Facility Location Models
Chapter: 1
Facility Location Models
1.1 Introduction Facility Location is a geographic location of manufacturing/service facilities where transformation activities from inputs into the output are performed. Selecting a location of facilities is very crucial decision not only for manufacturing unit but also for service unit. Generally it is a strategic decision and involves lot of activities. It starts from identifying the suitable locations based on certain criteria and then evaluating all locations based on specific tools and techniques. Factor Rating Method, Break even analysis, Centre of Gravity Method, Simple Median Method and Transportation Techniques are available that would help the decision maker to identify the best suitable location for their facility. 1.2 Factor Rating Method It is the simple method to compare the alternative sites. The procedure for factor rating method is explained below. Identify the factors which are relevant for location and list them. According to the relative importance of factors, rate each factor i.e. 1 to 7 scales where 1 is least important and 7 is most important. Rate each location i.e. 1 to 10 scales where 1 is very poor and 10 is very good on each factor. Calculate the total score of each location. Prefer the location which has highest location score. Example 1.1: A Car manufacturing unit has considered five alternative locations for their manufacturing plant. Table 1.1 provides the information regarding the factors which is rated in 1 to 7 scale rating. Table 1.2 provides information regarding the score of each location on each factor from 1 to 10. Suggest the best location to the manufacturing unit by using factor rating method. Table 1.1 Factor ratings for manufacturing unit Factors Raw material availability Tax Benefit Labor availability Factor rating ( 1 to 7 scale ) 5 6 3
Proximity to customers Power availability Transportation facility Basic amenities Availability of water
6 5 4 2 1
Table 1.2 Rating of
Facility Location Models
1.1 Introduction Facility Location is a geographic location of manufacturing/service facilities where transformation activities from inputs into the output are performed. Selecting a location of facilities is very crucial decision not only for manufacturing unit but also for service unit. Generally it is a strategic decision and involves lot of activities. It starts from identifying the suitable locations based on certain criteria and then evaluating all locations based on specific tools and techniques. Factor Rating Method, Break even analysis, Centre of Gravity Method, Simple Median Method and Transportation Techniques are available that would help the decision maker to identify the best suitable location for their facility. 1.2 Factor Rating Method It is the simple method to compare the alternative sites. The procedure for factor rating method is explained below. Identify the factors which are relevant for location and list them. According to the relative importance of factors, rate each factor i.e. 1 to 7 scales where 1 is least important and 7 is most important. Rate each location i.e. 1 to 10 scales where 1 is very poor and 10 is very good on each factor. Calculate the total score of each location. Prefer the location which has highest location score. Example 1.1: A Car manufacturing unit has considered five alternative locations for their manufacturing plant. Table 1.1 provides the information regarding the factors which is rated in 1 to 7 scale rating. Table 1.2 provides information regarding the score of each location on each factor from 1 to 10. Suggest the best location to the manufacturing unit by using factor rating method. Table 1.1 Factor ratings for manufacturing unit Factors Raw material availability Tax Benefit Labor availability Factor rating ( 1 to 7 scale ) 5 6 3
Proximity to customers Power availability Transportation facility Basic amenities Availability of water
6 5 4 2 1
Table 1.2 Rating of