CHAPTER 9: FACILITY LOCATION DECISIONS

9.1 IMPORTANCE OF LOGISTICS NETWORK DESIGN

Efforts to enhance the efficiency and effectiveness of a logistics operation lead to a research of new way to lacate a facility to lower costs and improve service. An advantage of a strategic location of facility could differentiate a firm compared to competitors.

Location decisions involve determining the number, location and size of the facilities to be used.

These facilities include such as nodal points in the network as plants, ports, vendors, warehouses, retail outlets and service center - points in the logistics network where goods temporarily stop on their way to final consumers. It is the determining of the structure of the structure of product flow from source point to demand point.

9.2 CLASSIFICATION OF LOCATION PROBLEMS

a) Driving force

- main critical factor in selecting location

- service location, accessibility of customers to the location is main factor

b) Number of facilities

- locating a single facility is much simpler than multiple

- transportation costs are main factor considered

- competitive forces, divisions of demand among facilities, inventory consolidation effects and facility costs are also covered.

c) Discreteness of the choices

- selecting continuous versus discrete location method.

- continuous 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 pre-selected possible choices.

d) The degree of data aggregation

- refers to the amount of data used in solving a practical location problem.

e) Time horizon

- refers to length of period involves.

- time period can be single time period.

- methods that handle multi period location planning are referred to as dynamic.

9.3 A HISTORICAL PERSPECTIVE ON LOCATION

Bid Rent Curve > Weber's Classification Of Industries > Hoover's Tapered Transportation Rates

9.4 OTHER LOCATION PROBLEMS

• Hub and Spoke - refers to the place that has high tendency to congested and crowded. For example, KL Sentral.
• Obnoxious Facilities - location is judged on cost minimizing or profit maximizing criteria. For example, waste dumps, water treatment plants, chemical reclaimation plants, and prisons.
• Microlocation - involve significant-size geographical areas where distance approximation over road, rail, water, and air network are reasonable.