Assignment

Course Title: Production & Operation

Management

Submitted to: Submitted by:

Name: Nustat Hossain Zerin Name: Shohel Rana
Lecturer, Faculty Member, ID: 172-015-45
(CBIFT) Batch-172
Dept. AMT

Submission Date: 07/04/2021

 Ans To The Question No: 1

Facility Location

Facility Location is the right location for the manufacturing facility; it will have
sufficient access to the customers, workers, transportation, etc. For commercial
success, and competitive advantage following are the critical factors:

Overall objective of an organization is to satisfy and delight customers with its

product and services. Therefore, for an organization it becomes important to have
strategy formulated around its manufacturing unit. A manufacturing unit is the
place where all inputs such as raw material, equipment, skilled labors, etc. come
together and manufacture products for customers. One of the most critical factors
determining the success of the manufacturing unit is the location.

Facility location determination is a business critical strategic decision. There are

several factors, which determine the location of facility among them competition,
cost and corresponding associated effects. Facility location is a scientific process
utilizing various techniques.
 Ans to the Question No 2:

Described below various models are available which help to identify the ideal
location.

1. Factor rating method

A method for identifying & weighing important location factor. The decision where to locate is
based on many different types of information & inputs.

Factor-rating method are among the most commonly used techniques for choosing
a location, because they analyze diverse factors in an easily comprehensible manner. Factor-
rating systems simply consist of a weighted list of the factors a company considers the most
important and a range of values for each factor.

The process of selecting a new facility location involves a series of following steps:

1. Identify the important location factors.

2. Rate each factor according to its relative importance, i.e., higher the ratings is indicative
of prominent factor.
3. Assign each location according to the merits of the location for each factor.
4. Calculate the rating for each location by multiplying factor assigned to each location with
basic factors considered.
5. Find the sum of product calculated for each factor and select best location having highest
total score.

Example:

Let us assume that a new medical facility, Health-care, is to be located in Delhi. The location
factors, factor rating and scores for two potential sites are shown in the following table. Which is
the best location based on factor rating method ?
Solution:

The total score for location 2 is higher than that of location 1. Hence location 2, is the best
choice.

2. Weighted factor rating method

In this method to merge quantitative and qualitative factors, factors are assigned weights based
on relative importance and weight age score for each site using a preference matrix is calculated.
The site with the highest weighted score is selected as the best choice.

Let us assume that a new medical facility, Health-care, is to be located in Delhi. The location
factors, weights, and scores (1 = poor, 5 = excellent) for two potential sites are shown in the
following table. What is the weighted score for these sites? Which is the best location?
Solution:
The weighted score for this particular site is calculated by multiplying each factor’s weight by its
score and adding the results

Weighed score location 1 = 25 × 3 + 25 × 4 + 25 × 3 + 15 × 1 + 10 × 5 = 75 + 100 + 75 + 15 +

50 = 315

Weighed score location 2 = 25 × 5 + 25 × 3 + 25 × 3 + 15× 2 + 10 × 3 = 125 + 75 + 75 + 30 +

30 = 335

Location 2 is the best site based on total weighted scores.

3. Load-distance method
The load-distance method is a mathematical model used to evaluate locations based on
proximity factors. A method of evaluating different locations based on the load being
transported & the distance.

Example:

The new Health-care facility is targeted to serve seven census tracts in Delhi. The table given
below shows the coordinates for the centre of each census tract, along with the projected
populations, measured in thousands. Customers will travel from the seven census tract centers to
the new facility when they need health-care. Two locations being considered for the new facility
are at (5.5, 4.5) and (7, 2), which are the centers of census tracts C and F. Details of seven census
tract centers, co-ordinate distances along with the population for each centre are given below. If
we use the population as the loads and use rectilinear distance, which location is better in terms
of its total load- distance score ?
Solution:
Calculate the load-distance score for each location. Using the coordinates from the above table
calculate the load-distance score for each tract.
Using the formula DAB = |XA– XB| + |YA– YB|

Summing the scores for all tracts gives a total load-distance score of 239 when the facility is
located at versus a load-distance score of 168 at location (7, 2). Therefore, the location in census
tract F is a better location.

4. Centre of gravity method

Centre of gravity is based primarily on cost considerations. The center of movement in the
geographic area based on transport weight & distance.

The centre of gravity is determined by the formula

CX  = ∑Dix.Wi/∑Wi and CY  = ∑Diy.Wi/∑Wiwhere Cx  = x-coordinate of the centre of gravity

Cy  = y-coordinate of the centre of gravity
Dix  = x-coordinate of location i
Diy  = y-coordinate of location i
Example:

The new Health-care facility is targeted to serve seven census tracts in Delhi. The table given
below shows the coordinates for the centre of each census tract, along with the projected
populations, measured in thousands. Customers will travel from the seven census tract centre s to
the new facility when they need health- care. Two locations being considered for the new facility
are at (5.5, 4.5) and (7, 2), which are the centers of census tracts C and F. Details of seven census
tract centers, coordinate distances along with the population for each centre are given below.
Find the target area’s centre of gravity for the Health-care medical facility.

Solution:
To calculate the centre of gravity, start with the following information, where population is given
in thousands.

Next we find Cx and Cy

Cx= 453.5/68 = 6.67

Cy= 205.5/68 = 3.02

The centre of gravity is (6.67, 3.02). Using the centre of gravity as starting point, managers can
now search in its vicinity for the optimal location.
Break-even analysis:
Break even analysis implies that at some point in the operations, total revenue equals total cost.
Break even analysis is concerned with finding the point at which revenues and costs agree
exactly. It is called ‘Break-even Point’.

Example:

Potential locations X, Y and Z have the cost structures shown below. The ABC company has a
demand of 1,30,000 units of a new product. Three potential locations X, Y and Z having
following cost structures shown are available. Select which location is to be selected and also
identify the volume ranges where each location is suited?

Solution:
Solve for the crossover between X and Y:

10X+ 150,000 = 8X + 350,000 2X = 200,000 X = 100,000 unitsSolve for the crossover between
Y and Z:

8X + 350,000 = 6X + 950,000 2X = 600,000 X = 300,000 units.

Therefore, at a volume of 1,30,000 units, Y is the appropriate strategy. From the graph we can
interpret that location X is suitable up to 100,000 units, location Y is suitable up to between
100,000 to 300,000 units and location Z is suitable if the demand is more than 300,000 units.

BEP chart