*Lecturer: Ho Trung Thao (thao.hotrung@hoasen.edu.vn)

Chapter 5 (part II)Locating Facilities*

Scoring modelsScoring models emphasize the factors that are important for locations, but which cannot easily be costed or quantified.

The important factors in location decisions

Scoring models - factors in location decisionsIn the region and country

availability, skills and productivity of workforce local and national government policies, regulations, grants and attitudes political stability economic strength and trends climate and attractiveness of locations quality of life including health, education, welfare and culture location of major suppliers and markets infrastructure particularly transport and communications culture and attitudes of people.

Scoring models - factors in location decisionsIn the city or area

population and population trends availability of sites and development issues number, size and location of competitors local regulations and restrictions on operations community feelings local services, including transport and utilities.

In the site

amount and type of passing traffic ease of access and parking access to public transport organizations working nearby total costs of the site potential for expansion or changes.

Scoring models - factors in location decisions

Important factors for scoring modelsavailability of a workforce with appropriate skillslabor relations and community attitudesenvironment and quality of life for employeescloseness of suppliers and servicesquality of infrastructuregovernment policies toward industry.When decision maker want the facility near to raw material

Concerning with customers, decisions about location put more weight on:

population densitysocio-economic characteristics of the nearby populationlocation of competitors and other serviceslocation of other attractions such as retail shopsconvenience for passing traffic and public transportease of access and convenient parkingvisibility of site.Important factors for scoring models

Scoring models the basis of scoring models,Five steps:Step 1 decide the relevant factors in a decision

Step 2 give each factor a maximum possible score that shows its importance (usually 0-100) and weight for each factor (0.00-1.00)

Step 3 consider each location in turn and give an actual score for each factor, up to this maximum

Step 4 add the total weighted score (= Site Score x Factor Weight) for each location and find the highest

Step 5 discuss the result and make a final decision.

Scoring model ExampleSamson Ltd. is considering three alternative sites for its new facility.

After evaluating the firms needs, the Managers have narrowed the list of important Selection Criteria down into three major factors.

- Availability of skilled labor- Availability of Raw materials, and- Proximity to the firms markets.

Based on these criteria, the three Alternative sites were scored between 0 and 100 points: Scoring model Example (cont.)

Weights of each factor have been assigned as follows:Scoring model Example (cont.)

Scoring model Example (cont.)Now we will multiply each score by its corresponding factor weightWeighted scores are calculated as: (Site Score) x (Factor Weight)From these results, the largest total weight is for Site A. It appears to be the best location.

FACTORFactorWeight(Total=1)Site ASite BSite CScoreWeighted ScoreScoreWeighted ScoreScoreWeighted ScoreSkilled labor0.5703570355025Raw materials0.3601840129027Market Prox.0.2701495196013Total Weighted Score676664

NETWORK MODELSElectronic maps of road networks allow another approach to location, which is based on actual road layouts.

Single median problemCovering problem

Single median problemFinds the location of one facility on a network that minimize total cost is called the single median problem

The easiest way to find the single median

- Starts with a matrix of the shortest distances between towns.

- To find the shortest average distance, we have to combine these distances with the loads carried.

- Multiply the distances by the demands at each town, to get a matrix of the weight-distances.

- Add these for each town, and find the lowest overall value.

P-median 1 facility planar solution, weighted demand

Single median problemMinimize the average distance to the facility

Single median problem - ExampleIan Bruce delivers goods to eight towns, with locations and demands as shown in next slide. He wants to find the location for a logistics centre that minimizes the average delivery time to these towns. Where should he start looking?

HTALFR10CPBEDI15GOEN152520101015202298145667Distance between AL and CPFacility CPDemand at CPMap of Ian Bruces problemSingle median problem Example (cont.)8

HTALFR10CPBEDI15GOEN152520101015202298145667Map of Ian Bruces problemSingle median problem Example (cont.)8Ways from AL to ENRED= 15+9+7= 31

HTALFR10CPBEDI15GOEN152520101015202298145667Map of Ian Bruces problemSingle median problem Example (cont.)8Ways from AL to ENRED= 15+9+7= 31 GREEN= 15+8+6+6= 35

HTALFR10CPBEDI15GOEN152520101015202298145667Map of Ian Bruces problemSingle median problem Example (cont.)8Ways from AL to ENRED= 15+9+7= 31 (smallest)GREEN= 15+8+6+6= 35YELLOW= 22+6+6= 34

Single median problem - Example SolutionWeight-distance of a centre at AL = (10 0) + (15 15) + (25 22) + (20 24) + (20 31) + (10 28) + (10 32) + (15 36) = 3015.

) (Weight x Distance)

Single median problem - Example SolutionWeight-distance of a centre at AL = (10 0) + (15 15) + (25 22) + (20 24) + (20 31) + (10 28) + (10 32) + (15 36) = 3015.

Town EN has the lowest total cost, and is the single median

) (Weight x Distance)

Covering problemLocate facilities that provide some service required by customers

If customers are positioned within a certain predefined critical distance d from any of the facilities, then they are considered served or cover

Two types: Look for the single location that gives the best service to all townsFind the number of facilities needed to achieved a level of service and their best locations.

Covering problem - ExampleThe following figure shows part of a road network, with the travel time (in minutes) shown on each link. Where would you locate a depot to give best customer service?

IAHDBG10EF1015410610Travel time (min.) between A and DFacility DRoad network showing travel time in minutes between locationCovering problem Example (cont.)CJ1415515336

IAHDBG10EF1015410610Travel time (min.) between A and DFacility DRoad network showing travel time in minutes between locationCovering problem Example (cont.)CJ1415515336

Solution to the covering problemCovering problem Example (cont.)

LOCATION PLANNINGStep 1 Identify the features needed in a new location, determined by the business and logistics strategies, structure of the supply chain, aims, customers, and other relevant factors. Look for regions and countries that can best supply these.Step 2 Within the identified region, use an infinite set approach such as the centre of gravity or similar model to find the best area for locations.Step 3 Search around this area to find a feasible set of available locations.Step 4 Use a feasible set approach such as a costing model or scoring model to compare these alternatives.Step 5 Discuss all available information and come to a decision.

LOCATION PLANNING (cont.)We can use the following procedure

1. Examine the overall aims, looking at the logistics strategy and other plans to identify the aims and goals of logistics in terms of customer service, costs, timing, and so on.

2. Do a logistics audit, describing the details of the current logistics system, including the location of facilities, network connecting these, measures of performance, and industry benchmarks.

3. Identify mismatches, where there are differences between the aims (from step 1) and actual performance (from step 2).

4. Examine alternatives for overcoming the mismatch, looking in general terms to see where and how the structure of the supply chain can be improved.

LOCATION PLANNING (cont.)5. Location decisions, having set the general features of the supply chain, look in detail at the facilities needed. Use appropriate models to find the best locations and sizes for these facilities.

6. Confirm the locations, making sure that the locations identified in step 5 really are best, and work with the structure identified in step 4.

7. Implement and monitor the solutions, doing whatever is needed to execute the changes and continuing to check performance.

Quiz 03Prob. 01What happens if we change the factor weights in the example. Lets use the following factor weights:Skilled labor: 0.45;Raw Materials: 0.40; and Market: 0.15Determine which site is the best in this new factor weights.

FACTORFactorWeight(Total=1)Site ASite BSite CScoreWeighted ScoreScoreWeighted ScoreScoreWeighted ScoreSkilled labor0.45707050Raw materials0.40604090Market Prox.0.15709560Total Weighted Score

Quiz 03213456789202530153020303040154030201535Prob. 02 Use covering problem method to locate a facility that give the best customer service?

Quiz 03

Prob. 03A firm wishes to find a central location for its service. Business forecasts indicate travel from the central location to New York City on 20 occasions per year. Similarly, there will be 15 trips to Boston, and 30 trips to New Orleans. The x, y-coordinates are (11.0, 8.5) for New York, (12.0, 9.5) for Boston, and (4.0, 1.5) for New Orleans. What is the center of gravity of the three demand points?

Home work 03- in textbook ed. 1stProb. 2(page 134).

Home work 03- in textbook ed. 1stProb. 4(page 134).

Home work 03- in textbook ed. 1stProb. 6 (page 135): correct the word population by travel time in minute.

Home work 03- in textbook ed. 1stCase study (page 131)

*******Weights reflecting the relative importance of each factorSince factor weights, selected factors, and assigned scores are all determined subjectively, the managers should be very careful in selecting these items and numbers.

*Example, a highway system could be considered a network with major highway intersections as nodes.The arcs of the network represent travel distance (or time) between pairs of nodes, calculated using the shortest route.Networks can represent more accurately the geographic uniqueness of an area (e.g., the travel restrictions caused by river with few bridges or by mountainous terrain).

*****Two objectives: cover all customers in the network with the smallest number of facilities, orcover as many customer as possible with the given number of facilities*****