Cadena de suministro Mtro. William H. Delano Frier
Module 4 Location Strategics
Facility Location Location Planning Models Qualitative Quantitative
Location Planning The need of a Location Planning Influence based on company s organization and control Reasons to change Effectiveness and efficiency of conversion process Costs Available labor / Unions Production Volume / Capacity Distance to Suppliers and customers
Decision Long term decisions Not easily turned back They affect fixed and variable costs Transportation Taxes, salaries, rent Objective: Maximize benefit for the company
Decisions / Service Investment Approach Cost varies between plants The Facility is an important source of investment Directly affects customer contact Affects business volume
Decisions / Industry Cost Approach Income varies little between plants The location directly impacts the costs Shipments, production Cost varies between plants
Decision Sequence Country Region /Community Location
Alternative Evaluation / Methods Preliminary study Detailed Analysis Qualitative Factors Quantitative Breake-even point Gravity Center Minisum Minimax Transportation
Preliminary Study Factors / Country Government Culture and Economy Market Labor availability, attitude, productivity, costs Infrastructure Exchange Rate
Preliminary Study Factors / Region Objectives / Business Weather and Environment Community acceptance Labor Energy Costs Government Closeness to Suppliers and Customers Land and Building William Delano Frier
Preliminary Study Factors / Location Size Cost Transportation Services Closeness to services Environmental Impact
Detailed Analysis Qualitative Models System based on the factor evaluation Explains why a destintation is preferred Uses measurement factors with an adjustable weight for each situation Decision is taken by consensus
Factor Evaluation Factors Relative Weight Score Evaluation Advantages granted by the state 4 8 32 Labor ability 3 2 6 Distance to customers 3 6 18 Distance to suppliers 5 2 10 Availability and water quality 1 3 3 Community acceptance 5 4 20 Education System Qualoty 4 1 4 Transportation System 3 10 30 Weather 2 7 14 Energetics 2 6 12 149
Detailed Analysis Quantitative Models Break-even Point Analysis Identifies the operation level needed in order to recover all the costs. Depends on: Sales Price Operations Cost Structure PE= Fixed Costs Incomes/unit - variable cost/unit
Break-even point analysis Graphical view of the relations between: Production Volumes Income Costs Fixed: Do not depend on the production level Variable : Vary proportionally based on volume produced
Break-even Point Analysis High FC Low VC Location A Total Income Profit CT High VC Low FC Location B Total Income CT $ Losses CV $ Losses CV CF CF 0 V BE Volume Produced V BE Volume Produced
Break-even Point We are considering buiding a new plant and are looking at 3 locations: Texcoco, Mexico City and Toluca The fixed costs / year are: $30k, $60k, & $110k respectively Variable costs / case are: $75, $45, & $25 respectively Price / case $120 Which is the best location for 2000 units?
Break-even Point Data Texcoco D.F. Toluca Fixed Costs 30000 60000 110000 Variable Costs 75 45 25 Volume 2000 Results Breakeven Point Units Dollars Texcoco vs DF 1000 105000 Texcoco vs Toluca 1600 150000 2500 172500 Volume Analysis @2000 units Texcoco D.F. Toluca Total Cost $ 180,000 $ 150,000 $ 160,000
Break-even Point Cost-volume analysis 450000 400000 350000 300000 250000 $ 200000 150000 100000 50000 0 0 1000 2000 3000 4000 5000 6000 Texcoco D.F Units Toluca Texcoco D.F. Toluca
Center of Gravity Locates an optimal point to provide service to multiple destinations Considers : Existing coordinates Example: Markets, suppliers Shipping volume Distance traveled (or cost) The cost/unit/km remains constant
Center of Gravity / Steps Obtain the coordinates from available web based information Google Maps, INEGI, other Calculate coordinates X&Y for the center of gravity Determine center of gravity coordinates Minimize distribution costs
Center of Gravity / Methodology Coordinate X C Coordinate Y C x y i i d i d i ix W iy W i W i i W i d ix = coordinate x of location i W i = Number of transactions of / for each location d iy = Coordinate Y of location i
Center of Gravity.. Example
Minisum Location Model Rectilinear distances in right angles Considers the shipping volume Considers existing coordinates Movements are made: East - West, North - South Diagonal movements are not considered
Minisum Location Model Methodology Calculate the median of the total number of shipments / movements Starting at the origin and traveling through the x axis, find the value of coordinate x where the number of total shipments is >= to M Starting at the origin and traveling through the y axis, find the value of coordinate y where the number of total shipments >= to M
Minisum Location Model Exercise Western University has purchased video equipment that will be used by 6 campus buildings The location of the 6 buildings and number of people that will use the equipment is: School Location People Administration (5,13) 31 Education (8,18) 28 Engineering (0,0) 19 Humanities (6,3) 53 Laws (14,20) 32 Sciences (10,12) 41
Minisum Location Model 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Minisum Location Model
Minisum Location Model Exercise 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 6,12 óptimo 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Determining Cost Transportation Cost n CiLiD i 1 i C i = Cost of moving a shipment / person one distance unit L i = Quantity of shipments / people moved D i = Distance between location i and the new plant D x i xi + y-yi
Total Movement Cost Median CT 6 CiLi i 1 ( x xi y yi ) i=1 1* 31 * (abs(6-5) + abs(12-13)) = $62 i=2 1* 28 * (abs(6-8) + abs(12-18)) = $224 i=3 1* 19 * (abs(6-0) + abs(12-0)) = $342 i=4 1* 53 * (abs(6-6) + abs(12-3)) = $477 i=5 1* 32 * (abs(6-14) + abs(12-20)) = $512 i=6 1* 41 * (abs(6-10) + abs(12-12)) = $164 Total $1781
Minimax Location Model
Minimax Location Model Methodology Values to be defined:
Minimax Location Model Methodology All points in the line that join (x1,y1) and (x2,y2) are optimal. The optimal solution to the problem can be expressed as follows: x* x 1 y* y 1 (1 ) x 2 (1 ) y 2 0 1 El The valor optimal óptimo value c de laof función the objective objetivofunction es 5 is c5/2 2
Minimax Location Model Example.. 6 locations with the following coordinates: (5,13), (0,0), (14,20), (8,18), (6,3), (10,12). Objective: Locate a new building that minimizes the maximum distance to the current locations
Minimax Location Model Exercise 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1.5,15.5 Todos los puntos de la recta son óptimos 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 12,5
Lineal Programming Transportation Method Finite number of destinations and sources Volume Cost Origin-Destination Minimizes the Total Transportation Cost The final result determines: Optimal quantity to be shipped from source i to destination j
Global Distribution of Auto-Parts (VW)