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Supply Chain Management. Facility Location Techniques. Facilities. Plants Warehouses Distribution centers Service centers Retail operations Public Service Facilities. Types Of Facilities. Heavy manufacturing auto plants, steel mills, chemical plants Light industry

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Supply chain management

Supply Chain Management

Facility Location Techniques


Facilities
Facilities

  • Plants

  • Warehouses

  • Distribution centers

  • Service centers

  • Retail operations

  • Public Service Facilities


Types of facilities
Types Of Facilities

  • Heavy manufacturing

    • auto plants, steel mills, chemical plants

  • Light industry

    • small components manufacturing, assembly

  • Warehouse & distribution centers

  • Retail & service

  • Public sector


Factors in heavy manufacturing location
Factors In Heavy Manufacturing Location

  • Construction costs

  • Land costs

  • Raw material & finished goods shipment modes

  • Proximity to raw materials

  • Utilities

  • Labor availability


Factors in light industry location
Factors In Light Industry Location

  • Construction costs

  • Land costs

  • Easily accessible geographic region

  • Education & training capabilities


Factors in warehouse location
Factors In Warehouse Location

  • Transportation costs

  • Proximity to markets


Factors in retail location
Factors In Retail Location

  • Proximity to customers

  • Location is everything


Global location factors

Government stability

Government regulations

Political & economic systems

Economic stability & growth

Exchange rates

Culture

Climate

Export import regulations

Duties & tariffs

Raw material availability

Number and proximity of suppliers

Transportation & distribution system

Labor cost & education

Available technology

Commercial travel

Technical expertise

Cross-border trade regulations

Group trade agreements

Global Location Factors


Regional location factors 1

Labor (availability, education, cost & unions)

Proximity of customers

Number of customers

Construction/leasing costs

Land costs

Modes and quality of transportation

Transportation costs

Incentive packages

Governmental regulations

Environmental regulations

Raw material availability

Commercial travel

Climate

Infrastructure

Quality of life

Regional Location Factors 1


Regional location factors 2

Community government

Local business regulations

Government services

Business climate

Community services

Taxes

Availability of sites

Financial Services

Community inducements

Proximity of suppliers

Education system

Regional Location Factors 2


Site location factors

Customer base

Construction/leasing cost

Land cost

Site size

Transportation

Utilities

Zoning restrictions

Traffic

Safety/security

Competition

Area business climate

Income level

Site Location Factors


Location incentives
Location Incentives

  • Tax credits

  • Relaxed government regulation

  • Job training

  • Infrastructure improvement

  • Money


Location analysis selected techniques models
Location Analysis Selected Techniques & Models

  • Location Rating Factor

  • Median Location

  • Center-of-Gravity

  • Load-Distance

  • Transportation Model

  • p-Center Model


Location rating factor
Location Rating Factor

  • Identify important factors

  • Weight factors (0.00 - 1.00)

  • Subjectively score each factor (0 - 100)

  • Sum weighted scores


Location factor example
Location Factor Example

Scores (0 to 100)

Weight

Site 1

Site 2

Location Factor

Site 3

Labor pool and climate

Proximity to suppliers

Wage rates

Community environment

Proximity to customers

Shipping modes

Air service

.30

.20

.15

.15

.10

.05

.05

80

100

60

75

65

85

50

65

91

95

80

90

92

65

90

75

72

80

95

65

90


Location factor example1
Location Factor Example

Weighted Scores

Site 1

Site 2

Location Factor

Site 3

Labor pool and climate

Proximity to suppliers

Wage rates

Community environment

Proximity to customers

Shipping modes

Air service

Total Score

24.00

20.00

9.00

11.25

6.50

4.25

2.50

77.50

19.50

18.20

14.25

12.00

9.00

4.60

3.25

80.80

27.00

15.00

10.80

12.00

9.50

3.25

4.50

*82.05


Single facility location sfl
Single Facility Location (SFL)

  • Let wi = the interaction between the new facility and customer i

  • Let di(x,y) = the travel distance from customer location i to any location (x,y)

  • The SFL Model


Distance measures
Distance Measures

  • Using the Rectilinear Distance measure

    • di(x,y) = |ai - x| + |bi - y|

  • Using the Euclidean Distance measure

    • di(x,y) = [(ai - x)2 + (bi - y)2]1/2

  • Using the Squared Euclidean Distance measure (Used in Center of Gravity!)

    • di(x,y) = {[(ai - x)2 + (bi - y)2]1/2}2


Sfl with rectilinear distance median problem
SFL with Rectilinear Distance: Median Problem

  • Place Existing Facilities in a Non-Decreasing Order of the Coordinates (x and y, separately)

  • Find the Cumulative Sum of the Weights and obtain the Median

  • The Coordinate which corresponds to the Cumulative Sum of the Weights just Exceeding the Median point is the Median Location for the New Facility


Example
Example

  • Suppose four hospitals are located within a city at A(10,6), B(8,5), C(4,3), and D(15,6). Locate a centralized blood-bank facility at (x, y) that will serve the hospitals. The number of deliveries to be made per year between the blood-bank and each hospital is estimated to be 350, 900, 420, and 1350, respectively.


Solution
Solution

For x*:

Hospital ai wiwi

C 4 420 420

B 8 900 1320

A 10 350 1670

D 15 1350 3020

Median 3020/2 = 1510 x* = 10


Solution1
Solution

For y*:

Hospital bi wiwi

C 3 420 420

B 5 900 1320

A,D 6 350+1350 3020

Then, y* = 6


Sfl with squared euclidean distance center of gravity problem
SFL with Squared Euclidean Distance: Center-of-Gravity Problem

  • Locate facility at center of geographic area

  • Based on weight & distance traveled

  • Establish grid-map of area

  • Identify coordinates & weights shipped for each location


Grid map and coordinates

n Problem

n

xiWi

yiWi

i = 1

i = 1

x =

y =

n

n

Wi

Wi

i = 1

i = 1

Grid-Map And Coordinates

y

2 (x2, y2), W2

y2

1 (x1, y1), W1

y1

where,

x, y = coordinates of the new

facility at center of gravity

xi, yi= coordinates of existing

facility i

Wi = annual weight shipped

from facility i

3 (x3, y3), W3

y3

x1

x2

x3

x


Center of gravity example

700 Problem

600

500

400

300

200

100

x

100

200

300

400

500

600

700

Center-of-Gravity Example

A B C D

X 200 100 250 500

Y 200 500 600 300

Wt 75 105 135 60

y

C

B

o

Center

D

A

0


Calculating center of gravity

n Problem

xiWi

i = 1

(200)(75) + (100)(105) + (250)(135) + (500)(60)

x =

n

75 + 105 + 135 + 60

Wi

i = 1

n

yiWi

i = 1

(200)(75) + (500)(105) + (600)(135) + (300)(60)

y =

n

75 + 105 + 135 + 60

Wi

i = 1

Calculating Center-of-Gravity

= 238

=

=

= 444


Load distance technique
Load-Distance Technique Problem

  • Compute (Load x Distance) for each site

  • Choose site with lowest (Load x Distance)

  • Distance can be actual or straight-line


Load distance calculations

n Problem

li di

LD =

i = 1

Load-Distance Calculations

where,

LD = the load-distance value

li = the load expressed as a weight, number of trips or units

being shipped from the proposed site and location i

di = the distance between the 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


Load distance example
Load-Distance Example Problem

Suppliers

A B C D

X 200 100 250 500

Y 200 500 600 300

Wt 75 105 135 60

Potential Sites

Site X Y

1 360 180

2 420 450

3 250 400

Compute distance from each site to each supplier

= 161.2

Site 1

dA = (xA - x1)2 + (yA - y1)2

= (200-360)2 + (200-180)2

= 412.3

dB = (xB - x1)2 + (yB - y1)2

= (100-360)2 + (500-180)2

dC = 434.2

dD = 184.4


Site 2 Problem

dA = 333

dB = 323.9

dC = 226.7

dD = 170

Site 3

dA = 206.2

dB = 180.4

dC = 200

dD = 269.3

Compute load-distance

n

li di

LD =

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


Transportation model
Transportation Model Problem

  • M different sources

  • N different customers

  • Si represents the capacity at source i

  • Dj represents the demand of customer j

  • cij is the cost per unit to produce the product at source i and send it to customer j


Transportation model1
Transportation Model Problem

  • xij = number of units to be shipped from source i to customer j

  • The objective is to determine the minimum cost production and distribution plan for a given set of facilities



The transportation model
The Transportation Model Problem

  • Ship items at lowest cost

  • Sources have fixed supplies

  • Destinations have fixed demand

1


Transportation problem
Transportation Problem Problem

Grain Elevator Supply

1. Kansas City 150

2. Omaha 175

3. Des Moines 275

600 tons

Mill Demand

A. Chicago 200

B. St. Louis 100

C. Cincinnati 300

600 tons

2


Shipping cost table
Shipping Cost Table Problem

Mill

Grain Chicago St. Louis Cincinnati

Elevator A B C

Kansas City $6 $8 $10

Omaha 7 11 11

Des Moines 4 5 12

3


The transportation tableau
The Transportation Tableau Problem

To

Chicago

St. Louis

Cincinnati

Supply

From

6

8

10

150

Kansas City

7

11

11

175

Omaha

4

5

12

275

Des Moines

Demand

200

100

300

600

4


Network of routes
Network Of Routes Problem

4

Des Moines (275)

Chicago (200)

12

5

7

11

Omaha (175)

Cincinnati (300)

11

10

6

Kansas City (150)

St. Louis (100)

8

5


Solving transportation problems
Solving Transportation Problems Problem

  • Manual methods

    • Stepping-stone

    • Modified distribution (MODI)

  • Computer solution

    • Excel

    • POM for Windows

6


Solution for grain shipment
Solution For Grain Shipment Problem

Mill

Elevator Chicago St. Louis Cincinnati Supply Shipped

Kansas City 25 0 125 150 150

Omaha 0 0 175 175 175

Des Moines 175 100 0 275 275

Demand 200 100 300 600

Shipped 200 100 300

Cost 4525

7


A solution
A Solution Problem

8


Unbalanced problems
Unbalanced Problems Problem

Location Capacity(tons)

A. Charlotte 90

B. Raleigh 50

C. Lexington 80

D. Danville 60

280

Location Demand (tons)

1. Richmond 120

2. Winston-Salem 100

3. Durham 110

330

9


Shipping costs
Shipping Costs Problem

To

From 1 2 3

A $70 $100 $50

B 120 90 40

C 70 30 110

D 90 50 70

10


Transportation solution tableau
Transportation Solution Tableau Problem

To

Winston-

Salem

Richmond

Durham

Supply

From

500

100

50

90

90

Charlotte

120

90

40

30

20

50

Raleigh

70

50

110

80

80

Lexington

90

50

70

Danville

40

20

60

Demand

120

100

110

Cost

15900

11


Public service facility location model p center model
Public Service Facility Location Model: p-Center Model Problem

Let :

yi = 1, if a facility is opened at site j;

0, otherwise

xij = 1, if people at location j are assigned to the facility at site i;

0, otherwise

w = the maximum distance between any customer and the

serving (closest) facility


P center model
p-Center Model Problem

  • for every customer j = 1, … , N

  • for every site i = 1, … , M

  • for every customer j = 1, … , N


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