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There are many analytical techniques that can be used in facility location decisions.Some of
these are:
1) Factor Rating
2) Cost-Profit-Volume analysis
3) Center of Gravity Method, etc
Cost-Profit-Volume analysis:
Cost profit volume analysis is used for finding industrial locations.
Example:
Result:
Since Bowling Green has the lowest Total Cost at the volume being produced, it will be chosen as the
site of new facility
Center of Gravity Method:
The Center of Gravity Method is a mathematical technique used for finding the location of a
distribution centre that will minimize distribution costs. The method takes into account the
location of markets, the volume of goods shipped to those markets and shipping costs in finding
the best location for a distribution center.
Equations
The centre of Gravity is determined using equations
Since the number of containers shipped each month affects costs, distance alone should not be
the principal criterion. The centre of gravity method assumes that cost is directly proportional to
both distance and volume shipped. The ideal location is that which minimizes the weighted
distance between the warehouse and its retail outlets, where the distance is weighted by the
number of containers shipped.
FOR EXAMPLE:
Result:
The firm will be located at:
X coordinate 66.7
Y coordinate 93.3