Chapter 7 supplement, facility location models. This chapter includes contents: Explain the major categories of facilities and the factors important in facility location; explain the general considerations of the facility site selection process for services and manufacturing facilities; use three quantitative tools for facility site selection;...
OPERATIONS MANAGEMENT: Creating Value Along the Supply Chain, Canadian Edition Robert S Russell, Bernard W Taylor III, Ignacio Castillo, Navneet Vidyarthi CHAPTER Supplement Facility Location Models Learning Objectives Explain the major categories of facilities and the factors important in facility location Explain the general considerations of the facility site selection process for services and manufacturing facilities Discuss the factors a company should consider when selecting facility site and explain how geographic information systems (GIS) can be used as a site selection tool Use three quantitative tools for facility site selection Copyright 2014 John Wiley & Supplement 7-2 Lecture Outline Types of Facilities Site Selection: Where to Locate Site Selection: Factors to Consider Location Analysis Techniques Copyright 2014 John Wiley & Supplement 7-3 Types of Facilities Heavy-manufacturing facilities large, require a lot of space, and are expensive Light-industry facilities smaller, cleaner plants and usually less costly Retail and service facilities smallest and least costly Copyright 2014 John Wiley & Supplement 7-4 Factors in Heavy Manufacturing Location Construction costs Land costs Raw material & finished goods shipment modes Proximity to raw materials Utilities Means of waste disposal Labour availability Copyright 2014 John Wiley & Supplement 7-5 Factors in Light Industry Location Land costs Transportation costs Proximity to markets depending on delivery requirements including frequency of delivery required by customer Copyright 2014 John Wiley & Supplement 7-6 Factors in Retail Location Proximity to customers Location is everything Copyright 2014 John Wiley & Supplement 7-7 Site Selection: Where to Locate Infrequent but important being “in the right place at the right time” Must consider other factors, especially financial considerations Location decisions made more often for service operations than manufacturing facilities Location criteria for service access to customers Location criteria for manufacturing facility nature of labor force labour costs proximity to suppliers and markets distribution and transportation costs energy availability and cost community infrastructure quality of life in Copyright 2014 John Wiley & Supplement 7-8 Global Supply Chain Factors Government stability Government Climate Number & proximity of regulations suppliers Political & economic Transportation & systems distribution system Economic stability & Labour cost & growth education Exchange rates Available technology Culture Commercial travel Export/import Technical expertise regulations, duties & 2014 John Cross-border trade 7-9 Copyright Wiley & Supplement Regional and Community Location Factors in Canada Labour (availability, Modes and quality of education, cost, and unions) Proximity of customers Number of customers Construction/leasing costs Land cost transportation Transportation costs Community government Local business regulations Government services (e.g., Chamber of Commerce) Copyright 2014 John Wiley & Supplement 7-10 Location Factor Rating With OM Tools Copyright 2014 John Wiley & Supplement 7-20 Centre-of-Gravity Technique Locate facility at centre of movement in geographic area Based on weight and distance traveled; establishes grid-map of area Identify coordinates and weights shipped for each location Copyright 2014 John Wiley & Supplement 7-21 Grid-Map Coordinates y n n xiWi i=1 (x2, y2), W2 y2 yiWi x= i=1 y= n n Wi y1 i=1 (x1, y1), W1 Wi i=1 where, (x3, y3), W3 y3 x1 x2 x3 x, y = coordinates of new facility at centre of gravity xi, yi = coordinates of existing facility i Wi = annual weight shipped from facility i x Copyright 2014 John Wiley & Supplement 7-22 Centre-of-Gravity Technique y 700 600 Miles 500 (135) B (105) 400 300 200 x y W C A 200 200 75 B 100 500 105 C 250 600 135 D 500 300 60 D (60) A (75) 100 100 200 300 400 500 600 700 x Miles Copyright 2014 John Wiley & Supplement 7-23 Centre-of-Gravity Technique n xiWi x= i=1 n (200)(75) + (100)(105) + (250)(135) + (500)(60) = = 238 75 + 105 + 135 + 60 Wi i=1 n yiWi y= i=1 = n (200)(75) + (500)(105) + (600)(135) + (300)(60) = 444 75 + 105 + 135 + 60 Wi i=1 Copyright 2014 John Wiley & Supplement 7-24 Centre-of-Gravity Technique y 700 600 Miles 500 400 300 200 A x 200 C (135) y 200 B W 75 (105) Centre of gravity (238, 444) D (60) A B 100 500 105 C 250 600 135 D 500 300 60 (75) 100 100 200 300 400 500 600 700 x Miles Copyright 2014 John Wiley & Supplement 7-25 Centre-of-Gravity With Excel Formula for x coordinate Copyright 2014 John Wiley & Supplement 7-26 Centre-of-Gravity With OM Tools Copyright 2014 John Wiley & Supplement 7-27 Load-Distance Technique Compute (Load x Distance) for each site Choose site with lowest (Load x Distance) Distance can be actual or straight-line Copyright 2014 John Wiley & Supplement 7-28 Load-Distance Calculations n li di LD = i=1 where, LD = load-distance value li = load expressed as a weight, number of trips or units being shipped from proposed site and location i di = distance between 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 Copyright 2014 John Wiley & Supplement 7-29 Load-Distance Potential Sites SiteX Y 360 180 420 450 250 400 Suppliers A B C D X 200 100 250 500 Y 200 500 600 300 Wt 75 105 135 60 Compute distance from each site to each supplier Site dA = (xA - x1)2 + (yA - y1)2 = (200-360)2 + (200-180)2 = 161.2 dB = (xB - x1)2 + (yB - y1)2 = (100-360)2 + (500-180)2 = 412.3 dC = 434.2 dD = 184.4 Copyright 2014 John Wiley & Supplement 7-30 Load-Distance Site dA = 333 dB = 323.9 dC = 226.7 dD = 170 Site dA = 206.2 dB = 180.3 dC = 200 Compute load-distance dD = 269.3 n LD = li di i=1 Site = (75)(161.2) + (105)(412.3) + (135)(434.2) + (60)(434.4) = 125,063 Site = (75)(333) + (105)(323.9) + (135)(226.7) + (60)(170) = 99,789 Site = (75)(206.2) + (105)(180.3) + (135)(200) + (60)(269.3) = 77,555* * Choose site Copyright 2014 John Wiley & Supplement 7-31 Load-Distance With Excel =B7*C11+C7*C12+D7*C13+E7*C14 Copyright 2014 John Wiley & Supplement 7-32 Load-Distance With OM Tools Copyright 2014 John Wiley & Supplement 7-33 Copyright Copyright © 2014 John Wiley & Sons Canada, Ltd All rights reserved Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd The purchaser may make back-up copies for his or her own use only and not for distribution or resale The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein Copyright 2014 John Wiley & 7-34 ... (xA - x1)2 + (yA - y1)2 = (20 0-3 60)2 + (20 0-1 80)2 = 161.2 dB = (xB - x1)2 + (yB - y1)2 = (10 0-3 60)2 + (50 0-1 80)2 = 412.3 dC = 434.2 dD = 184.4 Copyright 2014 John Wiley & Supplement 7-3 0 Load-Distance... Supplement 7-2 5 Centre-of-Gravity With Excel Formula for x coordinate Copyright 2014 John Wiley & Supplement 7-2 6 Centre-of-Gravity With OM Tools Copyright 2014 John Wiley & Supplement 7-2 7 Load-Distance... Centre-of-gravity Load-distance Copyright 2014 John Wiley & Supplement 7-1 5 Location Factor Rating Identify important factors Weight factors (0.00 - 1.00) Subjectively score each factor (0 -