Location, Logistics, and

Distribution
Chapter 14
McGraw­Hill/Irwin         Copyright © 2013 by The McGraw­Hill Companies, Inc. All rights reserved.
Learning Objectives
1. Describe what a third-party logistics
provider is.
2. Assess the major issues that need to be
considered in locating a plant or warehouse
facility.
3. Learn how a factor-rating system can be
used to narrow potential location sites.
4. Set up the transportation model to analyze
location problems and how to use Excel
Solver to find solutions to these models.
5. Understand the centroid method for locating
entities such as cell phone communication
towers. 14­2
Logistics

 Logistics - the art and science of obtaining,

producing, and distributing material and
product in the proper place and in the proper
quantities
 International logistics - managing these
functions when the movement is on a global
scale
 Third-party logistics company - an outside
company used to manage all or part of another
company’s logistics functions
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 Logistics Decisions

Multimodal
solutions
are the
norm

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Warehouse Activities

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Facility Location Issues

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Facility Location Issues

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Plant Location Methods

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 Factor-Rating System
 Most widely used Example – refinery location factors
 List of factors is developed
 Range of possible points
assigned to each factor
 Each site is rated against
each factor
 The sums of assigned
points for each site are
computed
 The site with the most
points is selected
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Linear Programming –
Transportation Method
 Transportation method is a special linear
programming method
 Seeks to minimize costs of shipping n units to m
destinations or its seeks to maximize profit of
shipping n units to m destinations

5
1
A 7
9
8 2
B 4
6

3
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Example 14.1

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Example 14.1

Excel: US Pharmaceutical
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Centroid Method
 Used for locating single
facilities that considers
existing facilities, the
distances between them,
and the volumes of goods to
be shipped between them
 Assumes inbound and
outbound transportation costs
are equal
 Does not include special Cx =X coordinate of centroid
shipping costs for less than a
full load Cy =Y coordinate of centroid
 This methodology involves dix =X coordinate of the ith
formulas used to compute location
the coordinates of the two- diy – Y coordinate of the ith
dimensional point that meets location
the distance and volume Vi – volume of goods moved to or
criteria stated above 14­13
from the i location
th
Example 14.2

Excel: Centroid
Calculation

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Service Facility Location

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