Facility Location Factors

FACILITY LOCATION
Presented By:
Shreyas Todankar
Gaurang Sampat
Nikhil Kawde
What is meant by Facility?
• A building or place that provides a
particular service or is used for a
particular industry.
• A real property entity consisting of one

or more of the following: a building, a
structure
What is meaning of location?
• A place where something is or could be
located.
• A site or position.
• A determination of the location of

something.
On what parameters you will decide
that you require additional facility???
• Opening of a new venture.

• Expansion of existing business.
• Significant change in existing demand, supply
and marketing location.
• Significant change in cost structure.
• Government policies.
http://www.gyte.edu.tr/dersler/546/ISL536/%C3%9Cretim%205
FACILITY LOCATION
• Once a firm has decided to open a new facility
OR relocate an existing facility. It must decide
where that facility should be located.
• Facility location problem involves the
evaluation of various sites for a new facility.
• There are several factors that influence the
Facility Location Decision.
 WHAT ARE THESE FACTORS?????
FACTORS
Factors Related to Resources
Factors Related to the Market
Factors Related to the Infrastructure

Factors Related to Resources
 Labor availability, Labor cost, Labor Skills;
 Materials Availability, Material cost, material
quality;
 Equipment availability, Equipment Cost;
 Land availability, Land suitability, Land cost;
 Energy availability, energy cost;
 Water availability, water quality, water cost.
Factors Related to the Market
 Proximity to the firm’s market.

 Size of the market.
 Potential needs of the market.
Factors Related to the Infrastructure
• Availability of Financial Institutions, Strength
of Financial Institutions.
• Government Stability, Government taxes,
Import and Export restrictions.
• Quality of life, Cultural issues.
• Environmental regulations, Transportation
availability, Transportation cost.
• And finally, Competitors’ size, strength and
attitude in that region.
FACILITY LOCATION
• There are many analytical techniques that can be used in
facility location decision.
• Some of these are:
1) Break – Even analysis
2) Single Facility Location Problem
3) Factor Rating
4) Multifacility Location Problem
5) MiniMax Location Problem
6) Gravity Location Problem
7) Euclidean-Distance Location Problem
8) Covering Problem
9) Model for Warehouse Location Problem
BREAK – EVEN ANALYSIS
 BREAK – EVEN analysis is used in comparing
several potential locations on an economic
basis .
 When the fixed and variable costs for each site
differ, BREAK – EVEN analysis can be used to
identify the location with the lowest cost.
Example
• A company is considering three alternative
sites for its new production facility.
• The Annual Production Cost associated with
each alternative is a linear function of the
production volume.
• Total Production Cost = (Fixed Cost per year)
+ (variable cost per unit) x (annual production
volume)
Example
Plant A B C  Assume that The

expected annual
production volume is
2,50,000 units.
Fixed 1,00 2,50 6,00
cost ,00, ,00, ,00,  And further assume
per 000 000 000 that:
year  ( production volume=
x = 2,50,000)
Example
For Site A: Prod. Cost = 1,00,00,000 + 250x
For Site B: Prod. Cost = 2,50,00,000 + 150x
For Site C: Prod. Cost = 6,00,00,000 + 50x
• Based on these information, select which site

has the lowest cost !
Example
• For Site A: Prod. Cost =1,00,00,000 + 250
(2,50,000) = 7,25,00,000.
• For Site B: Prod. Cost = 2,50,00,000+ 150
(2,50,000) = 6,25,00,000.
• For Site C: Prod. Cost = 6,00,00,000 + 50
(2,50,000) = 7,25,00,000.
 At a production volume of 2,50,000 units, site
B has the lowest cost .
Example
Example
• This graphic shows that annual production cost
changes with different production volumes.
• -If the expected annual production volume is below
1,50,000 units, then choose site A.
• -If the expected annual production volume is
between 1,50,000 and 3,50,000 units, then choose
site B.
• -If the expected annual production volume is over
3,50,000 units, then choose site C.
Single Facility Location Problem
 Single Facility Location problem helps to
determine the optimal location for the new
facility.
 It is useful when there are existing facilities &
when we have to move the materials from
new facility to all the existing facilities.
http://books.google.co.in/books?
id=6tDjhiQd_WoC&pg=PA98&dq=facility+location+panneerselvam&hl=en&ei=N6inTLS9OouPcbb2kdsN&sa=X&oi=book_result&ct=result&r
Example
 Suppose there are 5 existing plants, which have a
material movement relationship with new plant .Let the
existing plants have locations of (400,200),(800,500),
(1100,800),(200,900) and (1300,300).
 The number of tons of materials transported per year
from the new plant to various existing plants are
450,1200,300,800 and 1500.
 Our objective is to determine optimum location for the
new plant such as the distance moved (cost) is
minimized.
Example
Existing X- Weight Cumulative
• Let(X,Y) be the coordinate of Plant Coordinate Weight
the new plant.

4 200 800 800
• The optimum X coordinate for
the new plant is determined as
1 400 450 1250
follows:
• The data of existing plants are 2 800 1200 2450
ordered according to their X
coordinate values. 3 1100 300 2750
• Next weights are accumulated.
• The total number of tons 5 1300 1500 4250
transported per year is 4250.
Total 4250
Example
• Thus the median location corresponds to a
cumulative weight of 4250/2=2125.
• From the above table, the corresponding X
coordinate value is 800.
• Since the cumulative weight first exceeds 2125 at X
=800
Example
Existing Y Weight Cumulativ
Plant coordinat e Weight
• Similarly, the e
determination of
1 200 450 450
Y-Coordinate is
as shown : 5 300 1500 1950
2 500 1200 3150
3 800 300 3450
4 900 800 4250
http://books.google.co.in/books? Total 4250

id=6tDjhiQd_WoC&pg=PA98&dq=facility+location+pan
neerselvam&hl=en&ei=N6inTLS9OouPcbb2kdsN&sa=
X&oi=book_result&ct=result&resnum=1&ved=0CDMQ6
AEwAA#v=onepage&q=facility%20location
Example
• The median location on Y axis corresponding to the
cumulative weight 4250/2=2125 is 500.
• Hence, the optimal Y coordinate for new facility is
500.
• Thus, optimal (X*,Y*) =(800,500) .
• The new facility location should be at ( 800,500 ) co-
ordinates.
Method of Factor Rating
 In factor rating method, first we must identify the
Most Important Factors in evaluating alternative sites
for the new facility.
 Then we should assign a weight between 0 and 100
to each of these factors.
 Each alternative location will then be rated based on
these factor weights.
 The most weighted alternative is selected as the best
alternative.
Example
• Samsung Ltd. is considering three alternative
sites for its new facility.
• After evaluating the firm’s Needs, the
Managers have Narrowed the list of Important
Selection Criteria down into three major
Factors.
- Availability of skilled labor.
- Availability of Raw materials.
- Proximity to the firm’s markets.
Example
• Weights reflecting the relative importance
of each factor have been assigned as
follows:
FACTOR WEIGHT
Availability of skilled 0.50
labor
Availability of Raw 0.30
materials
Proximity to the firm’s 0.20
markets.
TOTAL 1.00
Example
• Based on these criteria, the three Alternative sites
were scored between 0 and 100 points:
Example
• Now we will multiply each score by its corresponding
factor weight:
• Weighted scores =(Site Score) x (Factor Weight)
Example
• From these results, the largest total weight is
for Site A .
• It appears to be the best location.
• Since factor weights, selected factors and
assigned scores are all determined
subjectively, the managers should be very
careful in selecting these items and numbers.
Multifacility Location Problem
• In this problem our objective is to locate
several new facilities in relation to a set of
existing facilities, such that the total cost of
transportation between the new facilities and
the set of existing facilities in minimised.
Minimax Location Problem
• Minimax Location problems gives us the idea how to
locate a new emergency facility that will serve the
already existing facility.
• Thus, it helps to locate the new emergency facility such
that the maximum distance from the new emergency
facility to any of the existing facilities is minimized.
• The distance between the new facility and the existing
facilities may be rectilinear or euclidean.
Example
• In a foundry, there are seven shops whose coordinates
are summarized in the following table:
Sr.No Existing Facility Coordinates of Centroid
1 Sand Plant 10,20

2 Moulding Shop 30,40
3 Pattern Shop 10,120
4 Melting Shop 10,60
5 Felting Shop 30,100
6 Gouging Shop 30,140
7 Annealing Shop 20,190
The Company is interested in locating a new costly fire fighting equipment

in the foundry. Determine the minimax location for the new equipment.
• The Problem can be solved by using the following
formulas:
To find C1,C2,C3,C4 and C5 the following formulas can be
used:
C1=min (ai +bi)
C2=max (ai+bi)
C3=min (-ai+bi)
C4=max (-ai+bi)
C5=max(C2-C1,C4-C3)
To find the points P1 and P2 using the following formula
P1=[1/2(C1-C3),1/2(C1+C3+C5)]
P2=[1/2(C2-C4),1/2(C2+C4-C5)]
Example
(a1,b1) (a2,b2)
x x
L2
L1
L3
(x,y)
L4 x
(a3,b3)
x
(a4,b4)
The objective is to minimize Fmax ( x , y ). We have to

identify x*, y* such that max ( L1, L2, L3, L4) is
minimized.
Example
The company is interested in locating a new costly fire fighting
equipment in the foundry. Determine the minimax location for
new equipment.
Since, the movement of the new equipment is constrained within
the foundry, the assumption of rectilinear distance is more
appropriate.
The coordinates of the centroids of the existing shops are as
follows :
(a1,b1)=10,20 (a5,b5)=30,100
(a2,b2)=30,40 (a6,b6)=30,140
(a3,b3)=10,120 (a7,b7)=20,190
(a4,b4)=10,60
Example
C1=min[ai+bi]=min[(10+20),(30+140),(10+120),(10+60),
(30+100),(30+140),(20+190)]
= min[30,70,130,70130,170,210]
= 30
C2 = max[ai+bi]=max[(10+20),(30+40),(10+120),(10+60),
(30+100),(30+140),(20+190)]
= max[30,70,130,70,130,170,210]
= 210
C3=min[-ai+bi]=min[(-10+20),(-30+40),(-10+120),(-10+60),
(-30+100)(-30+140),(-20+190)
= min[10,10,110,50,70,110,170]
= 10
C4=max[-ai+bi]=max [(-10+20),(-30+40),(-10+120),(-10+60),
(-30+100),(-30+140),(-20+190)]
=max[10,10,110,50,70,110,170]
= 170
Example
C5=max[C2-C1),(C4-C3)]
=max[(210-30),(170-10)]
max[180,160]
=180
Step 2
P1=[1/2(C1-C3),1/2(C1+C3+C5)]
=[1/2(30-10),1/2(30+10+180)]
=(10,110)
P2=[1/2(C2-C4),1/1(C2+C4-C5)]
=[1/2(210-170),1/2(210+170-180)]
=(20,100)
Any point X*,Y* on the line segment joining points (10,110)and (20,100)is a
minimax location for the fighting equipment
Gravity Location Problem
• The center of gravity method is used to find a
location that Minimizes the Sum of
Transportation Cost in between new facility
and old facilities.
• The location of the firm’s existing facilities are
converted into x and y coordinates.
• The following center of gravity equations are
then used for calculating the x and y
coordinates for the new facility:
Center of Gravity Method
• Cx : x coordinate for new location.
• Cy : y coordinate for new location.
• i: index for existing locations.
• n: total number of existing locations.
• xi: x coordinate of ith existing location.
• yi: y coordinate of ith existing location.
• Vi: weight associated with the existing
location i .
Center of Gravity Method
Example
• Five facilities are Existing Coordi No. of trips
to be served by a facility nates of
single new facility. (i) (xi,yi) loads/year
(Vi)
• The details are
given below:
1 5,10 100
2 20,5 300
3 15,20 200
4 30,25 300
5 25,5 100
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C3%9Cretim%205
Example
• Cx=(100*5+300*20+200*15+300*30+100*25)
( 100+300+200+300+100 )
=21000/1000
=21
 Cy=(100*10+300*5+20020+300*25+100*5)
(100+300+200+300+100 )
=14500/1000
=14.5
 The optimal location of the new facility is (21,14.5).
Euclidean-Distance Location Problem
• The objective of this problem is to locate the
new(single)facility in relation to the set of existing
facilities such that the total cost of materials handling is
minimized based on euclidean distance.
• The formula to compute the euclidean distance is:
euclidean distance = [( p – r ) 2 + ( q – s ) 2 ] 1/2
• Where (p , q) & (r , s) are the coordinates of the two
locations.
Euclidean Distance
• The formula to compute the total weighted Euclidean
distance is:
Where:
m= no of existing facilities
ai= x coordinate of ith existing facility.
bi= y coordinate of ith existing facility.
x= x coordinate of new facility.
y= y coordinate of new facility.
wi= weight associated with the existing facility i.
• The objective is to find (x*,y*) such that f(x,y)is
minimized. The Objective is in quadratic form, partial
derivates of the objective function with respect to x* and
y* are to be equated to zero to find the optimal x*,y*.The
partial derivatives are shown below:
For any i,if x*=a1 and y*=b1,then the denominator of the partial derivatives will be zero.
So the x* and y* values will be infinite
Covering Problem
• Total Covering Problem: The aim is to cover all
the customers with minimum number of
facilities .
• Partial Covering Problem: The aim is to cover

as many customers as possible with a given
maximum number of facilities.
Total Covering Problem
• Consider a set of residential regions in a state
which are to be covered by set of dealers
• If the dealer is said to located in the distance
of say 30 Km from the residential area
• In this example, if the objective is to cover all
the residential regions with minimum number
of dealers then it is TOTAL COVERING
PROBLEM
Partial Covering Problem
• In the previous example Instead there is upper
limit on the number of number of dealers to
be located, then it may not be possible to
cover some of the residential regions.
• Hence it is called PARTIAL COVERING
PROBLEM
• The aim is to cover as many residential regions
as possible with given maximum number of
dealers
Examples of covering problem
• Locating minimum number of fire extinguishers to
cover various departments in large scale industry
• Locating various number of health centres to cover
various areas in a state
• Location minimum number of schools to cover
various villages in district
• Locating minimum number of emergency food grain
reserve stations to supply food grains to various
regions worldwide.
Illustration of Total covering
problem
• The table summarizes the distance between
30 major areas in a state it is desired to locate
facilities among the areas such that no area is
more than, say, 69 miles from the facility. This
means that if dij < 69 miles, then the area i is
covered by area j; otherwise the area i is not
covered by area j.
Thank You!

Facility Location Factors

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FACILITY LOCATION

• A real property entity consisting of one

• A determination of the location of

• Opening of a new venture.

Factors Related to the Market

Factors Related to the Infrastructure

 Proximity to the firm’s market.

Plant A B C  Assume that The

• Based on these information, select which site

the new plant.

2 500 1200 3150

3 800 300 3450

4 900 800 4250

http://books.google.co.in/books? Total 4250

1 Sand Plant 10,20

The Company is interested in locating a new costly fire fighting equipment

The objective is to minimize Fmax ( x , y ). We have to

• Partial Covering Problem: The aim is to cover

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