Facility Location
FACILITY LOCATION
There are many analytical techniques that can be used in facility location decisions.Some of these are:
1) Factor Rating
2) Cost-Profit-Volume analysis
3) Center of Gravity Method, etc
FACTOR RATING METHOD
It is most widely used analytical technique. it is most popular technique because a wide variety of factor can be included in the analysis .It is useful for service and industrial location.
In this method to merge quantitative and qualitative factors, factors are assigned weights based on relative importance and weight age score for each site using a preference matrix is calculated. The site with the highest weighted score is selected as the best choice.
STEPS OF FACTOR RATING METHOD
1. List relevant factors.
2. Assign importance weight to each factor.
3. Develop scale for each factor (0-1, etc.)
4. Score each location using factor scale.
5. Multiply scores by weights for each factor & total.
6. Select location with maximum total score.
After evaluating the firm’s Needs, the Managers have narrowed the list of Important Selection
Criteria down into major Factors then weights reflecting the relative importance of each factor have been assigned .Based on these criteria, the Alternative sites were scored between 0 and 100 points. Now we will multiply each score by its corresponding factor weight.
Weighted scores are calculated as:
(Site Score)x(Factor Weight)
From these results, the largest total weight is for Site France. It appears to be the best location.
Cost-Profit-Volume analysis:
Cost profit volume analysis is used for finding industrial locations.
Steps to Cost-Profit-Volume analysis:
1. Determine fixed and variable costs for each location
2. Plot the cost for each location
3. Select location with the lowest total cost for expected production volume
Example:
We are considering 3 locations to set up our firm facility:
Akron
Bowling Green
Chicago
Result:
Since Bowling Green has
There are many analytical techniques that can be used in facility location decisions.Some of these are:
1) Factor Rating
2) Cost-Profit-Volume analysis
3) Center of Gravity Method, etc
FACTOR RATING METHOD
It is most widely used analytical technique. it is most popular technique because a wide variety of factor can be included in the analysis .It is useful for service and industrial location.
In this method to merge quantitative and qualitative factors, factors are assigned weights based on relative importance and weight age score for each site using a preference matrix is calculated. The site with the highest weighted score is selected as the best choice.
STEPS OF FACTOR RATING METHOD
1. List relevant factors.
2. Assign importance weight to each factor.
3. Develop scale for each factor (0-1, etc.)
4. Score each location using factor scale.
5. Multiply scores by weights for each factor & total.
6. Select location with maximum total score.
After evaluating the firm’s Needs, the Managers have narrowed the list of Important Selection
Criteria down into major Factors then weights reflecting the relative importance of each factor have been assigned .Based on these criteria, the Alternative sites were scored between 0 and 100 points. Now we will multiply each score by its corresponding factor weight.
Weighted scores are calculated as:
(Site Score)x(Factor Weight)
From these results, the largest total weight is for Site France. It appears to be the best location.
Cost-Profit-Volume analysis:
Cost profit volume analysis is used for finding industrial locations.
Steps to Cost-Profit-Volume analysis:
1. Determine fixed and variable costs for each location
2. Plot the cost for each location
3. Select location with the lowest total cost for expected production volume
Example:
We are considering 3 locations to set up our firm facility:
Akron
Bowling Green
Chicago
Result:
Since Bowling Green has