinates that result in minimum transportation cost. >> Empirically,

Cx =

xi * Vi Vi

Cy

yi * Vi Vi

Cx is x coordinate of C.G

Cy is y coordinate of C.G

xi is x co-ord of existing i th location yi is y co-ord of existing i th location Vi is volume of goods moved to / from i th location.

D. Analytic Delphi Model :

## Incorporates tangible and intangible factors in the decision making process. ## Coordinating team >>> Administers questionnaire ## Forecasting team >>> SWOT analysis ## Strategic team >>> Goals / Priorities on the findings of forecasting team

Locating Service facilities :

>> Generally located close to customers >> Influenced by market selection decisions