Facility Location

Part 2
by
Anita Lee-Post

© Anita Lee-Post
 Center-of-gravity method
1. Establish relative distances between
existing facilities by placing them on
a coordinate grid system;
2. Use the following formulas to find
the X and Y coordinates for the
location of the new facility:

© Anita Lee-Post
 Center-of-gravity method formulas

d V
ix i
Cy =
d V
iy i

V
Cx =
V i i

Cx = X coordinate of center of gravity

Cy = X coordinate of center of gravity
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith location

© Anita Lee-Post
Center of gravity method example
• Three automobile showrooms (Bowling Green, Elizabethtown,
and Morehead) are located according to the following grid
which represents coordinate locations for each showroom in
Kentucky. Monthly demand of Z-Mobiles at each showroom is
also given below.
Y
Morehead Showroom No. of Z-Mobiles
(790,900) sold per month
Elizabethtown Bowling Green 1250
(250,580) Elizabethtown 1900
Bowling Green
Morehead 2300
(100,200)

(0,0) X

Question: What is the best location for a new Z-Mobile

warehouse/temporary storage facility considering only
distances and quantities sold per month?
© Anita Lee-Post
 Center-of-gravity example continued

Y
To begin, you must identify Morehead
the existing facilities on a (790,900)

two-dimensional plane or Elizabethtown

(250,580)
grid and determine their
coordinates. Bowling Green
(100,200)

(0,0) X

You must also have the Showroom No. of Z-Mobiles

volume information on sold per month
the business activity at Bowling Green 1250
the existing facilities. Elizabethtown 1900
Morehead 2300

© Anita Lee-Post
 Center-of-gravity example continued

You then compute the new coordinates using the formulas:

100(1250) + 250(1900) + 790(2300) 2,417,000

Cx = = = 443.49
1250 + 1900 + 2300 5,450

200(1250) + 580(1900) + 900(2300) 3,422,000

Cy = = = 627.89
1250 + 1900 + 2300 5,450

Y
Morehead
(790,900)
New
Lexington
Elizabethtown location
(250,580)

Bowling Green
(100,200)

(0,0) X
© Anita Lee-Post
 Transportation method using Excel Solver

1. Set up the transportation table

with n rows (factories) and m
columns (warehouse) showing:
• Demand requirements of each
warehouse or destination;
• Supply availability at each
factory or source;
• Shipping costs per unit of
goods from each source to
each destination.
© Anita Lee-Post
 Transportation method using Excel Solver

2. Set up a candidate solution table

with n rows and m columns
showing:
• Total units supplied from each source;
• Total units shipped to each
destination;
• The volume of goods to be shipped
from each source to each destination
(i.e., the shipping
schedule/configuration).
© Anita Lee-Post
 Transportation method using Excel Solver

3. Set up a cost calculation table

• Detailed shipping costs from each
source to each destination;
• Total cost of the shipping schedule.

© Anita Lee-Post
 Transportation method example
Modified Center-of-Gravity example
• Monthly demand of Z-Mobiles at three existing
automobile showrooms (Bowling Green, Elizabethtown,
and Morehead) is:
Showroom No. of Z-Mobiles sold per month

Bowling Green 1250

Elizabethtown 1900
Morehead 2300
• Monthly supply of Z-Mobiles at two new factories to be
considered (Lexington, and Louisville) is:
Factory No. of Z-Mobiles supplied per month

Lexington 2000
Louisville 1500

© Anita Lee-Post
 Transportation method example continued
• Monthly supply of Z-Mobiles at two existing factories
(Denver, and Detroit) is:
Factory No. of Z-Mobiles supplied per month
Denver 2500
Detroit 1450
• Cost to transport an Z-mobile from each factory to each
showroom is:
From/To Bowling Green Elizabethtown Morehead
Denver 25 30 40
Detroit 50 25 25
Lexington 30 50 30
Louisville 40 35 50

Question: Which is a better location for a new Z-Mobile factory:

Lexington or Louisville?
© Anita Lee-Post
 Transportation method using Excel Solver
What is the total transportation cost if the new factory is located in
Lexington?

1. Set up the transportation table for

Lexington
A B C D E

1 From/To Bowling Green Elizabethtown Morehead Supply

2 Denver 25 30 40 2500

3 Detroit 50 25 25 1450

4 Lexington 30 50 30 2000
5 Requirements 1250 1900 2300

© Anita Lee-Post
 Transportation method using Excel Solver

2. Set up a candidate solution table with

formulae to compute the total units of Z-
mobile shipped to each showroom and
the total units of Z-mobile supplied from
each factory:
A B C D E
Candidate
7 Solution Total Shipped

8 Denver =SUM(B8:D8)

9 Detroit =SUM(B9:D9)

10 Lexington =SUM(B10:D10)
Total
11 Supplied =SUM(B8:B10) =SUM(C8:C10) =SUM(D8:D10)

© Anita Lee-Post
 Transportation method using Excel Solver
3. Set up a cost calculation table with formulae
to compute the detailed shipping costs from
each factory to each showroom and the total
shipping costs of the entire shipping
schedule:
A B C D E
Cost
13 Calculations

14 Denver =B8*B2 =C8*C2 =D8*D2

15 Detroit =B9*B3 =C9*C3 =D9*D3

16 Lexington =B10*B4 =C10*C4 =D10*D4

17 Total cost =SUM(B14:D16)

© Anita Lee-Post
 Transportation method using Excel Solver

Access Excel Solver

• Select Tools and then Solver from
the Excel menu

© Anita Lee-Post
 Transportation method using Excel Solver

• If Solver is not
found at that
location, then:
• Select Tools and
then Add-In from
the Excel menu
• Select Solver Add-
in from the Add-
Ins Window

© Anita Lee-Post
 Transportation method using Excel Solver

• Set parameters in
the Solver
Parameters
window
• Target cell
• Minimization
problem
• Changing cells
• Constraints
• Click on the
“Options” button
to set solver
options

© Anita Lee-Post
 Transportation method using Excel Solver

• Set options in the

Solver Options
window
• Assume Linear
Model
• Assume Non-
Negative

• Click “OK” to
return to the
Solver Parameter
window
© Anita Lee-Post
 Transportation method using Excel Solver

• Click “Solve” in the

Solver Parameters
window for solver
results
• Select “Keep Solver
Solution” in the
Solver Results
window
• Click “OK” to return
to the spreadsheet

© Anita Lee-Post
 Transportation method using Excel Solver

Shipping schedule Lexington cost

© Anita Lee-Post
 Transportation method using Excel Solver
What is the total transportation cost if the new factory is located in
Louisville?

1. Make a copy of the

Lexington worksheet by
selecting Edit and then
Move or Copy sheet from
the Excel menu
2. Make sure the “Create a
copy” option is checked
in the Move or Copy
window
3. Click “OK”

© Anita Lee-Post
 Transportation method using Excel Solver

1. Set up the transportation table for Louisville

A B C D E

1 From/To Bowling Green Elizabethtown Morehead Supply

2 Denver 25 30 40 2500

3 Detroit 50 25 25 1450

4 Louisville 40 35 50 1500
5 Requirements 1250 1900 2300

2. Access Excel Solver as before to solve the

above transportation problem

© Anita Lee-Post
 Transportation method using Excel Solver

Shipping schedule Louisville cost

Conclusion: It is cheaper to locate in Lexington (a saving of $166000 -

150000 = $16000).
© Anita Lee-Post