Lecture 09_Facility Location

Question 1

Distribution System

Answer 1

1. Vertical
- **# of distribution stages **(e.g.plant warehouse, central warehouse, regional warehouse, fulfillment center FC)

2. Horizontal
- # of warehouses per stage

3. Locations, transport routes, inventory
4. Distribution channels
- part of the marketing mix
- long-term binding
- allocation of market power
- allocation of tasks in the chaintum

Question 2

Locatin Strategies

Answer 2

Innovation (Growth strategies)
- expansion of locations
- creanting new locations (geographic concentration / diversification)

Variation/elimination strategies
- Partial closure (contraction)
- Aggregation (Concentration)

Rationalization
- improved utilization of existing locations and capacities
- relocation

Question 3

Location Decisions

2 overarching items

Answer 3

Location Structure
- relocation of facilities (# of location remains constant(
- Location Split (increase in # of locations)
- merge locations (decrease in # of locations)

Single-Facility-Decisions
- closure of facilities, desinvest
- capacity expansion / reduction
- adjustment / reallocation of capacities

Question 4

Location Selection

Answer 4

Possible and feasible locations
- Preliminary selection: Scoring Model
- Macro locations: Countries, regions
- Micro locations: within selected regions

Promising locations
- profitability analysis
- risk analysis

Question 5

Global location factors

Answer 5

• cheap production factors [raw materials, wages]
• market proximity
• availability of technological resources
• amortization of investments
• international competition
• political and economical environment

Question 6

Location Theory of Weber

4 cases

Answer 6

• sales market for product A
• 2 materials with sourcing locations B1 and B2

4 Cases

1. Both materials are ubiquities
   - production near sales market

2. Both net weight materials
- production near sales market

3. Both weight loss materials
- tendency to the sourcing locations
- depending on weighting of B1 and B2
- can be approached via graviation center in the middle of triangle [if B1 weight loss higher, closer to B1; if B2 weight higher closer to B2

4. One Ubiquity, one weight loss material B2
- Line between A and B2

Question 7

Steiner Weber Model
Characteristics

Answer 7

Continuous location planning
- single location, no investment costs (only transport costs)
- Distance Measurement: Euclidean or Manhattan
- Decision: Location (coordinates) that minimize transportation costs)

Customer Data
- j = 1,2,…,n customers
- Locations (x(j), y(j))
- customer demand per time unit: b(j)

Transportation costs
- c per quantity and distance unit

Question 8

Steiner Weber Model
Distance Measurement

2 Alternatives

Answer 8

• Manhattan distance
• Euclidean Distance

Question 9

Manhattan Procedure

Steiner-Weber Model

Answer 9

Determination u(‘)
- Determine ∑ Demand b(j)
- sort customers by increasing coordinates, so that x1 <= x2 <=xn
- if b1 > 0.5 B, then u(‘) = x1, otherwise choose u(;) = x(h) with

Determination of v(‘)

Question 10

Ubiquitous
vs.
net weight
vs.
weight loss Materials

Answer 10

- Ubiquitous: everywhere available
- net weight: keep their weight,
- weight loss: loose weight across production process

Question 11

How does the location factor labour cost influence a shift in the optimal production location?

Weber’s location Theory

Answer 11

- if new transport costs < savings of labour costs: change location
- if new transport costs > savins of labour costs: don’t change location

Question 12

Manhattan Euclidian
Procedure

Answer 12

• find initial feasible solution
• u’ = ∑ of all x * Demand x / ∑ Demand
• v’ = ∑ of all y * Demand y / ∑ Demand