Tema04 Location Strategies

8/19/2019 Tema04 Location Strategies

1/39

Cadena de suministroMtro. William H. Delano Frier


2/39

Cadena de suministro | Profesor William H. Delano Frier

Module 4

Location Strategics


3/39


Facility Location

• Location Planning

• Models

• Qualitative

• Quantitative


4/39


Location Planning

• The need of a Location Planning

• Influence based on company´s organization andcontrol

• Reasons to change• Effectiveness and efficiency of conversion process

• Costs

• Available labor / Unions

• Production Volume / Capacity

• Distance to Suppliers and customers


5/39


Decision

• Long term decisions

• Not easily turned back

• They affect fixed and variable costs

• Transportation

• Taxes, salaries, rent

• Objective: Maximize benefit for the company


6/39


Decisions / Service

• Investment Approach

• Cost varies between plants

• The Facility is an important source of investment

• Directly affects customer contact

• Affects business volume


7/39


Decisions / Industry

• Cost Approach

• Income varies little between plants

• The location directly impacts the costs

• Shipments, production

• Cost varies between plants


8/39


Decision Sequence

Country Region /Community

Location


9/39


Alternative Evaluation / Methods

• Preliminary study

• Detailed Analysis

• Qualitative

• Factors

• Quantitative

• Breake-even point

• Gravity Center

•

Minisum• Minimax

• Transportation


10/39


Preliminary Study

Factors / Country

• Government

• Culture and Economy

• Market

• Labor availability,

attitude, productivity,

costs• Infrastructure

• Exchange Rate


11/39


Preliminary Study

Factors / Region• Objectives / Business

• Weather andEnvironment

• Community acceptance• Labor

• Energy Costs

• Government

• Closeness to Suppliersand Customers

• Land and Building

William Delano Frier


12/39


Preliminary Study

Factors / Location

• Size

• Cost• Transportation Services

• Closeness to services

•Environmental Impact


13/39


Detailed Analysis

• Qualitative Models

• System based on the factor evaluation

• Explains why a destintation is preferred

• Uses measurement factors with an adjustable

weight for each situation

• Decision is taken by consensus


14/39


Factor Evaluation

Factors Relative Weight Score Evaluation

Advantages granted by the state 4 8 32

Labor ability 3 2 6

Distance to customers 3 6 18

Distance to suppliers 5 2 10

Availability and water quality 1 3 3

Community acceptance 5 4 20

Education System Qualoty 4 1 4

Transportation System 3 10 30

Weather 2 7 14

Energetics 2 6 12

149


15/39


Detailed Analysis

• Quantitative Models

• Break-even Point Analysis

• Identifies the operation level needed in order to

recover all the costs.

• Depends on:

• Sales Price

• Operations Cost Structure

PE=

Incomes/unit - variable cost/unit

Fixed Costs


16/39


Break-even point analysis

• Graphical view of the relations between:

• Production Volumes

• Income

• Costs

• Fixed: Do not depend on the production level

•Variable : Vary proportionally based on volumeproduced


17/39


Break-even Point Analysis

CV

CF

CT

Losses

Profit

Total Income

V BE Volume Produced

$

0

High FC

Low VC

Location A

$

Volume Produced

V BE

CV

CF

CT

Total Income

Losses

Location B

High VC

Low FC


18/39


Break-even Point

• We are considering buiding a newplant and are looking at 3locations: Texcoco, Mexico Cityand Toluca

• The fixed costs / year are: $30k,$60k, & $110k respectively

• Variable costs / case are: $75, $45,& $25 respectively

• Price / case $120• Which is the best location for 2000

units?


19/39


Break-even PointData

Texcoco D.F. Toluca

Fixed Costs 30000 60000 110000

Variable Costs 75 45 25

Volume 2000

Results

Breakeven Point Units Dollars

Texcoco vs DF 1000 105000

Texcoco vs Toluca 1600 150000

2500 172500

Volume Analysis @2000 units

Texcoco D.F. Toluca

Total Cost 180,000$ 150,000$ 160,000$


20/39


Break-even PointCost-volume analysis

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

0 1000 2000 3000 4000 5000 6000

Units

$

Texcoco D.F. Toluca

TexcocoD.F

Toluca


21/39


Center of Gravity

• Locates an optimal point to provide service to

multiple destinations

• Considers :

• Existing coordinates

• Example: Markets, suppliers

• Shipping volume

•

Distance traveled (or cost)• The cost/unit/km remains constant


22/39


Center of Gravity / Steps

• Obtain the coordinates from available web based

information

• Google Maps, INEGI, other

• Calculate coordinates X&Y for the center of gravity

• Determine center of gravity coordinates

•Minimize distribution costs


23/39


Center of Gravity / Methodology

dix = coordinate x of

location i

Wi = Number of

transactions of / for each

location

diy = Coordinate Y of location i

Coordinate X

Coordinate Y

i

i

iiix

x W

Wd

C

ii

i iiyy

W

WdC


24/39


25/39


Minisum Location Model

• Rectilinear distances – in right angles

• Considers the shipping volume

• Considers existing coordinates

• Movements are made:

• East - West, North - South

• Diagonal movements are not considered


26/39



• Methodology

• Calculate the median of the total number of

shipments / movements

• Starting at the origin and traveling through the x

axis, find the value of coordinate x where the

number of total shipments is >= to M

• Starting at the origin and traveling through the y

axis, find the value of coordinate y where the

number of total shipments >= to M


27/39



• Exercise…

• Western University has purchased video equipment

that will be used by 6 campus buildings

• The location of the 6 buildings and number of

people that will use the equipment is:School Location People

Administration (5,13) 31

Education (8,18) 28

Engineering (0,0) 19

Humanities (6,3) 53

Laws (14,20) 32

Sciences (10,12) 41


28/39



20

19

18

17

16

1514

13

12

11

10

9

8

7

6

5

43

2

1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20


29/39




30/39



20

19

18

17

16

15

14

13

12

11

10

9

8

7

6

5

4

3

2

1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

6,12

óptimo

Exercise…


31/39


Determining Cost

Transportation Cost

Ci = Cost of moving a shipment / person one distance unit

Li = Quantity of shipments / people moved

Di = Distance between location i and the new plant

iy-y+ii x x D

n

i

D L C iii

1


32/39


Total Movement Cost

• Median

• i=1 1* 31 * (abs(6-5) + abs(12-13)) = $62

• i=2 1* 28 * (abs(6-8) + abs(12-18)) = $224

• i=3 1* 19 * (abs(6-0) + abs(12-0)) = $342

• i=4 1* 53 * (abs(6-6) + abs(12-3)) = $477

• i=5 1* 32 * (abs(6-14) + abs(12-20)) = $512

• i=6 1* 41 * (abs(6-10) + abs(12-12)) = $164

• Total $1781

)6

1( y i y

i x i xC iL iC T


33/39


Minimax Location Model


34/39



• Methodology

• Values to be defined:


35/39



• Methodology

• All points in the line that

join (x1,y1) and (x2,y2)

are optimal.• The optimal solution to

the problem can be

expressed as follows:

2esobjetivofunciónladeóptimovalorEl

10

)1(*

)1(*

5

21

21

c

y y y

x x x

λ

λλ

λλ

The optimal value of the objective function

is c5/2


36/39



• Example…..

• 6 locations with the

following coordinates:

(5,13), (0,0), (14,20),(8,18), (6,3), (10,12).

• Objective: Locate a new

building that minimizes

the maximum distance

to the current locations


37/39



20

19

18

17

16

1514

13

12

11

10

9

8

7

6

5

43

2

1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Todos los puntos de la

recta son óptimos

12,5

1.5,15.5

• Exercise…


38/39


Lineal Programming

• Transportation Method

• Finite number of destinations and sources

• Volume

• Cost Origin-Destination

• Minimizes the Total Transportation Cost

• The final result determines:

• Optimal quantity to be shipped from source i todestination j


39/39


Global Distribution of Auto-Parts

(VW)

Tema04 Location Strategies

Documents

Transcript of Tema04 Location Strategies