Facility Location

Where should a plant or service facility be located?

• Need to produce close to supplier as well as customer due to time-based

competition, trade agreements and shipping costs

• Need to locate near the appropriate labor pool to take advantage of low wage
and high technical skills

Profit-oriented organization Make decision on profit potential

Balance between cost and
Non-profit organization
level of customer service
 Facility Location
Factors Affecting Location Decisions
• Proximity to customers and suppliers

• Labor pool

• Business climate

• Total costs

• Infrastructure

• Government barriers

• Trade blocks
 Facility Location
Plant Location Methods
• Factor Rating System: most widely used -- can provide a
mechanism to combine diverse factors

• Center of Gravity Method: locating a single facility that

considers the existing facility, distance
between them and the volume of goods to be shipped
 Facility Location
Factor Rating Scale

Criteria and Weights for Location Decision

Criteria Weight
Proximity 10
Labor Pool 8
Business Climate 6
Total Cost 4
Infrastructure 3
 Facility Location
Factor Rating Scale
Assessed Values of Locations using Decision Criteria

Proximity Labor Pool Climate Total Cost Infrastructure

Weight 10 8 6 4 3
Location A 10 3 10 8 5
Location B 8 7 7 8 7
Location C 8 5 7 10 10
Location D 8 7 7 8 7
Location E 7 8 7 8 7
Location F 8 3 6 10 8
Location G 10 7 8 6 7
Location H 4 10 4 8 10
 Facility Location
Factor Rating Scale
Evaluation of Location Alternatives against Weighted Criteria

Infra-
Proximity Labor Pool Climate Total Cost Total Score
structure
Location A 100 24 60 32 15 231
Location B 80 56 42 32 21 231
Location C 80 40 42 40 30 232
Location D 80 56 42 32 21 231
Location E 70 64 42 32 21 229
Location F 80 24 36 40 24 204
Location G 100 56 48 24 21 249
Location H 40 80 24 32 30 206
 Facility Location
Center of Gravity Method
500
A
Location Amount 400 B
D
Plant (325, 75) 1500
300
Distributor A (25, 450) 350
200
Distributor B (350, 400) 250
C
Distributor C (400, 150) 450 100
Plant
Distributor D (450, 350) 450
0
0 100 200 300 400 500 600

A company needs to locate an intermediate holding facility

between its plant and major distributors. Locations and
amounts of product are as follows:
 Facility Location

500
A
400 B Location Amount
D Plant (325, 75) 1500
300
A (25, 450) 350
200 B (350, 400) 250
C C (400, 150) 450
100
Plant D (450, 350) 450
0
0 100 200 300 400 500 600
 Facility Location

Cx 
 d ixVi
Cy 
 d iyVi
Vi Vi

Location of Intermediate holding facility

325 *1500  25 * 350  350 * 250  400 * 450  450 * 450

Cx   322
1500  350  250  450  450

75 *1500  450 * 350  400 * 250  150 * 450  350 * 450

Cy   198
1500  350  250  450  450
 Facility Location

500
A Location Amount
400 B
Plant (325, 75) 1500
D
300 A (25, 450) 350
B (350, 400) 250
200
C C (400, 150) 450
100 D (450, 350) 450
Plant
WH (322,198)
0
0 100 200 300 400 500 600
 Facility Location
Service Facility Location Methods

From Miles to Clinic Population Relative

Community A B C D (thousand) Weight

A 0 11 8 12 10 1.1
B 11 0 10 7 8 1.4
C 8 10 0 9 20 0.7
D 9.5 7 9 0 12 1.0
one
Find the locations of two clinics at the lowest weighted travel-distance cost

A B+C+D B C+D+A C D+A+B D A+B+C

 Facility Location
Locating Service Facility

A B C D
A 0 88 121 88 132 88
B 112123.2 0 112 78.4
C 0 112 0 140 0 126 0
D 108 114 84 108 0
SUM 349.2 345 308 336.4

C
 Facility Location
Locating Service Facility

A B C D
A 0 88 88 88
B 78.4 112 0 112 78.4
C 0 0 0 0
D 0 108 0 84 108 0
SUM 220 172 308 166.4

C D
 Facility Location
Locating Service Facility

A B C D
A 0 88 88 88
B 78.4 0 112 78.4
C 0 0 0 0
D 0 0 108 0
SUM 78.4 88 308 166.4

C D A B
 Facility Location
Locating Service Facility

From Miles to Clinic Population Relative

Community A B C D (thousand) Weight

A 0 11 8 12 10 1.1
B 11 0 10 7 8 1.4
C 8 10 0 9 20 0.7
D 9.5 7 9 0 12 1.0

Find the locations of two clinics at the lowest weighted travel-distance cost
four