Part 4

Developing Alternatives:
Quantitative Approaches

Chapter 10

Quantitative Facilities
Planning Models
 Facility Location
Factors that influence the facility location decision:
 Transportation (availability, cost)
 Labor (availability, cost, skills)
 Materials (availability, cost, quality)
 Equipment (availability, cost)
 Land (availability, suitability, cost)
 Market (size, potential needs)
 Energy (availability, cost)
 Water (availability, quality, cost)
 Waste (disposal, treatment)
 Financial institutions (availability, strength)
 Government (stability, taxes, import and export restrictions)
 Existing plants (proximity)
 Competitors (size, strength and attitude in that region)
 Geographical and weather conditions
 Method of Factor Rating
Procedure:
 Identification of the most important factors in
evaluating alternative sites for the new facility.
 Assignment of a weight for each factor
 Evaluation of the alternative sites in terms of the
selected factors (score between 0 and 100)
 Calculation of weighted score for each location
 The most weighted alternative is selected as the
best alternative.
 Example
Three alternative sites are being considered for a new
facility. After evaluating the firm’s needs, the managers
have narrowed the list of important selection criteria down
into three major factors. Below are shown the weights
which were assigned to the criteria and the evaluation of
each site. Which site should be selected?
 Example …continue
Calculate weighted scores: (site score)x(factor
weight)

From these results, the largest total weight is for

Site A. It appears to be the best location.
 Example …continue
 What happens if we change the factor weights?
 Let’s use the following factor weights: skilled labor - 0.45;
raw materials - 0.40; and market - 0.15
 Then the following results are obtained:

 In this case, Site C appears to be the best choice with largest

weight score.
 Factor rating method is very sensitive to the weights
assigned to each factor.
Facility location problem
Cost-Profit-Volume Analysis

 Break-Even Analysis

If the fixed and variable costs for each site

are known we can identify the location with
the lowest cost.
Example
A company is considering three alternative
sites for its new production facility. The
annual production volume is 250,000 units.
Which site should be selected based on the
cost information below?
Site Fixed cost (per year) Variable cost (per unit)

A 10,000,000 250

B 25,000,000 150

C 60,000,000 50
 Example …Continue
Total production cost =
(Fixed cost) + (variable unit cost) X (annual production volume)

Site A:
Prod. Cost = 10,000,000 + 250 x 250,000 = 72,000,000
Site B:
Prod. Cost = 25,000,000 + 150 x 250,000 = 62,000,000
Site C:
Prod. Cost = 60,000,000 + 50 x 250,000 = 72,000,000

At a production volume of 250,000 units, site B has the lowest cost
What about other production volumes?
Example … continue

 If production volume < 150,000 units

 =>choose site A.
 If 150,000 < production volume < 350,000 units
 => choose site B.
 If production volume > 350,000 units
 =>choose site C.
 Annual production cost changes with different
production volumes.
 10.2 Facility Location Models

Facility location problems can be classified in a variety of

ways:
 Can be classified based on the number of new
facilities into:
1. Single –facility location problems
2. Multi-facility location problems
 The solution space can be:
1.Continuous (choice of ANY site in the space of 2D
or 3D)
2.Discrete (choice of specific locations)
 10.2 Facility Location Models
Various objectives can be used
 Minisum location problem
 Minimizing the sum of weighted distance between
the new facility and the other existing facilities
 Minimax location problem
 Minimizing the maximum distance between the
new facility and any existing facility

Generally, facilities are considered to be represented

either by points in two or three-dimensional space or by
defined areas.
 10.2 Facility Location Models
 When a facility location problem is categorized on the basis of
the distance between facilities, four distance measures are
typically used: (https://www.youtube.com/watch?v=1UpJAgqfBBc)
1. Rectilinear distance (Manhattan distance) : where distances
are measured along paths that are orthogonal (or perpendicular) to
each other.

An industrial example is a material transporter moving

along rectilinear aisles in a factory.
 10.2 Facility Location Models
 When a facility location problem is categorized on the basis of
the distance between facilities, four distance measures are
typically used:
2. Straight-line distance (as Euclidean distance): the distances
are measured along the straight-line path between two points.

An industrial example is a straight conveyor segment linking two

workstations illustrates straight-line distance.
 10.2 Facility Location Models
 When a facility location problem is categorized on the basis of
the distance between facilities, four distance measures are
typically used:
3. Chebyshev distance: where the distance between two points in
two-dimensional space is the greater of the horizontal and vertical
distance traveled.

D=

An industrial example: used in an automated storage/retrieval

(AS/R) machine, that moves vertically while moving horizontally along
an aisle to a reach a storage location
 10.2 Facility Location Models
 When a facility location problem is categorized on the basis of
the distance between facilities, four distance measures are
typically used:
4. Actual distance (flow path distance): where distances are
measured along the actual path traversed between two points.

An industrial example is when travel occurs on a network or along a

tree structure
 10.2 Facility Location Models
Summary: Distance measures
 10.2 Facility Location Models
Continuous Facility Location Problems
 For the new facility we can choose ANY site in the space.
 For the existing related facilities (suppliers, customers,
etc.) we know the coordinates (x,y) and the flows (cost)
between them.
 The sole consideration is transportation cost.
 Facility location models have numerous applications:
◦ New airport, new hospital, new school
◦ Addition of a new workstation
◦ Warehouse location
◦ New supermarket location, new oil station.
◦ Bathroom location in a facility, etc.
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem

ex.The number of trips per day between the new machine and existing machines
 10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem

Example #1
 Determine the new location of a warehouse in Nablus area which provides materials to 5
different companies.
 Location of these companies (a, b) and the material movement between the new
warehouse and the existing facilities (weights) are provided:
 Where should the new warehouse be located?

a b W
1 1 1 5
2 5 2 6
3 2 8 2
4 4 4 4
5 8 6 8
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem

Solving a single-facility, rectilinear minisum location problem

 10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem

Solution Procedure
1.Find x-coordinate:
 Order the facilities based on the ascending order of
their x-coordinates
 Calculate partial sum of weights
 Find the facility for which the partial sum first
equals or exceeds one-half the total weight
 The x-coordinate of the new facility will be the
same as the x-coordinate of this facility
2.Find y-coordinate
 Repeat the same for y-coordinate
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem

Alternate sites
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem

Example #1-Solution
A new machine should be placed in the maintenance department.
There are five machines that have material handling relationship
with the new machine. Their current coordinates are:
M1=(1,1), M2=(5,2), M3=(2,8), M4=(4,4) and M5=(8,6).
The cost per unit distance traveled between the machines is the
same, but the number of trips per day between the new machine
and each existing machine are 5,6,2,4 and 8.
 Find a location for the new machine in the maintenance
department.
 Calculate total weighted distance for the new location.
 If the machine cannot be placed in the optimal location (x,y),
find the second best alternative sites out of the following
alternative locations: (5,6), (4,2) and (8,4) .
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem

Example #1-Solution
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.1 Single-Facility, Rectilinear Minisum Location Problem
Contour Lines
 A contour line is a line of constant cost in
the plane. Thus, locating the new facility
at any point on a given contour line results
in the same total cost.

 Contour lines indicate at a glance the cost

penalty associated with the choice of a
non-optimum location.
 Single-facility minisum location problem
Iso-cost contour lines
Procedure:
1.Plot the locations of existing facilities
2.Draw vertical and horizontal lines through each existing facility
3.Sum the weights for all existing facilities having the same x-coordinate and
enter the total at the bottom of the vertical lines. Do the same for y
coordinates
4.Calculate “net pull” for each candidate x- coordinate. (pull to the right is
positive and pull to the left is negative). Do the same for y coordinates
5.Determine the slope for each grid region enclosed by the candidate
coordinates
The slope equals the negative of the ratio of the net horizontal pull and the
net vertical pull
6.Construct an iso-cost contour line from any candidate coordinate point by
following the appropriate slope in each grid.
https://www.youtube.com/watch?v=tMrgSQ5NqPA
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.3 Single-Facility, Rectilinear Minimax Location Problem
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.3 Single-Facility, Rectilinear Minimax Location Problem
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.3 Single-Facility, Rectilinear Minimax Location Problem
10.2.1 Rectilinear-Distance Facility Location Problems
10.2.1.3 Single-Facility, Rectilinear Minimax Location Problem
Homwork #4
Solve the following problems
10.1, 10.2, 10,3a, 10.6, 10.8