Location Planning

Scenarios for Location Planning

Establishing a new facility

Expansion of existing facility

Growing volume of business

Dispersal of industry due to industrial policy

Political, legal, social change

Shift in geography of demand

Factors Affecting Territory Selection
Markets

Raw material and supplies

Transportation facilities

Manpower supply

Infrastructure

Legislation and taxation

Climate
Factors Affecting Site Selection
Community facilities

Waste disposal

Community attitude

Ecology and pollution

Size of site

Topography

Transportation facilities

Supporting industries and services

Cost of land
Location Selection Models
 Location Selection

Based on subjective Based on cost

factors

Equal weight method

Variable weight method
Production cost Transportation cost
Weight cum rating method
Factor point rating Median model
CVP analysis
Gravity model
Transportation model
 Equal Weight Method

Factors / Sites S1 S2 S3 S4
F1 2 5 9 2

F2 3 3 8 3

F3 6 2 7 3

Site Rating 11 10 24 8
 Variable Weight Method

Factors / Sites Maximum Points S1 S2 S3 S4

F1 300 200 250 250 50

F2 100 50 70 80 100

F3 150 5 50 10 40

Site Rating 255 370 340 190

 Weight Cum Rating Method

Factors / Sites Maximum Points S1 S2 S3 S4

F1 5 2 5 9 2

F2 3 3 3 8 3

F3 2 6 2 7 3

Site Rating 31 38 83 25
 Factor Point Rating

Poor Fair Adequate Good Excellent

F1 Water Supply -15 -12 0 6 10

F2 Community Facility -3 -1 0 1 2

F3 Community Attitude -6 -3 0 3 6
CVP Analysis, Median and
Gravity Models
CVP Analysis
Fixed cost  F
Variable cost  V
Unit price  P

At the break even point,

Revenue = Cost

P * Q = F + (V * Q)
F
Q=
P-V
Median Model
Path of movement of a load is along rectilinear path.

D = |x2-x1| + |y2-y1|

.
x2 y2
S2
L = Load transported
C = Cost of transportation per unit

.S1
x1 y1
Cost = C*L*D
Total cost = C*L*D

M
• Identify the median value of total number of loads moved.
• Find the x-coordinate value of the existing facility that sends or receives the
median load.
• Find the y-coordinate value of the existing facility that sends or receives the
median load.
• The determined x and y values are the optimal location for the new facility.
Gravity Model
Path of movement of a load is along diagonal path.

.
D = (x2-x1) + (y2-y1)
L = Load transported
x2 y2
S2 C = Cost of transportation per unit

S1 .
x1 y1
Cost = C*L*D
Total cost = C*L*D

M
 Li * Xi
M M

X =
Li

Li * Yi
M M

Y =
Li