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Facility Location Planning. Location Planning. Interrelated facility planning decisions: Location of facilities: geographic placement Number of facilities: facility types (manufacturing plants, distribution centers, retail outlets, etc.) which make up distribution network

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Presentation Transcript
location planning
Location Planning
  • Interrelated facility planning decisions:
  • Location of facilities: geographic placement
  • Number of facilities: facility types (manufacturing plants, distribution centers, retail outlets, etc.) which make up distribution network
  • Size of facilities (capacity): refers to the overall cubic feet and throughput (volume) rate which constrains all future facility operations.

This must also consider the layout.

4. Allocation of customers to facilities: order processing and fulfillment

  • Important factors affecting the decision include: proximity, facility volume, transportation costs, customer importance, etc.
  • Facility location dependent upon objective(s)
strategic importance
Strategic Importance
  • Capital investment (machinery, technology, land, buildings, etc.)
  • Long-term commitment
  • Impact on costs (operating efficiency)
  • Numerous criteria
location planning process
Location Planning Process
  • Each problem is unique
  • Scope of problem: Two levels
  • Level 1: Macro (national and regional), identifies a general location based upon primary cost, customer service standards, technological constraints, and dominant location factors; many possible locations eliminated at this level
  • (2) Level 2: Micro (local and specific), identifies an exact site within the general location; incorporates considerations which are not easily quantifiable

3. “Satisficing” solutions

facility location methods of analysis
Facility Location Methods of Analysis
  • Simple cost formulation combined with a complex optimization procedure

2. Complex cost model combined with a simple heuristic method to minimize the cost function

single site facility location problems
Single-Site Facility Location Problems
  • Hoover’s Strategies: e.g., market-oriented, production-oriented
  • Cost-Volume-Profit (Breakeven) Analysis
  • Transportation Method of Linear Programming
  • Center of Gravity Approach
  • Others? E.g., Payback, NPV, IRR, etc.
multiple site facility locations
Multiple-Site Facility Locations
  • More complex decision-making problem due to its interdependence; large number of potential logistic system configurations; yet more realistic and more common as even many small firms have more than one facility.
  • Some methods of analysis: optimization (e.g., LP), simulation methods, heuristic methods
linear scoring rule rating scale or weighted checklist
Linear Scoring Rule (rating scale or weighted checklist)
  • Integrates both quantitative and qualitative factors
  • LSR Concerns
  • weights are subjective and solution sensitive
  • scores are subjective and solution sensitive
  • all factors considered?
  • Example

A paint manufacturer would like to locate a retail store. A list of important location factors is presented below. Factor weights are assigned a number from 1 to 10 according to their relative importance of each factor (10 being most important). Each location factor is scored on a scale from 1 to 10 (10 representing the most favorable status).

lsr example
LSR Example

Factor FactorWeighted

WeightLocation FactorsScoreScore

8 Proximity to competition 5 40

5 Rent/lease considerations 3 15

8 Parking Space 10 80

7 Proximity to complementary stores 8 56

6 Modernity of store space 9 54

Total Score: 245