Week 7 / Bonus Assignment Material

Question 1

Evaluating Location Alternatives

Answer 1

Locational Break-Even Analysis:

Transportation Model: Consider costs of moving raw materials or finished goods

Factor Rating: Decision based on quantitative and qualitative inputs

Centre of Gravity Method: Decision based on minimum distribution costs

Location Analysis Software: Geographic information system

Question 2

Locational Break-Even Analysis

Answer 2

1. Determine fixed and variable costs
2. Plot total costs lines
3. Determine location with lowest
   total costs

Assumptions:
• Fixed costs and variable costs 
are constant for the range of 
probable output
• Only one product is involved

Question 3

Transportation Model

Answer 3

Determines the shipments of raw
materials and finished goods in order
to minimize total transportation cost

 Considers demand and capacity 
constraints
 For multi-facility conditions
 A special –purpose algorithm of 
linear programming

Question 4

Factor-Rating Method

Answer 4

Scoring the factors and determining the
weighted score for each location.

1. Develop a list of relevant factors.
2. Assign a weight to each factor.
3. Develop a scale for each factor.
4. Score all factors for each location.
5. Multiply score by weight for each factor and
   sum for each location.
6. Choose the location with the highest
   composite score

MORE IS BETTER!

Question 5

Centre-of-Gravity Method (COG)

Answer 5

 Finds location of distribution centre that
minimizes total distribution costs
 Considers
• Location of markets
• Volume of goods shipped to those markets
• Shipping cost (or distance)

Question 6

Centre-of-Gravity Method

Answer 6

Finds location of distribution centre that
minimizes total distribution costs

 Overlay a coordinate system on a map showing existing locations
 Location (0,0) arbitrary
 Map drawn to scale
 Determine coordinates of each destination
 Calculate X and Y coordinates for ‘centre of gravity’
• Weighted by quantity transported

Question 7

COG equation

Answer 7

x - bar = ∑xiQi / ∑Qi

y - bar = ∑yiQi / ∑Qi

where xi = x coordinate of destination i
yi = y coordinate of destination i
Qi = Quantity to be transported
to destination i

Question 8

Location Analysis Software

Answer 8

Geographic Information Systems (GIS)
• Computer-based tool for collecting, storing,
retrieving, and displaying location-dependent
demographic data on map
• Combines data from different databases
• Intuitive and graphical

 Modelling/optimization software
• Many use linear programming
• E.g. LogicNet (http://www.llamasoft.com/)

Question 9

Why delay occurs?

Answer 9

• Demand > Supply
• Variability
• Variability in patients arrival
• Variability in treatment times
Type 1: Mild patient & Severe patient
Type 2: Experience of care providers

Question 10

Utilization

Answer 10

Measures the percentage of time that servers are busy

Stability: u = (a) / (M x S) < 1

Question 11

Service discipline

Answer 11

First come first served
First-come-first-served

Patient priority (e.g emergency department)

Mixed policy (Blood bank)

Question 12

Multi channel single stage with FCFS Discipline

Answer 12

A: Average arrival rate (patients / unit time)
S: Average service rater per server (patient / unit time)
m: Number of servers