LOCATION

PLANNING AND
ANALYSIS
 Nature
of
Location Decision
Location Options
1. Expand existing facilities.
2. Add new facilities.

3. Move.
Making Location
Decision
1.Decide on the
criteria.
 2. Identify the
important factors.
 Factors affecting the
location decisions of a
company/business:
 Regional Factors
1.Location of raw materials
2.Location of markets
3.Labor factors
4.Climate
 Community Considerations

1.Quality of life
2.Services
3.Attitudes
4.Utilities
5.Taxes
 Site-related Factors
1.Land
2.Transportation
3.Environment
3. Develop location
alternatives.
4.Evaluate the
alternatives.
Center of Gravity Method
An approach that seeks to compute
geographic coordinates for a potential single
new facility that will minimize costs
This method is beneficial
because it’s:
■ Simple to compute
■ Considers existing facilities
■ Minimizes costs
If quantities to be shipped to every location are equal, you
can obtain the coordinates of the center of gravity by
finding the average of the x-coordinates and the average of
the y-coordinates.

x
 x i

y
 y i

n
where
xi  x coordinate of destinatio n i
yi  y coordinate of destinatio n i
n  Number of destinatio ns
 
Destination x y
x i 18
D1 2 2 x   4 .5
D2 3 5
n 4
D3 5 4

D4 8 5
y
 y i

16
4
18 16
n 4

The center of gravity is (4.5,4). This is slightly west of D3.

When the quantities to be shipped to every location are unequal,
you can obtain the coordinates of the center of gravity by finding
the weighted average of the x-coordinates and the average of the y-
coordinates.

x
 xQ i i

Q i

y
 yQ i i

Q i

where
Qi  Quantity t o be shipped to destinatio n i
xi  x coordinate of destinatio n i
yi  y coordinate of destinatio n i
Suppose the shipments for the problem depicted in the figure
are not all equal. Determine the center of gravity based on
the following information.
 x
 xQi i

2(800)  3(900)  5(200)  8(100) 6,100
  3.05
Q i 2,000 2,000

y
 yQi
i
2(800)  5(900)  4(200)  5(100) 7,400
i
  3.7
Q i 2,000 2,000

The coordinates for the center of gravity are (3.05, 3.7). You may
round the x-coordinate down to 3.0, so the coordinates for the center
of gravity are (3.0, 3.7). This is south of destination D2 (3, 5).
 Cost-Profit-Volume Analysis

Cost-Profit-Volume (CPV) analysis is used to determine how changes

in costs and volume affect a company's operating income and net
income. CPV analysis requires that all the company's costs, including
manufacturing, selling, and administrative costs, be identified as
variable or fixed.
Fixed and variable costs for four potential plant
locations are shown below:

Demand: 12,000
CPV Formula = FC + VC(Q)

Location A = 250,000 + 11Q

Location B = 100,000 + 30Q
Location C = 150,000 + 20Q
Location D = 200,000 + 35Q
CPV Formula = FC +
VC(Q)
Location A
250,00 + 11 (12,000) = 382,000
Location B
100,000 + 30 (12,000) = 460,000
Location C
150,000 + 20 (12,000) = 390,000
Location D
200,000 + 35 (12,000) = 620,000
Location A
250,00 + 11 (12,000) = 382,000
Location B
100,000 + 30 (12,000) = 460,000
Location C
150,000 + 20 (12,000) = 390,000
Location D
200,000 + 35 (12,000) = 620,000
5. Make selection.