Davis-location Is The Function Of Determining Where The Plant Should

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Davis-location is the function of determining where the plant should be located for max. operating economy and effectiveness.  Facility location is the process of identifying the best geographic location for a service or production facility Factors affecting location decisions: 1 input related factors: raw materials, human resources, capital and technology 2 output related factors: marketing, economic impacts 3 other factors: climate, political stability, government regulation

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Proximity to source of supply:  Reduce

transportation costs of perishable or bulky raw materials



Proximity to customers:  E.g.:

high population areas  Proximity to labor:  Local wage rates, attitude toward unions, availability of special skills

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Community considerations:  Local

community’s attitude toward the facility (e.g.: prisons)



Site considerations:  Local



zoning & taxes, access to utilities, etc.

Quality-of-life issues:  Climate,

etc.



cultural attractions, commuting time,

Other considerations:  Options

for future expansion, local competition, etc.

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Objectives To expand existing facility To add new location while retaining existing one. Shut down at one location and move to another

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Issues in Facility Location Free Trade Zones: closed facility into which foreign goods can be brought without being subject to custom requirements.  Political Risk  Government Barriers  Trading Blocs  Environmental Regulation  Competitive Advantage

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Plant Location Methodology: Factor Rating Method Example Two refineries sites (A and B) are assigned the following range of point values and respective points, where the more points the better for the site location. Sites Major factors for site location

Fuels in region Power availability and reliability Labor climate Living conditions Transportation Water supply Climate Supplies Tax policies and laws

Pt. Range

0 to 330 0 to 200 0 to 100 0 to 100 0 to 50 0 to 10 0 to 50 0 to 60 0 to 20

A

123 150 54 24 45 4 8 5 5

Total pts. 418

B

156 100 63 96 50 5 4 50 Best Site 20 is B

544

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Plant Location Methodology: Transportation Method of Linear Programming



Transportation method of linear programming seeks to minimize costs of shipping n units to m destinations or its seeks to maximize profit of shipping n units to m destinations

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Plant Location Methodology: Centroid Method 

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The centroid method is used for locating single facilities that considers existing facilities, the distances between them, and the volumes of goods to be shipped between them This methodology involves formulas used to compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above

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Plant Location Methodology: Centroid Method Formulas Cx =

∑d V ∑V ix

i

i

Cy =

∑d V ∑V iy

i

i

Where: Cx = X coordinate of centroid Cy = X coordinate of centroid dix = X coordinate of the ith location diy = Y coordinate of the ith location Vi = volume of goods moved to or from ith location

Plant Location Methodology: Example of Centroid Method

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 Centroid

method example

 Several

automobile showrooms are located according to the following grid which represents coordinate locations for each showroom S ho wro o m

Y Q

(790,900)

D

No o f Z-Mo b ile s s o ld p e r mo nth

A

1250

D

1900

Q

2300

(250,580)

A

(100,200) (0,0)

X

Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month?

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Plant Location Methodology: Example of Centroid Method (Continued): Determining Existing Facility Coordinates To begin, you must identify the existing facilities on a twodimensional plane or grid and determine their coordinates.

Y Q (790,900)

D

(250,580)

A (100,200) (0,0)

You must also have the volume information on the business activity at the existing facilities.

S ho wro o m

X

No o f Z-Mo b ile s s o ld p e r mo nth

A

1250

D

1900

Q

2300

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Plant Location Methodology: Example of Centroid Method (Continued): Determining the Coordinates of the New Facility You then compute the new coordinates using the formulas: Cx =

100(1250) + 250(1900) + 790(2300) 2,417,000 = = 443.49 1250 + 1900 + 2300 5,450

Cy =

200(1250) + 580(1900) + 900(2300) 3,422,000 = = 627.89 1250 + 1900 + 2300 5,450

You then take the coordinates and place them on the map: Y

New location of facility Z about (443,627)

Q (790,900)

D

Z

(250,580)

A (100,200) (0,0)

X

S ho wro o m

No o f Z-Mo b ile s s o ld p e r mo nth

A

1250

D

1900

Q

2300