Plant Location

1
Facilities Design
S.S. Heragu
Industrial Engineering Department
University of Louisville
2
Chapter 11

Basic Models
for the
Location Problem
3
11.1 Introduction
11.2 Important Factors in Location
Decisions
11.3 Techniques for Discrete Space
Location Problems
- 11.3.1 Qualitative Analysis
- 11.3.2 Quantitative Analysis
- 11.3.3 Hybrid Analysis
Outline
4
11.4 Techniques for Continuous Space
Location Problems
- 11.4.1 Median Method
- 11.4.2 Contour Line Method
- 11.4.3 Gravity Method
- 11.4.4 Weiszfeld Method
11.5 Facility Location Case Study
11.6 Summary
11.7 Review Questions and Exercises
11.8 References
Outline Cont...
5
McDonalds
QSCV Philosophy
11,000 restaurants (7,000 in USA, remaining
in 50 countries)
700 seat McDonalds in Pushkin Square,
Moscow
$60 million food plant combining a bakery,
lettuce plant, meat plant, chicken plant, fish
plant and a distribution center, each owned
and operated independently at same location
6
Food taste must be the same at any
McDonald, yet food must be secured locally
Strong logistical chain, with no weak links
between
Close monitoring for logistical performance
300 in Australia
Central distribution since 1974 with the help
of F.J. Walker Foods in Sydney
Then distribution centers opened in several
cities
McDonalds cont...
7
McDonalds cont...
2000 ingredients, from 48 food plants,
shipment of 200 finished products from
suppliers to DCs, 6 million cases of food and
paper products plus 500 operating items to
restaurants across Australia
Delivery of frozen, dry and chilled foods
twice a week to each of the 300 restaurants
98% of the time within 15 minutes of
promised delivery time, 99.8% within 2 days
of order placement
No stockouts, but less inventory
8
Entities in a Supply Chain
Supplier
Supplier
Manufacturing
Plant
Manufacturing
Plant
Raw
Material(s)
Assembly
Plant
Central Distribution
Center(s)
Regional Distribution
Center(s)
Regional Distribution
Center(s)
Retail
Outlets
Retail
Outlets
9
Introduction
Design and Operation of a Supply chain

- Warehousing
- Distribution Channels
- Freight Transportation
- Freight Consolidation
- Transportation Modes
10
Introduction
Logistics management can be defined as the
management of transportation and
distribution of goods.

- facility location
- transportation
- goods handling and storage.
11
Introduction Cont...
Some of the objectives in facility location
decisions:
(1) It must first be close as possible to raw
material sources and customers;
(2) Skilled labor must be readily available in the
vicinity of a facilitys location;
(3) Taxes, property insurance, construction and
land prices must not be too high;
(4) Utilities must be readily available at a
reasonable price;
12
(5) Local , state and other government
regulations must be conducive to business;
and
(6) Business climate must be favorable and the
community must have adequate support
services and facilities such as schools,
hospitals and libraries, which are important
to employees and their families.
13
Logistics management problems can be
classified as:

(1) location problems;

(2) allocation problems; and

(3) location-allocation problems.
14
List of Factors Affecting
Location Decisions
Proximity to raw materials sources
Cost and availability of energy/utilities
Cost, availability, skill and productivity of
labor
Government regulations at the federal, state,
country and local levels
Taxes at the federal, state, county and local
levels
Insurance
Construction costs, land price
15
Location Decisions Cont...
Government and political stability
Exchange rate fluctuation
Export, import regulations, duties, and tariffs
Transportation system
Technical expertise
Environmental regulations at the federal,
state, county and local levels
Support services
16
Location Decisions Cont...
Community services, i.e. schools, hospitals,
recreation, etc.
Weather
Proximity to customers
Business climate
Competition-related factors
17

11.2
Important Factors in Location
Decisions
International
National
State-wide
Community-wide
18
11.3.1
Qualitative Analysis
Step 1: List all the factors that are important,
i.e. have an impact on the location decision.
Step 2: Assign appropriate weights (typically
between 0 and 1) to each factor based on the
relative importance of each.
Step 3: Assign a score (typically between 0 and
100) for each location with respect to each
factor identified in Step 1.

19
11.3.1
Qualitative Analysis
Step 4: Compute the weighted score for each
factor for each location by multiplying its
weight with the corresponding score (which
were assigned Steps 2 and 3, respectively)
Step 5: Compute the sum of the weighted
scores for each location and choose a
location based on these scores.
20
Example 1:
A payroll processing company has recently
won several major contracts in the midwest
region of the U.S. and central Canada and
wants to open a new, large facility to serve
these areas. Since customer service is of
utmost importance, the company wants to be
as near its customers as possible.
Preliminary investigation has shown that
Minneapolis, Winnipeg, and Springfield, Ill.,
would be the three most desirable locations
and the payroll company has to select one of
these three.
21
Example 1: Cont...
A subsequent thorough investigation of each
location with respect to eight important factors
has generated the raw scores and weights
listed in table 2. Using the location scoring
method, determine the best location for the new
payroll processing facility.
22
Solution:
Steps 1, 2, and 3 have already been completed
for us. We now need to compute the weighted
score for each location-factor pair (Step 4), and
these weighted scores and determine the
location based on these scores (Step 5).

23
Table 11.2. Factors and Weights
for Three Locations
Wt. Factors Location
Minn.Winn.Spring.
.25 Proximity to customers 95 90 65
.15 Land/construction prices 60 60 90
.15 Wage rates 70 45 60
.10 Property taxes 70 90 70
.10 Business taxes 80 90 85
.10 Commercial travel 80 65 75
24
Table 11.2. Cont...
Wt. Factors Location
Minn. Winn. Spring.
.08 Insurance costs 70 95 60
.07 Office services 90 90 80

Click here

25
Solution: Cont...
From the analysis in Table 3, it is clear that
Minneapolis would be the best location based
on the subjective information.
26
Table 11.3. Weighted Scores for
the Three Locations in Table 11.2
Weighted Score Location
Minn. Winn. Spring.
Proximity to customers 23.75 22.5 16.25
Land/construction prices 9 9 13.5
Wage rates 10.5 6.75 9
Property taxes 7 9 8.5
Business taxes 8 9 8.5
27
Table 11.3. Cont...
Weighted Score Location
Minn. Winn. Spring.
Commercial travel 8 6.5 7.5
Insurance costs 5.6 7.6 4.8
Office services 6.3 6.3 5.6
28
Solution: Cont...
Of course, as mentioned before, objective
measures must be brought into consideration
especially because the weighted scores for
Minneapolis and Winnipeg are close.
29
11.3.2
Quantitative
Analysis
30
General Transportation Model
31
Parameters
c
ij
: cost of transporting one unit from
warehouse i to customer j
a
i
: supply capacity at warehouse i
b
i
: demand at customer j
Decision Variables
x
ij
: number of units transported from
warehouse i to customer j
32
= =
=
m
i
n
j
ij ij
x c Z
1 1
Cost tion Transporta Total Minimize
i) se at warehou n restrictio (supply m 1,2,..., i ,
Subject to
1
= s
=
n
j
i ij
a x
j) market at t requiremen (demand n 1,2,..., j ,
1
= >
=
m
i
j ij
b x
ns) restrictio negativity - (non n 1,2,..., j i, , 0 = >
ij
x
33
Transportation Simplex Algorithm
Step 1: Check whether the transportation problem is balanced or
unbalanced. If balanced, go to step 2. Otherwise, transform the
unbalanced transportation problem into a balanced one by adding a
dummy plant (if the total demand exceeds the total supply) or a
dummy warehouse (if the total supply exceeds the total demand)
with a capacity or demand equal to the excess demand or excess
supply, respectively. Transform all the > and < constraints to
equalities.
Step 2: Set up a transportation tableau by creating a row
corresponding to each plant including the dummy plant and a
column corresponding to each warehouse including the dummy
warehouse. Enter the cost of transporting a unit from each plant to
each warehouse (c
ij
) in the corresponding cell (i,j). Enter 0 cost for
all the cells in the dummy row or column. Enter the supply capacity
of each plant at the end of the corresponding row and the demand at
each warehouse at the bottom of the corresponding column. Set m
and n equal to the number of rows and columns, respectively and all
x
ij
=0, i=1,2,...,m; and j=1,2,...,n.
Step 3: Construct a basic feasible solution using the Northwest corner
method.
34
Transportation Simplex Algorithm
Step 4: Set u
1
=0 and find v
j
, j=1,2,...,n and u
i
, i=1,2,...,n using
the formula u
i
+ v
j
= c
ij
for all basic variables.
Step 5: If u
i
+ v
j
- c
ij
< 0 for all nonbasic variables, then the
current basic feasible solution is optimal; stop. Otherwise,
go to step 6.
Step 6: Select the variable x
i*j*
with the most positive value u
i*
+
v
j*-
c
ij*
. Construct a closed loop consisting of horizontal and
vertical segments connecting the corresponding cell in row
i* and column j* to other basic variables. Adjust the values
of the basic variables in this closed loop so that the supply
and demand constraints of each row and column are
satisfied and the maximum possible value is added to the
cell in row i* and column j*. The variable x
i*j*
is now a basic
variable and the basic variable in the closed loop which now
takes on a value of 0 is a nonbasic variable. Go to step 4.
35
Example 2:
Seers Inc. has two manufacturing plants at
Albany and Little Rock supplying Canmore
brand refrigerators to four distribution centers
in Boston, Philadelphia, Galveston and Raleigh.
Due to an increase in demand of this brand of
refrigerators that is expected to last for several
years into the future, Seers Inc., has decided to
build another plant in Atlanta. The expected
demand at the three distribution centers and
the maximum capacity at the Albany and Little
Rock plants are given in Table 4.
36
Bost. Phil. Galv. Rale. Supply
Capacity
Albany 10 15 22 20 250
Little Rock 19 15 10 9 300
Atlanta 21 11 13 6 No limit

Demand 200 100 300 280
Table 11.4. Costs, Demand and
Supply Information
37
Table 11.5. Transportation Model
with Plant at Atlanta
Capacity
Albany 10 15 22 20 250
Little Rock 19 15 10 9 300
Atlanta 21 11 13 6 880
Demand 200 100 300 280 880

Click here for Excel formulation
Click here for LINGO formulation
38
Example 3
Consider Example 2. In addition to Atlanta,
suppose Seers, Inc., is considering another
location Pittsburgh. Determine which of the
two locations, Atlanta or Pittsburgh, is suitable
for the new plant. Seers Inc., wishes to utilize
all of the capacity available at its Albany and
Little Rock Locations
39
Capacity
Albany 10 15 22 20 250
Little Rock 19 15 10 9 300
Atlanta 21 11 13 6 330
Pittsburgh 17 8 18 12 330
Demand 200 100 300 280
Table 11.10. Costs, Demand and
Supply Information
40
Table 11.12. Transportation
Model with Plant at Pittsburgh
Capacity

Albany 10 15 22 20 250
Little Rock 19 15 10 9 300
Pittsburgh 17 8 18 12 880
Demand 200 100 300 280 880

Click here for Excel model
Click here for LINDO Model
Click here for LINGO Model
41
Min/Max Location Problem:
Location
d
11
d
12
d
21
d
22
d
1n
d
2n
d
m1
d
m2
d
mn
Site
42
11.3.3
Hybrid Analysis
Critical
Objective
Subjective
43
Hybrid Analysis Cont...
CF
ij
= 1 if location i satisfies critical factor j,
0 otherwise
OF
ij
= cost of objective factor j at location i
SF
ij
= numerical value assigned
(on scale of 0-100)
to subjective factor j for location i
w
j
= weight assigned to subjective factor
(0< w < 1)
44

OFM
i
=
max
i
OF
ij
j =1
q

(

(
(
OF
ij
j =1
q
max
i
OF
ij
j =1
q

(

(
(
min
i
OF
ij
j =1
q

(

(
(
, i = 1,2,. .. ,m
SFM
i
= w
j
SF
ij
j =1
r
, i =1,2, . .. ,m
m i
CF CF CF CF CFM
p
j
ij ip i i i
,..., 2 , 1
,
1
2 1
=
= - - - =
[
=
45
The location measure LM
i
for each location is
then calculated as:

LM
i
= CFM
i
[ o OFM
i
+ (1- o) SFM
i
]

Where o is the weight assigned to the
objective factor.

We then choose the location with the highest
location measure LM
i
46
Example 4:
Mole-Sun Brewing company is evaluating six
candidate locations-Montreal, Plattsburgh,
Ottawa, Albany, Rochester and Kingston, for
constructing a new brewery. There are two
critical, three objective and four subjective
factors that management wishes to incorporate
in its decision-making. These factors are
summarized in Table 7. The weights of the
subjective factors are also provided in the
table. Determine the best location if the
subjective factors are to be weighted 50 percent
more than the objective factors.
47
Table 11.13:
Critical, Subjective and Objective
Factor Ratings for six locations for
Mole-Sun Brewing Company, Inc.
48
Factors Location

Albany 0 1
Kingston 1 1
Montreal 1 1
Ottawa 1 0
Plattsburgh 1 1
Rochester 1 1
Critical
Water
Supply
Tax
Incentives
Table 11.13 Cont...
49
Table 11.13 Cont...
Factors Location

Albany 185 80 10
Kingston 150 100 15
Montreal 170 90 13
Ottawa 200 100 15
Plattsburgh 140 75 8
Rochester 150 75 11
Critical
Labor
Cost
Energy
Cost
Objective
Revenue
50
Location

0.3 0.4
Albany 0.5 0.9
Kingston 0.6 0.7
Montreal 0.4 0.8
Ottawa 0.5 0.4
Plattsburgh 0.9 0.9
Rochester 0.7 0.65
Table 11.13 Cont...
Factors
Ease of
Transportation
Subjective
Community
Attitude
51
Table 11.13 Cont...
Factors Location

0.25 0.05
Albany 0.6 0.7
Kingston 0.7 0.75
Montreal 0.2 0.8
Ottawa 0.4 0.8
Plattsburgh 0.9 0.55
Rochester 0.4 0.8
Support
Services
Subjective
Labor
Unionization
52
Table 11.14 Location Analysis of
Mole-Sun Brewing Company,
Inc., Using Hybrid Method
53
Location

Albany -95 0.7 0
Kingston -35 0.67 0.4
Montreal -67 0.53 0.53
Ottawa -85 0.45 0
Plattsburgh -57 0.88 0.68
Rochester -64 0.61 0.56
Table 11.14 Cont...
Factors
SFM
i
Subjective
Sum of
Obj. Factors
Critical Objective LM
i
54
11.4
Techniques For
Continuous Space Location Problems
55
11.4.1 Model for Rectilinear
Metric Problem
Consider the following notation:
f
i
= Traffic flow between new facility and
existing facility i
c
i
= Cost of transportation between new facility
and existing facility i per unit
x
i
, y
i
= Coordinate points of existing facility i
56
Model for Rectilinear Metric
Problem (Cont)
Where TC is the total distribution cost
=
+ =
m
i
i i i i
y y x x f c
1
] | | | | [ TC
The median location model is then to minimize:
57
Model for Rectilinear Metric
Problem (Cont)
Since the c
i
f
i
product is known for each facility,
it can be thought of as a weight w
i

corresponding to facility i.

= =
+ =
m
i
m
i
i i i i
y y w x x w
1 1
] | | [ ] | | [ TC Minimize
58
Median Method:
Step 1: List the existing facilities in non-
decreasing order of the x coordinates.
Step 2: Find the j
th
x coordinate in the list at
which the cumulative weight equals or
exceeds half the total weight for the first
time, i.e.,

= =
= =
> <
j
i
m
i
i
i
j
i
m
i
i
i
w
w
w
w
1 1
1
1 1
2
and
2
59
Median Method (Cont)
Step 3: List the existing facilities in non-
decreasing order of the y coordinates.
Step 4: Find the k
th
y coordinate in the list
(created in Step 3) at which the cumulative
weight equals or exceeds half the total
weight for the first time, i.e.,

= =
= =
> <
k
i
m
i
i
i
k
i
m
i
i
i
w
w
w
w
1 1
1
1 1
2
and
2
60
Median Method (Cont)
Step 4: Cont... The optimal location of the new
facility is given by the j
th
x coordinate and the
k
th
y coordinate identified in Steps 2 and 4,
respectively.
61
Notes
1. It can be shown that any other x or y
coordinate will not be that of the optimal
locations coordinates
2. The algorithm determines the x and y
coordinates of the facilitys optimal location
separately
3. These coordinates could coincide with the x
and y coordinates of two different existing
facilities or possibly one existing facility
62
Example 5:
Two high speed copiers are to be located in the
fifth floor of an office complex which houses
four departments of the Social Security
Administration. Coordinates of the centroid of
each department as well as the average number
of trips made per day between each department
and the copiers yet-to-be-determined location
are known and given in Table 9 below. Assume
that travel originates and ends at the centroid
of each department. Determine the optimal
location, i.e., x, y coordinates, for the copiers.
63
Table 11.15 Centroid Coordinates
and Average Number of Trips to
Copiers
64
Table 11.15
Dept. Coordinates Average number of
# x y daily trips to copiers
1 10 2 6
2 10 10 10
3 8 6 8
4 12 5 4
65
Solution:
Using the median method, we obtain the
following solution:
Step 1:
Dept. x coordinates in Weights Cumulative

# non-decreasing order Weights
3 8 8 8
1 10 6 14
2 10 10 24
4 12 4 28
66
Solution:
Step 2: Since the second x coordinate, namely
10, in the above list is where the cumulative
weight equals half the total weight of 28/2 =
14, the optimal x coordinate is 10.

67
Solution:
Step 3:
Dept. y coordinates in Weights Cumulative

# non-decreasing order Weights
1 2 6 6
4 5 4 10
3 6 8 18
2 10 10 28
68
Solution:
Step 4: Since the third y coordinates in the
above list is where the cumulative weight
exceeds half the total weight of 28/2 = 14, the
optimal y coordinate is 6. Thus, the optimal
coordinates of the new facility are (10, 6).
69
Equivalent Linear Model for the
Rectilinear Distance, Single-
Facility Location Problem
Parameters
f
i
= Traffic flow between new facility and
existing facility i
c
i
= Unit transportation cost between new
facility and existing facility i
x
i
, y
i
= Coordinate points of existing facility i
Decision Variables
x, y = Optimal coordinates of the new facility
TC = Total distribution cost
70

The median location model is then to

= =
+ =
m
i
m
i
i i i i
y y w x x w
1 1
] | | [ ] | | [ TC Minimize
71

Since the c
i
f
i
product is known for each facility,
it can be thought of as a weight w
i

corresponding to facility i. The previous
equation can now be rewritten as follows

= =
+ =
m
i
m
i
i i i i
y y w x x w
1 1
] | | [ ] | | [ TC Minimize
72

i i
i
i i
i
i
i i
i
i i
i
x x x x
x x x x
x x
x x x x
x
x x x x
x
+
+
+
=
+ =
s >
s
=
>
=
) (
and
0, or 0 ) ( whether that, observe can We
otherwise 0
0 if ) (
otherwise 0
0 if ) (
Define
73
i i
i
i i
i
i i
y y y y
y y y y
y y
+
+
+
=
+ =
) (
and
yields , of definition similar A
74
=
+ +
+ + +
n
i
i i i i
i
y y x x w
1
) ( Minimize
Model Linear d Transforme
sign in ed unrestrict , ,
n 1,2,..., i 0, , , ,
n 1,2,..., i , - ) (
n 1,2,..., i , - ) (
Subject to
y x
y y x x
y y y y
x x x x
i i i i
i i
i
i i
i
= >
= =
= =
+ +
+
+
75
11.4.2
Contour Line Method
76
Step 1: Draw a vertical line through the x
coordinate and a horizontal line through the y
coordinate of each facility
Step 2: Label each vertical line V
i
, i=1, 2, ..., p
and horizontal line H
j
, j=1, 2, ..., q where V
i
=
the sum of weights of facilities whose x
coordinates fall on vertical line i and where
H
j
= sum of weights of facilities whose y
coordinates fall on horizontal line j
Algorithm for Drawing Contour
Lines:
77
m
i=1
Step 3: Set i = j = 1; N
0
= D
0
= w
i

Step 4: Set N
i
= N
i-1
+ 2V
i
and D
j
= D
j-1
+ 2H
j
.
Increment i = i + 1 and j = j + 1
Step 5: If i < p or j < q, go to Step 4. Otherwise,
set i = j = 0 and determine S
ij
, the slope of
contour lines through the region bounded by
vertical lines i and i + 1 and horizontal line j
and j + 1 using the equation S
ij
= -N
i
/D
j
.
Increment i = i + 1 and j = j + 1
Lines (Cont)

78
Step 6: If i < p or j < q, go to Step 5. Otherwise
select any point (x, y) and draw a contour line
with slope S
ij
in the region [i, j] in which (x, y)
appears so that the line touches the
boundary of this line. From one of the end
points of this line, draw another contour line
through the adjacent region with the
corresponding slope
Step 7: Repeat this until you get a contour line
ending at point (x, y). We now have a region
bounded by contour lines with (x, y) on the
boundary of the region

Lines:
79
1. The number of vertical and horizontal lines
need not be equal
2. The N
i
and D
j
as computed in Steps 3 and 4
correspond to the numerator and
denominator, respectively of the slope
equation of any contour line through the
region bounded by the vertical lines i and i +
1 and horizontal lines j and j + 1

Notes on Algorithm for Drawing
Contour Lines
80
Contour Lines (Cont)
y y w x x w TC
y y x x
i
m
i
i i
m
i
i
+ =
= =

= = 1 1
, i.e., y), (x, point some at located is
facility new hen the function w objective he Consider t
81
By noting that the V
i
s and H
j
s calculated in
Step 2 of the algorithm correspond to the sum
of the weights of facilities whose x, y
coordinates are equal to the x, y coordinates,
respectively of the i
th
, j
th
distinct lines and that
we have p, q such coordinates or lines (p < m, q
< m), the previous equation can be written as
follows
y y H x x V TC
i
q
i
i i
p
i
i
+ =

= = 1 1
82
Suppose that x is between the s
th
and s+1
th

(distinct) x coordinates or vertical lines (since
we have drawn vertical lines through these
coordinates in Step 1). Similarly, let y be
between the t
th
and t+1
th
vertical lines. Then

TC = V
i
(
i=1
s
x x
i
) + V
i
i=s+1
p
(x
i
x)
+ H
i
(
i =1
t
y y
i
) + H
i
i=t +1
q
(y
i
y)
83
Rearranging the variable and constant terms in
the above equation, we get

i
q
t i
i i
t
i
i i
p
s i
i i
s
i
i
t
i
q
t i
i i
s
i
p
s i
i i
y H y H x V x V
y H H x V V TC

+ = = + = =
= + = = + =
+ +
(
+
(
=
1 1 1 1
1 1 1 1

84
The last four terms in the previous equation
can be substituted by another constant term
c and the coefficients of x can be rewritten
as follows

= = = + =
+ =
s
i
s
i
i i
s
i
p
s i
i i
V V V V TC
1 1 1 1
Notice that we have only added and
subtracted the term
=
s
i
i
V
1
85
Since it is clear from Step 2 that
the coefficient of x can be rewritten as
,
1 1

= =
=
m
i
i
s
i
i
w V

= =
= = = + = =
=
=
(
+
s
i
m
i
i i
s
i
p
i
i i
s
i
p
s i
i
s
i
i i
w V
V V V V V
1 1
1 1 1 1 1
2
2 2
Similarly, the coefficient of y is

= =
t
i
m
i
i i
w H
1 1
2
86
c y w H x w V
t
i
m
i
i i
s
i
m
i
i i
+
(
+
(
=

= = = = 1 1 1 1
2 2 TC Thus,
The N
i
computation in Step 4 is in fact
calculation of the coefficient of x as shown
above. Note that N
i
=N
i-1
+2V
i
. Making the
substitution for N
i-1
, we get N
i
=N
i-2
+2V
i-1
+2V
i
Repeating the same procedure of making
substitutions for N
i-2
, N
i-3
, ..., we get

N
i
=N
0
+2V
1
+2V
2
+...+2V
i-1
+2V
1
=

= =
+
i
k
k
m
i
i
V w
1 1
2
87
Similarly, it can be verified that

= =
+ =
i
k
k
m
i
i i
H w D
1 1
2
) (
as rewritten be can which

2 2 TC Thus,
1 1 1 1
c TC x
D
N
y
c y D x N
c y w H x w V
t
s
t s
t
i
m
i
i i
s
i
m
i
i i
+ =
+ + =
+
(
+
(
=

= = = =
88
The above expression for the total cost function
at x, y or in fact, any other point in the region
[s, t] has the form y= mx + c, where the slope
m = -N
s
/D
t
. This is exactly how the slopes are
computed in Step 5 of the algorithm
89
3. The lines V
0
, V
p+1
and H
0
, H
q+1
are required for
defining the exterior regions [0, j], [p, j], j =
1, 2, ..., p, respectively)
4. Once we have determined the slopes of all
regions, the user may choose any point (x, y)
other than a point which minimizes the
objective function and draw a series of
contour lines in order to get a region which
contains points, i.e. facility locations,
yielding as good or better objective function
values than (x, y)
90
Example 6:
Consider Example 5. Suppose that the weight
of facility 2 is not 10, but 20. Applying the
median method, it can be verified that the
optimal location is (10, 10) - the centroid of
department 2, where immovable structures
exist. It is now desired to find a feasible and
near-optimal location using the contour line
method.
91
Solution:
The contour line method is illustrated using
the figure below
92
Solution:
Step 1: The vertical and horizontal lines V
1
, V
2
,
V
2
and H
1
, H
2
, H
2
, H
4
are drawn as shown. In
addition to these lines, we also draw line V
0
, V
4

and H
0
, H
5
so that the exterior regions can be
identified
Step 2: The weights V
1
, V
2
, V
2
, H
1
, H
2
, H
2
, H
4
are
calculated by adding the weights of the points
that fall on the respective lines. Note that for
this example, p=3, and q=4
93
Solution:
Step 3: Since
set N
0
= D
0
= -38

Step 4: Set
N
1
= -38 + 2(8) = -22; D
1
= -38 + 2(6) = -26;
N
2
= -22 + 2(26) = 30; D
2
= -26 + 2(4) = -18;
N
3
= 30 + 2(4) = 38; D
3
= -18 + 2(8) = -2;
D
4
= -2 + 2(20) = 38;
(These values are entered at the bottom of each
column and left of each row in figure 1)
38
4
1
=
= i
i
w
94
Solution:
Step 5: Compute the slope of each region.
S
00
= -(-38/-38) = -1; S
14
= -(-22/38) = 0.58;
S
01
= -(-38/-26) = -1.46; S
20
= -(30/-38) = 0.79;
S
02
= -(-38/-18) = -2.11; S
21
= -(30/-26) = 1.15;
S
03
= -(-38/-2) = -19; S
22
= -(30/-18) = 1.67;
S
04
= -(-38/38) = 1; S
23
= -(30/-2) = 15;
S
10
= -(-22/-38) = -0.58; S
24
= -(30/38) = -0.79;
S
11
= -(-22/-26) = -0.85; S
30
= -(38/-38) = 1;
S
12
= -(-22/-18) = -1.22; S
31
= -(38/-26) = 1.46;
S
13
= -(-22/-2) = -11; S
32
= -(38/-18) = 2.11;
95
Solution:
Step 5: Compute the slope of each region.

S
33
= -(38/-2) = 19;
S
34
= -(38/38) = -1;

(The above slope values are shown inside each
region.)

96
Solution:
Step 6: When we draw contour lines
through point (9, 10), we get the region
shown in the previous figure.

Since the copiers cannot be placed at the
(10, 10) location, we drew contour lines
through another nearby point (9, 10).
Locating anywhere possible within this
region give us a feasible, near-optimal
solution.
97
11.4.3
Single-facility Location Problem with
Squared Euclidean Distances
98
La Quinta Motor Inns
Moderately priced, oriented towards business
travelers
Headquartered in San Antonio Texas
Site selection - an important decision
Regression Model based on location
characteristics classified as:
- Competitive, Demand Generators,
Demographic, Market Awareness, and
Physical
99
La Quinta Motor Inns (Cont)
Major Profitability Factors - Market awareness,
hotel space, local population, low
unemployment, accessibility to downtown office
space, traffic count, college students, presence
of military base, median income, competitive
rates
100
Gravity Method:
As before, we substitute w
i
= f
i
c
i
, i = 1, 2, ..., m
and rewrite the objective function as

Minimize TC = c
i
f
i
(x
i
x )
2
+ (y
i
y )
2
| |
i =1
m
2
1 1
2
) ( ) ( TC Minimize y y w x x w
i
m
i
i
m
i
i i
+ =

= =
The cost function is
101
Since the objective function can be shown to
be convex, partially differentiating TC with
respect to x and y, setting the resulting two
equations to 0 and solving for x, y provides the
optimal location of the new facility
Gravity Method (Cont)

= =
= =
=
= =
c
c
m
1 i
m
1 i
m
1 i
m
1 i

0 2 2
x
TC
i i i
i i i
w x w x
x w x w
102
Similarly,
Gravity Method (Cont)

= =
= =
=
= =
c
c
m
1 i
m
1 i
m
1 i
m
1 i

0 2 2
y
TC
i i i
i i i
w y w y
y w y w
Thus, the optimal locations x and y are simply
the weighted averages of the x and y coordinates
of the existing facilities
103
Example 7:
Consider Example 5. Suppose the distance
metric to be used is squared Euclidean.
Determine the optimal location of the new
facility using the gravity method.
104
Solution - Table 11.16
Department i x
i
y
i
w
i
w
i
x
i
w
i
y
i
1 10 2 6 60 12
2 10 10 10 100 100
3 8 6 8 64 48
4 12 5 4 48 20
Total 28 272 180
4 . 6 28 180 and 7 . 9 28 272
that conclude we 10, table From
= = = = y x
105
Example 6. Cont...
If this location is not feasible, we only need to
find another point which has the nearest
Euclidean distance to (9.7, 6.4) and is a feasible
location for the new facility and locate the
copiers there
106
11.4.4
Weiszfeld
Method
107
Weiszfeld Method:
As before, substituting w
i
=c
i
f
i
and taking the
derivative of TC with respect to x and y yields
) y (y ) x (x f c TC Minimize
m
1 i
i i i i
2 2
=
+ =
The objective function for the single facility
location problem with Euclidean distance can
be written as:
108
Weiszfeld Method:
| |
=
=
=
=
+
+
=
+

=
c
c
m
1 i
i i
i
m
1 i
i i
i i
m
1 i
i i
i i
0
) y (y ) x (x
x w

) y (y ) x (x
x w

) y (y ) x (x
) x 2(x w
2
1

x
TC
2 2
2 2
2 2
109
Weiszfeld Method:

) y (y ) x (x
w
) y (y ) x (x
x w
x
m
1 i
i i
i
m
1 i
i i
i i
2 2
2 2
=
=
+
+
=
110
Weiszfeld Method:
| |
=
=
=
=
+
+
=
+

=
c
c
m
1 i
i i
i
m
1 i
i i
i i
m
1 i
i i
i i
0
) y (y ) x (x
y w

) y (y ) x (x
y w

) y (y ) x (x
) y 2(y w
2
1

y
TC
2 2
2 2
2 2
111
Weiszfeld Method:
=
=
+
+
=
m
1 i
i i
i
m
1 i
i i
i i
2 2
2 2
) y (y ) x (x
w
) y (y ) x (x
y w
y
112
Weiszfeld Method:
Step 0: Set iteration counter k = 1;
=
=
=
=
= =
m
m
m
m
1 i
i
1 i
i i
k
1 i
i
1 i
i i
k
w
y w
y ;
w
x w
x
113
Weiszfeld Method:
Step 1: Set

Step 2: If x
k+1
= x
k
and y
k+1
= y
k
, Stop. Otherwise,
set k = k + 1 and go to Step 1

( ) ( )
( ) ( )
=
=
+
+
+
=
m
i
i i
i
m
i
i i
i i
k
y y x x
w
y y x x
x w
x
1
2 2
1
2 2
1
( ) ( )
( ) ( )
=
=
+
+
+
=
m
i
i i
i
m
i
i i
i i
k
y y x x
w
y y x x
y w
y
1
2 2
1
2 2
1
114
Example 8:
Consider Example 6. Assuming the distance
metric to be used is Euclidean, determine the
optimal location of the new facility using the
Weiszfeld method. Data for this problem is
shown in Table 11.
115
Table 11.17
Coordinates and weights for
4 departments
116
Table 11.17:
Departments # x
i
y
i
w
i
1 10 2 6
2 10 10 20
3 8 6 8
4 12 5 4
117
Solution:
Using the gravity method, the initial seed can
be shown to be (9.8, 7.4). With this as the
starting solution, we can apply Step 1 of the
Weiszfeld method repeatedly until we find that
two consecutive x, y values are equal.
118
Summary: Methods for Single-
Facility, Continuous Space
Location Problems
Problem
- Rectilinear
- Squared
Euclidean
- Euclidean
Method
- Median
- Gravity

- Weiszfeld
119
Facility Location Case Study
See Section 11.5

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