Network creation and physical distribution

Network creation and physical distribution

1. Models for location
There are two different approaches to location decisions:
Infinite set approach
•There are no restrictions on, site availability
Feasible set approach
•Choose the best out of the feasible sites
1
2
Dr. Mehdi Safaei

2. Feasible set approach
Identifyavailablesites,comparethem,andfindthebest.
Models of feasible set
approach
Costing models
Scoring models
Dr. Mehdi Safaei

3. Feasible set approach-Costing Models
Calculatesthetotalcostofworkingfromeachlocation
andfindsthecheapest.
Asmanyofthecostsofrunningafacilityarefixedregardlessofits
location,wecanconcentrateonvariablecosts
Total variable cost = operating cost +inward transport cost + outward transport cost
Facility is near
the customers
Low outward
transport costs
Facility is near
the supplies
Low inward
transport costs
Dr. Mehdi Safaei

4. Feasible set approach-Costing Models
Thedifficultiesofthismethod
wedonotknowthereal costsbeforeweactuallyopenafacility
Accuratecostcalculationwasimportantforthecompromisemethod.Buthere,you
don'tneedtoknowtheexactcost.
Transport costs
depend on the
distance
traveled
But in real-world situations, other
factors also have an impact
Type of vehicles
Frequency of
journeys
Routes taken
Ways of combining
customer orders
And so on.
Dr. Mehdi Safaei

5. Feasible set approach-Costing Models
Thenwecanusethissimplemeasuretoidentifythelocation
withthelowesttotalvalueof:
load ×rectilinear distance moved.
Dr. Mehdi Safaei

6. Feasible set approach-Costing Models
Practice
Bannerman Industries wants to build a warehouse to serve its seven core
customers (1, 2, 3, 4, 5, 6, 7)
Warehouse: (A, B, C)
Weeklydemand
Customers located at coordinates:
Customer 1=
(100, 110)
Customer 2=
(120,130)
Customer 3=
(220, 150)
Customer 4=
(180, 210)
Customer 5=
(140, 170)
Customer 6=
(130, 180)
Customer 7=
(170, 80)
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12
11
8
20
5
9
(100, 110)
(120,130)
(220, 150)
(180, 210)
(140, 170)
(130, 180)
(170, 80)Alternative locations for warehouse:
A=(120, 90)
B=(160, 170)
C=(180,130)
(120, 90)
(160, 170)
(180,130)
Which site is recommended to select warehouses to
reduce costs?
Dr. Mehdi Safaei

7. Feasible set approach-Costing Models
Solution
Then the distance from A to customer 1 =
difference in X co-ordinates + difference in Y co-ordinates
= (120–100) + (110–90) = 40
Dr. Mehdi Safaei

8. Weaknesses of Costing Model
Difficulty of finding accurate costs
Customer locations not being
known in advance
Order sizes not known in advance
Dr. Mehdi Safaei

9. Feasible set approach
Models of feasible set
approach
Costing models
Scoring models
Dr. Mehdi Safaei

10. Feasible set approach-Scoring models
Focusonthedifferentfactorsthatareimportantfor
locations,butwhich cannoteasilybecostedor
quantified
An attractive lifestyle in one location
Benefitto
employees
Assistinthe
hiringprocess
Andsoon
It is impossible to measure of lifestyle
Dr. Mehdi Safaei

11. Important factors in scoring model for location decision
Important factors in
scoring model
In the region and
country
In the city or area
In the site
Dr. Mehdi Safaei

12. Important factors in scoring model for location decision
Intheregionandcountry
Availability, skills and productivity of workforce
Local and national government policies, rules, grants and viewpoint
Political stability
Economic strength and trends
Climate and attractiveness of locations
Quality of life –including health, education, and culture
Location of major suppliers and markets
Infrastructure –Transportation systems, communications and …
Dr. Mehdi Safaei

13. Important factors in scoring model for location decision
Inthecityorarea
Population and population trends
Availability of sites and development issues
Number, size and location of competitors
Local rules and restrictions on operations
Community feelings
Local services, including transport and utilities.
Dr. Mehdi Safaei

14. Important factors in scoring model for location decision
Inthesite
Amount of traffic
Easy to access and parking
Access to public transport
Organizations working nearby
Total costs of the site
Potential for expansion or changes
Access to retail shops
Visibility of site
Dr. Mehdi Safaei

15. Feasible set approach-Scoring models
Therearefive
stepsinthe
scoringmodels
Decide the relevant factors in a decision
Step 1
Give each factor a maximum possible score that
shows its importance
Step 2
Consider each location in turn and give an actual
score for each factor, up to this maximum
Step 3
Add the total score for each location and find the
highest
Step 4
Discuss the result and make a final decision
Step 5
Dr. Mehdi Safaei

16. Scoring models-Practice
Williams-Proctorconsidered
5
alternativelocationsforanew
warehousefortheirmusicdistributionbusiness.Aftermany
discussionstheycompiledalistofimportantfactors,their
maximumscores,andactualscoresforeachsite.
Whatistherelativeimportanceofeachfactor?
Whichsitewouldyourecommend?
Dr. Mehdi Safaei

17. Scoring models-Practice
Dr. Mehdi Safaei

18. Network Models
Postcode of
starting and
finishing locations
Thereare,however,manydatabasesofroad
networksthatautomaticallyfindthebestroutes
betweentwopoints
The package finds the
shortest, fastest or
cheapest route
Dr. Mehdi Safaei

19. Network Models-Single median problem
Therearecitieswithdemands.
Locateawarehouse
Itmustbeinatown
Acommonmeasureisaveragetraveldistanceor
time,andfindingtheshortestiscalledthe
“singlemedianproblem”
Route planning software
, or
using some Alternative measurement
methods
such as the
straight-line distance
Dr. Mehdi Safaei

20. Network Models-Single median problem
AnkaraIzmirIstanbul
Distance
448 km477km0Istanbul
593 km0477 kmIzmir
0593 km448 kmAnkara
AnkaraIzmirIstanbul
Demand
150 ton100 ton0Istanbul
97 ton075 tonIzmir
0150 ton200 tonAnkara
AnkaraIzmirIstanbul
4626967200125375Istanbul
33600136650118600Izmir
1785504480071550Ankara
Weight-Distances Matrix=
Then we add these for each
town, and find the lowest overall
value
258419248650315525
238844
288850
294900
553319537500554369Final Summation
Dr. Mehdi Safaei

21. Network Models-Single median problem
Dr. Mehdi Safaei

22. Network Models-Single median problem-Example
IanBrucedeliversgoodstoeighttowns,withlocationsanddemandsas
showninFigurebelow.Hewantstofindthelocationforalogisticscenter
thatminimizestheaveragedeliverytimetothesetowns.Whereshouldhe
startlooking?
Map of Ian Bruce’s Problem
Dr. Mehdi Safaei

23. Network Models-Single median problem-Example
Dr. Mehdi Safaei