Chapter
13 Supply Chain Logistic Networks
1. Explain how location decisions affect processes and departments throughout the organization.
a. Marketing:
b. Human resources:
c. Accounting and finance:
d. Operations:
e. International operations:
1. Factors Affecting Location Decisions
Factors must meet what two conditions?
•
•
1. Dominant factors in manufacturing
a.
b.
c.
d.
e.
f.
g.
h
2. Dominant factors in services
a.
b.
c.
d.
2. Load-Distance Method
The objective of the Load-Distance Method is to:
1. Distance Measures
a. Euclidean distance is the straight-line distance, or shortest possible path, between two
points.
•
( ) ( )
2
*
2
*yyxxd iii −+−=
where di = distance between customer i and the proposed facility
xi = x-coordinate of customer i
yi = y-coordinate of customer i
*
x
= x-coordinate of proposed facility
*
y
= y-coordinate of proposed facility
b. Rectilinear distance measures the distance between two points with a series of 90-degree
turns, as along city blocks.
• di = |xi – x*| + |yi – y*|
2. Calculating a load-distance score
a. The formula for the ld score
=
iii dlld
b. Application 13.1: Distance Measures
What is the distance between (20, 10) and (80, 60)?
Euclidean distance =
Rectilinear distance =
c. Application 13.2: Load-Distance Method
Management is investigating which location would be best to position its new plant
relative to two suppliers (located in Cleveland and Toledo) and three market areas
(represented by Cincinnati, Dayton, and Lima). Management has limited the search for
this plant to those five locations. The following information has been collected. Which is
best, assuming rectilinear distance?
Location
x, y coordinates
Trips/year
Cincinnati
(11,6)
15
Dayton
(6,10)
20
Cleveland
(14,12)
30
Toledo
(9,12)
25
Lima
(13,8)
40
Total load
distance
15( ) + 20( ) + 30( ) + 25( ) + 40( )
=
15( ) + 20( ) + 30( ) + 25( ) + 40( )
=
15( ) + 20( ) + 30( ) + 25( ) + 40( )
=
15( ) + 20( ) + 30( ) + 25( ) + 40( )
=
15( ) + 20( ) + 30( ) + 25( ) + 40( )
=
3. Center of gravity
a. The formulas are:
=
ii
iii
l
xl
x
and
=
ii
iii
l
yl
y
b. Application 13.3: Center of Gravity
A firm wishes to find a central location for its service. Business forecasts indicate travel
from the central location to New York City on 20 occasions per year. Similarly, there will
be 15 trips to Boston, and 30 trips to New Orleans. The x,y-coordinates are (11.0, 8.5) for
New York, (12.0, 9.5) for Boston, and (4.0, 1.5) for New Orleans. What is the center of
gravity of the three demand points?
3. Break-Even Analysis
• Used to:
o Basic Steps
▪
▪
▪
▪
• Application 13.4: Break-Even Analysis. By chance, the Atlantic City Community Chest has
to close temporarily for general repairs. They are considering four temporary office
locations:
Property Address
Move-in Costs
Monthly Rent
Boardwalk
$400
$50
Marvin Gardens
$280
$24
St. Charles Place
$360
$10
Baltic Avenue
$60
$60
Use the graph below to determine for what length of lease each location would be
favored? (Hint: In this problem, lease length is analogous to volume).
4. Transportation Method
• When facilities are interactive, the location of a new facility affects the shipping pattern of
other facilities in the network. Three major issues:
o Location:
o Allocation:
o Capacity:
• Transportation method for location
1. Setting up the tableau
2. Dummy plants and warehouse
3. Finding a solution
5. Geographic Information Systems and Location Decisions
• Describe geographical information system (GIS)
1. How is GIS used to identify locations and demographic customer segments?
a.
b.
2. How is GIS method used for locating multiple facilities?
a. Five-step framework
•
•
•
•
•
6. Inventory Placement
• Why is inventory placement a fundamental supply chain design decision:
• Two extreme positions:
o Centralized placement is defined as:
▪ Advantages:
o Forward placement is defined as:
▪ Advantages:
7. A Systematic Location Selection Process
• Are quantitative or qualitative factors considered?
• Process of selecting a new facility
o Step 1:
o Step 2:
o Step 3:
o Step 4:
o Step 5:
o Step 6:
• Application 13.5: Preference Matrix
Management is considering three potential locations for a new cookie factory. They have
assigned scores shown below to the relevant factors on a 0 to 10 basis (10 is best). Using
the preference matrix, which location would be preferred?
Location
Factor
Weight
The
Neighborhood
Sesame
Street
Ronald’s
Playhouse
Material Supply
0.1
5
9
8
Quality of Life
0.2
9
8
4
Mild Climate
0.3
10
6
8
Labor Skills
0.4
3
4
7
WS =
WS =
WS =