NOTE

CHAPTER 13 : FACILITY LOCATION DECISION

'CLASSIFICATION OF LOCATION PROBLEMS'

1) Driving Force

The driving force classification refers to the main critical factor in selecting location for a particular facility.For example in selecting location for a plant or a warehouse, economic factor are usually dominant with the retail location revenue generate by allocation is important:The service location, accessibility of customer or client to the location is the main factor.

2)Number of Facilities

Locating a single facility is much simpler than multiple facility, especially at one time.Although, transportation cost are the main factor considered, other factor such as competitive forces, divition of demand among facilities, inventory consolidation effect and facility cost are also considered.

3)Discreteness of the Choices

There also exists options of selecting continues vs descrete location method. Continues location method refers to the selection of the best location after exploring every possible location along a space continuum.Discrete location method refers to the selection of the best location from a list of preselected possible choices.

4)Degree of Data Aggregation

Degree of data aggregation refers to the amount of data used in solving a practical location problem.For example, in selecting a location for a what geographic area, much aggregate data relationship is used. While a specific side selected, for example the specific seperated by a road, little aggregate data is used.

5)Time Horizon

Time horizon refers to the length of period involved.Tome period can be a single time period, for example one year period or many years at once. This is especially if facilities represent a fix investment and moving location from one place to another is expensive.Methods that handle multy-period location planning are reffered to as dinamic.

'A Historical Perspective on Location'

1) Bid-Rent Curves Theory of Industrial Location By Johann von Thunen

  
Balancing land use practices and transportation costs
using von Thünen's land use model

Profit at the central market depends not only on the market value of the product but also on the transportation costs to get the product to the market. "Land Use" varies from products of high cost, high market value (such as dairy products and fresh vegetables labeled as Land Use 1 in the diagram above) to low cost, low market value products (such as grain or livestock labeled as Land Use 4 in the diagram above).

As the distance from the central market increases, the profit that would be gained from a product decreases.  In the diagram above, if the producer of "land use 1" (tomatoes, for example) needed to transport the product 5 miles, there would be no profit made at the market.  This rate of depreciation in market value varies with different land use types.  Using the same example, if the farmer had land 4 miles from the market it would be more profitable to produce "land Use 2."  An equilibrium is met where the profit of one land use outweighs the profit of another (signified above by  the dotted lines).  At this point, the land use changes.

2)Alfred Weber's Theory of Industrial Location

Alfred Weber formulated a theory of industrial location in which an industry is located where the transportation costs of raw materials and final product is a minimum. He singled out two special cases. In one the weight of the final product is less than the weight of the raw material going into making the product. This is the weight losing case. In the other the final product is heavier than the raw materials that require transport. Usually this is a case of some ubiquitous (available everywhere) raw material such as water being incorporated into the product. This is called the weight-gaining case.

Figure 1 shows the situation in which the processing plant is located somewhere between the source and the market. The increase in transport cost to the left of the processing plant is the cost of transporting the raw material from its source. The rise in the transportation cost to the right of the processing plant is the cost of transporting the final product. Note the line on the left of the processing plant has a steeper slope than the one on the right.


Figure 2 shows the situation if the processing plant is moved closer to the source of raw material. Note that the transport cost of the final product delivered to the market is lower than in the previous location. The transportation cost for the product delivered to the market will be lowest of all if the processing plant is located at the source of the raw material, as shown in Figure 3.

The weight gaining case is illustrated in Figures 4, 5 and 6. The optimal location of the processing plant in this case is at the market. Weber established that firms producing goods less bulky than the raw materials used in their production would settle near to the raw-material source. Firms producing heavier goods would settle near their market. The firm minimizes the weight it has to transport and, thus, its transport costs.

3) Hoover's Tapered Transportation Rates

Hoover observed that transportation rates are tapered with distance. If the facilities near to sources of materials, the inbound will decreased while outbound will increase. But, if the facilities near to customer, inbound will increased and outbound will decreased. Facilities located near to customer is preferred.

OTHER LOCATION PROBLEMS

1) Hub and Spoke. 

A location problems solution made popular airlines, delivery services (Pos Malaysia, Fed Ex) and communication system are in Hub and spoke concept. We give an example here KL central is the Hub and any transportation that we will use to go to KL central we can call it as Spoke. Example for Spoke is Monorail, KTMB, ERL, Rapid KL,Taxi, Buses and many more.

2) Obnoxius Facilities 

This has the tendancy to place location close to the centre of demand which is sometimes a disadvantage. Obnoxious Facilities such as waste dumps, water treatment plants, chemical reclamnation plants and prisons are located on accuration that attemps to maximize the minimum distance between them and the population. For example when we want to open new branch for FKC, but on the same time the location that we choose are near to waste dumps. This location not suitable to running business for fast foods restaurant because it will effect to customer satisfaction.

3) Microlocation 

Location problems also related to geographical area where we need to have a connection with our supplier, customer and others. For example, if we want to build warehouses on the top of mountain, we are difficult to communicate with its customers and suppliers because there no facilities to comunicate with each other.