UNIT 6 WAREHOUSE FACILITY LOCATION

PLANNING
Structure
6.1 Introduction
Objective
6.2 Objectives of Facility Location Planning
6.2.1 Concept of Facility Location Planning
6.2.2 Facilities and Amenities Required for Warehousing
6.2.3 Facility Planning Decision Models
6.3 Subjective methods for Facility - Location Planning
6.3.1. Precedence Method
6.3.2. Preferential Factor Method
6.3.3. Dominant Factor Method
6.4 Qualitative and Semi-Quantitative Techniques for Facility –
Location Planning
6.4.1. Equal Weights Method
6.4.2 Variable Weights Method
6.4.3. Weight–Cum–Rating Method
6.4.4. Factor-Point Rating Method
6.4.5. Composite Measure Method
6.5 Quantitative Models for Facility Location Planning
6.5.1 Median Model
6.5.2 Gravity Model
6.6. Summary
6.7 Keywords
6.8 Further Readings

6.1 INTRODUCTION
We have studied about various locations such as urban, sub-urban and rural
sites and their merits and limitations for establishment of a warehouse or go-
down or a store. We also have understood what facilities and amenities are
likely to be available at each of such locations. In fact, these two studies viz,
location study and facility planning always be carried out simultaneously.
Therefore, in this unit, we shall learn decision making process for selection of
location and facility planning.
Objective:
After studying this unit, you should be able to
 Understand the concepts of facility planning and location study.
 Describe the objectives of facility planning
 Understand Subjective Methods for selection of facilities and location
of a site
 Evaluate the site selection and facility plan qualitatively
 Examine the new site selection optimally by applying the quantitative
techniques

6.2 OBJECTIVES OF FACILITY LOCATION PLANNING

The objectives of location study and facility planning are multi-dimensional.
These are listed below:
a) Objectives Related to Design of Work Place
 Suitable design or installation for proper movement.
  Maintaining the sequence of movement of parts by locating succeeding
facilities adjacently.
 Safe working conditions with reference to ventilation, lighting etc.
 Minimum movement or workers.
 Least chances of accidents, fire, etc.
 Appropriate space for handling equipment, workers, tools etc.
 Optimum utilization of space (vertical height) available in the location.
b) Objectives Related to Material Handling and Planning
1. Fast travel of material inside the warehouse without congestion or
bottleneck.
2. Less material handling and minimum transportation cost.
3. Reduced waiting time for stored/in-process inventory.
c) Objectives Related to Performance
1. Simpler cleaning and maintenance
2. Increased productivity, better product quality and reduced cost
3. Least set-up cost and minimal change-over
4. Exploitation of buffer capacity, common worker for different warehouse
jobs, etc.
d) Objectives Related to Flexibility
1. Scope for future expansion
2. Considerations for valid product/market mix
3. Considerations for alternate routine
6.2.1 Concept of Facility Location Planning Figure 6.1:
As described in the previous unit, the process of study and decision making on
selection of location and planning required facilities go simultaneously, hand
in hand.Particularly, this exercise for warehousing is more than a combination
of location study and facility planning because warehouse itself is a facility for
an industry or market. Thus, this study can be understood as ‘facility location
planning’. Various facilities and amenities required for warehouse are
discussed in the previous unit (unit-5, location study). However, we shall
recollect and list out them to have a quick reference.
6.2.2 Facilities and amenities required for warehousing
1. Electric Power Supply and generator if required
2. Sufficient lighting and ventilation without affecting the warehousing
activities and materials.
3. Water supply as required by warehouse (if any), and drinking water for
workmen.
4. Sanitation and waste disposal without affecting the surround and
environment.
5. Safety and Security for the infrastructure, people as well as for materials.
6. Transportation facilities for in and out flow of material.
7. Mobility of transporting vehicles within the warehouse.
8. Approach roads and mobility.
9. Mobile equipment within the warehouse.
10. Docking space and picking facility.
11. Suitability for Loading and unloading.
12. Nearness to banks and other financial and insurance companies
13. Community selection and freedom from social obligations
14. Schools, transportation, recreation centers, markets of general groceries
for living hood of workers, if the warehouse is having large number of
workmen (generally more than 15)
15. The site is free from legal issues and complacent with statutory
requirement.
All the above are basic minimum requirements for considering a site to be set
up as a warehouse or go-down. It is impossible to get a site that is ideal with all
the above listed requirements fulfilled. However, if all the above facilities if
they aren’t already existing, the site needs these facilities to be established or
planned. The cost for such establishment is usually one-time capital
investment.Thence, the selection of a facility location requires carefully
studying all the factors and the extent they influence. We, therefore finally
need to choose a site that is subjected to minimum impact. Further, it is
important to draw a trade-off between the availabilities and requirements to
achieving the objectives.
6.2.3 Facility Planning Decision Models
The methods and techniques for facility planning decisions may be modeled
broadly in three categories as given below
1. Subjective Methods

2. Qualitative Methods

3. Quantitative Methods

SAQ 1
a) Enumerate the objectives of a facility planning?
b) The facility planning has to focus on multi-dimensional objectives.
Explain.
c) Why is plant layout important while designing Work Place?
d) List out objectives of plant layout related to Material Planning and
Handling.
e) State objectives of plant layout related to performance of warehouse.
f) List out Facility Planning Decision Models applied for warehousing.
g) List out the facilities and amenities required for warehousing.
ACTIVITY 6.1
List out various factors to be considered for establishing the facilities that are
required for the following cases. Prepare a report on each and compare the
significance of each factor.
A. A go-down of various agricultural products such as rice/paddy, wheat,
pulses etc.
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B. An automobile spare parts
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C. A warehouse for cold storage
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6.3 SUBJECTIVE METHODS FOR FACILITY -

LOCATION PLANNING
Subjective methods are empirical in nature and depend on the decision maker’s
beliefs, preferences and experiences. There are three most commonly used
subjective techniques while planning for a facility location. These are:
1. Precedence method

2. Preferential Factor method and

3. Dominant Factor method

6.3.1. Precedence Method

Most of us are always looking for some precedents. So in the industry
precedence subjective technique, the basic assumption is that if a location was
best for similar firms in the past, it must be the best for us now. As such, there
is no need for conducting a detailed location study and the location choice is
thus subject to the principle of precedence – good or bad.
6.3.2. Preferential Factor Method
In the case of the preferential factor, the location decision is dictated by a
personal factor. It depends on the individual whims or preferences e.g. if one
belongs to a particular state, he may like to locate his unit only in that state.
Such personal factors may override the factors of cost or profit in taking a final
decision. This could hardly be called a professional approach though such
methods are probably more common in practice than generally recognized.
6.3.3. Dominant Factor Method
In some other cases, the decision of facility location there could be a certain
dominant factor (in contrast to the preferential factor) which could influence
the location decision. In a true dominant sense, mining or petroleum drilling
operations must be located where the mineral resource is available. The
decision in this case is simply whether to locate or not at the source.

6.4 QUALITATIVE AND SEMI-QUANTITATIVE

TECHNIQUES FOR FACILITY – LOCATION
PLANNING
For evaluating qualitative factors, factor ranking and factor weight rating
systems may be used. In the ranking procedure, a location is compared and
ranked if one is better or worse than another for the particular factor. By
weighing factors and rating locations against these weights a semi-quantitative
comparison of location is possible. Let us now discuss some specific methods,
which are popularly applied such as-
1. Equal Weights Method
2. Variable Weights Method
3. Weight– cum – Rating Method
4. Factor-Point Rating Method
5. Composite Measure Method
6.4.1. Equal Weights Method
We could assign equal weights to all factors and evaluate each location along
the factor scale. For example, Bunsen, a manufacturer of fabricated metal
products selected three factors by which to rate four sites. Each site was
assigned a rating of 0 to 10 points for each factor. The sum of the assigned
factor points constituted the site rating by which it could be compared to other
sites.
Table 6.1: Decision Matrix for Equal Weights Method
Factor \ Potential sites S1 S2 S3 S4
F1 4 5 9 2
F2 3 4 8 3
F3 2 3 7 6
Site Rating (Total) 9 12 24 11
Looking at Table 6.1, Site-3 has the highest site rating of 24. Hence, this site
would be chosen.
6.4.2 Variable Weights Method
The above method could be utilized on account of giving equal weightage to
all the factors and evaluating each location site along the factor scale. Hence,
factor F1 might be assigned 300 points, factor 2 might be assigned 100 points
and factor 3 might be assigned 50 points. Thus the points scored, out of the
maximum assigned to each of the factors, for each possible location site could
be obtained and again the site rating could be derived as follows:
Table 6.2: Decision Matrix for Variable Weights Method
Factor \ Potential sites Max.Points S1 S2 S3 S4
F1 300 220 260 250 50
F2 100 40 60 70 100
F3 50 15 50 20 40
Site Rating (Total) 285 370 340 190
Looking at the table 6.2, site 2 has the highest site rating of 370. Hence this
site would be chosen
6.4.3. Weight–cum–Rating Method
We could have yet another method of evaluating a potential location site. We
could assign variable weights to each factor. The location point assignment for
the factor is then obtained by multiplying the location rating for each factor by
the factor weight. For example, rating weights of one to five could be assigned
to the three factors F1 (Labour climate), F2 (community facilities ) and F3
( power availability & reliability), as 5, 3, 2 respectively .Now for each of the
factors, sites S1, S2, S3 or S4 could receive 0 to 10 points as follows. Now
each site rating could be obtained
Table 6.3: Decision Matrix for Weight Cum Rating Method
Factor \ Potential Factor Rating
S1 S2 S3 S4
sites Weights
F1 5 2 5 9 2
F2 3 3 3 8 3
F3 2 6 2 7 3
Site Rating (Total) 31 38 83* 25
*Sample Calculation: 5X9 +3X8 +2X7 =83
As shown in table 6.3, the sample calculation should hopefully suffice to
obtain the site ratings. Hence, site S3 with the highest rating of 83 is chosen.
6.4.4. Factor-Point Rating Method
Table 6.4: Factor Point Ratings Sample

Factor Description Poor Fair Adequate Good Excellent

F1 Water supply -15 -12 0 6 10
F2 Appearance of site -3 -1 0 1 2
Now for a 1st one, establish a subjective scale common to all factors. Assign
points against the subjective scale for each factor and assign the factor points
of the subjective rating for each factor. For example, five subjective ratings,-
Poor, Fair, Adequate, Good and Excellent were selected to be used in
evaluating each site for each factor. For each of the factors, ‘adequate’ was
assigned a value zero and then negative and positive relative worth weights
were then assigned a subjective ratings below and above adequate for each
factor in Table 6.4.
The range between minimum and maximum weights assigned to a factor in
effect weighs and factor against all other factors in a manner equivalent to the
method (iii) described just previous to this one. Each location site S1 to S4
were then rated by selecting the applicable subjective rating for each of the
factors for each location and the equivalent points of that subjective factor
rating assigned to the factor. Thus we now obtain Table 6.5
Table 6.5: Decision Matrix for Factor Point Rating Method
Factors Site1 Site2 Site3 Site4
F1 Adequate (0) Fair (-12) Good (6) Adequate (0)
F3 Adequate (0) Adequate (0) Adequate (0) Adequate (0)
Total site rating 0 -15 9 -1
Accordingly Site 3 with the highest rating of 9 would be chosen.
In most cases, hardly any attempt is made to establish a direct relationship
between the site rating point value and the cost values. Usually, this is left to
the management.
The location analyst presents to management both the cost and the intangible
data results. In such cases, management could take a decision based on a
simple composite measure method illustrated below with the aid of a
numerical example.
6.4.5. Composite Measure Method
Let us enlist the steps of the composite measure method
Step-1: Develop a list of all relevant factors.
Step-2: Assign a scale to each factor and designate some minimum.
Step-3: Weigh the factors relative to each other in light of importance towards
achievement of system goals.
Step-4: Score each potential location according to the designated scale and
multiply the scores by the weights.
Step-5: Total the points for each location and either (a) use them in
conjunction with a separate economic analysis, or (b) include an economic
factor in the list of factors and choose the location on the basis of maximum
points.
Now let us illustrate the composite measure method with a numerical example.
There are three potential sites and five relevant factors like transportation costs
per week, labour costs per week finishing material supply, maintenance
facilities and community attitude. The costs are in rupees whereas for the last
three factors, points are assigned on 0-100 scale. The data collected is shown
in Table 6.6 below.
Table 6.6: Payoff Matrix
Description Factor Site-1 Site-2 Site-3
Transportation cost/week (Rs.) F1 800 640 580
Labour cost/week (Rs) F2 1180 1020 1160
Finishing material supply
F3 30 80 70
(Points)
Maintenance facilities (Pts.) F4 60 20 30
Community attitude (Pts.) F5 50 80 70
The location analyst has pre-established weights for various factors. This
includes a standard of 1.0 for each Rs. 10/- a week of economic advantage.
Other weights applicable are 2.0 on finishing material supply, 0.5 on
maintenance facilities and 2.5 on community attitudes. Also the organization
prescribes a minimum acceptable score of 30 for maintenance facilities.
First of all, let us look at the economic factors F1 and F2 for which monetary
values were possible. If we sum up the costs for each site, we get the costs for
sites S1, S2 and S3 as Rs. 1980, Rs. 1660 and Rs. 1740, respectively. Thus site
S1 would be the worst cost wise. Site S2 would have an economic advantage
over site S1 by a margin of Rs. 320 (1980 –1660). Similarly site S3 would have
an economic advantage over site S1 to the extent of Rs. (1980 –1740) i.e. Rs.
240. Now monetary value in Rs. can be converted to a point scale as you
would realize that a standard of 1.0 is to be assigned for each Rs. 10 per week
of economic advantage. Thus we could get the following table 6.7
Table 6.7: Decision Matrix for Composite Measure Method
Factors Weightage S1 S2 S3
Combined Economic Advantage(F1 +F2) 1.0 0 32 24
F3 2.0 30 80 70
F4 0.5 60 20 30
F5 2.5 50 80 70
Composite Site Rating (Total) 215 402 354
Now, on referring to certain prerequisites for certain factors, because of the
nature of the situation, a constraint in the form of a site scoring at least 30 on
account of maintenance had been given. You would be able to observe that this
basic requirement is not met by S2. In fact any further calculations for S2 need
not have been carried out as soon as one detected this flaw. However, we
deliberately persisted on going through all the calculations. There could have
been the possibility of revision of maintenance clause constraint viz., perhaps,
it might have felt that a bare minimum score of 15 or 20 would suffice. In such
cases, therefore it is better to go through all the calculations and when finally
taking a decision, do keep the constraints in mind.
SAQ 2
a) Write notes on the following methods of rating a hypothetical location in a
location facility planning.
i) Equal weights method
ii) Variable weights method
iii) Weight cum rating method
iv) Factor point rating method
v) Composite measure method
b) Write a detailed note on qualitative methods of rating to select a location
with reference to facility planning.
c) What are the most commonly used subjective techniques while planning
for a facility location? Explain them.
d) Enumerate for facility – location planning.
e) List out the qualitative and semi-quantitative techniques.
f) Explain Equal Weights Method for location facility planning.
g) Discuss Variable Weights Method for location facility planning.
h) Describe Weight– cum – Rating Method for location facility planning.
i) Enumerate Factor-Point Rating Method for location facility planning.
j) Explain Composite Measure Method for location facility planning.
ACTIVITY 6.2
Suppose you have to select a site for establishing a warehouse for
a) A cement Factory
b) A readymade Garments Production Shop
c) An ancillary unit for producing cutting tools
d) A rice mill (to process paddy to rice) or a flour mill (Wheat to Flour)
What factors do you choose for the above cases? Select some conditions or
factors (select arbitrarily if not existing) and make a comparative study of any
four sites in your vicinity by various methods given above. Write your analysis
and the decision matrices.
a) Warehouse for cement Factory
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b) Warehouse for An ancillary unit for producing cutting tools
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c) Warehouse for A rice mill (to process paddy to rice) or a flour mill
(Wheat to Flour)
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6.5 QUANTITATIVE MODELS FOR FACLITY LOCATION

PLANNING
Several quantitative techniques and models are available under the operations
research and optimization methods to arrive to best decisions in facility
location planning. However, the most relevant and widely applied two models,
namely Median model and Gravity model are discussed in the paragraphs to
follow:
6.5.1 Median Model
This model uses the graphical and statistical techniques to find the best
location for a new plant. Before going to the explanation of the model we shall
understand the nature of the problem and its basic assumption.
Suppose a plant is to be established at a site, and now, the decision is to be
taken on selection of its location. Obviously, one has to think of various factors,
of which quantitative approach recommends two major factors i.e., nearness to
availability of raw materials (say source points) and nearness to markets (say
destinations). Mere distance calculations will not suffice the decision because;
it also depends on the quantity of materials to be transported and the cost of
transportation from the proposed location to the markets and from sources to
proposed location. To consider all these, first the sources and markets are to be
identified and represented in the geographical map.
Now, let us learn the computation in two stages.
Stage-I: Identification of co-ordinates of sources and destination
Step-1: Identify the origin: To measure the distances that require to be traveled,
a reference point is necessary. When it is represented on a graph, we need to
locate an origin from where we measure the distances always. Take the
geographical map that contains all the identified sources and destinations.
Locate the origin at convenient position; conventionally it will be at left-
bottom (southwest corner) of the map. It is always convenient if all the sources
as well as destinations occupy positions in first quadrant of the graph:
Step-2: Draw the co-ordinate axes on the map.
Step-3: Measure horizontal (from Y-axis) and vertically (from X-axis)
distances of sources and destinations on the map as measured with references
to origin. These distances are noted as co-ordinates of the sources and
destinations. While measuring distances, it is not necessary to calculate the
actual or real distances, but it is sufficient to compute the measured distance on
the map in terms of centimeters or millimeters as in any units devised (or
scaled) suitably.
After finding the co-ordinate points, we proceed to stage-II, the simple median
model.
Stage II: Simple Median Model:
This is based on the basis of assumption that the mode of interaction or the
path of movement, transportation of load is done on a rectilinear/rectangular
pattern. In simple words, the movement can be expressed as the movement of
rooks on a chessboard. (i.e., either horizontal or vertical motions are allowed,
but not cross or diagonal motion)
The computation algorithm is as follows:
Step-1: Computation of Median:
Sum up all the loads (N=Li) to be transported i.e., from sources to new
location and new location to destination. If the number of loads to be moved is
odd number, then median is (N+1)/2 and if it is even then there exist two
medians viz. N/2 and N/2 +1.
Step-2: Graph preparation:
Draw X &Y axes and graduate them with suitable scale.
Step-3: Locating Sources and Destinations:
Locate all sources and destinations on the graph paper with the given co-
ordinate points.
Step-4: Computation along X-axis
a) Horizontal pass: Locate all Snx and Dnx on X-axis and note their
distances from the origin.
b) Loading calculation: Put the loads that are to be transported under Snx
and Dnx. Find the cumulative load and put under each of Snx and Dnx.
 c) Location decision: Now identify the point on x-axis among all Snx and
Dnx, where the median is just contained by the cumulative loads. If
there are two medians, and each of these fall in different stations (of
Snx and Dnx), then the middle point of such stations is considered as
the X-co ordinate of the new location.
Step-5: Computation along Y-axis
a) Vertical Pass: Repeat as that of 4(a) and locate Sny and Dny on Y-axis.
b) Loading Calculations: Repeat as that of 4(b)
c) Location decision: Find Y co ordinate of new location by using
similar methods as that 4 (c)
Step-6: Location of new Plant:
Locate the new plant with the co ordinate points found by step-4 and step-5
Step-7: Cost computations:
Computation of transportation cost can be done in the following tabular form
with the formula
Total Cost (TC) =  Li[ | X-ai| + | Y- bi | ]
Table 6.8: Computation table for Median Method
The old Load to X- Y- X-Load Y-Load Total Unit Total
location be Distance Distance distance distance = Load cost cost
Si (ai,bi) transpor from/to from/to =Li |(X-ai)| Li |(Y-bi)| distance
ted (Li) new new
location location
|(X-ai)| |(Y-bi)|

(1) (2) (3) (4) (5) (6) (7) (8) (9)

= (2)X(3) = (2)X(4) =(5)+(6) =(7)X(8)

The above method is illustrated with a numerical problem here below:

Illustration 6.1
A particular city is trying to find the best location for a master solid-waste
disposal station. At present four sub-stations are located at the following co
ordinate locations: station1 (4,12), station2 (6.5, 4) Station3 (11,9) and station4
(1,13).
The number of loads hauled monthly to the master station will be300, 200, 350
and 400 from stations1, 2, 3 and 4 respectively. Use simple median model to
find the best location.
Solution:
Step1: Calculate the median: As the number of loads to be moved is four, we
get two media
Median loads = (300+200+350+400)/2 =1250/2 = 625 and {(300 + 200 + 350
+ 400)/ 2} + 1 = {1250/2}+1 = 626
Step 2 &3 are shown in the following graph:

S3(350) S1(300) S4(400)

14
S 4 (1 ,1 3 ) N e w L o ca tio n

850 1250
12 S 1 (4 ,1 2 )

10
S 3 (1 1 ,9 )

550
8

S2(200)
S 2 (6 .5 ,4 )

200
4

0 2 4 6 8 10 12
S 4 (400) S 1(300) S 2(200) S 3(350)
C u m m u la tive
4 00 7 00 9 00 1250
Figure 6.2: Median Plot
Now, according to step4, we can say that both median loads fall under S1(4,12)
along X-axis as the cumulative loads is 700 (both 625 and 626 fall under 700).
Hence, the X- co ordinate of the new location should be 4
Similarly, to find the y-co ordinate, the median loads (625 and 626) are falling
under 850 which corresponds to S1 again,
Hence the new location will have the y- co ordinate as 12,
Thus, the new location is (4,12)
Illustration 6.2
Raju and Co. wants to establish a central go-down for their production centres
located at S1(10,50) and S2(30,10) and market centres located as D1(40,60)
and D2(60,70). The loads that are to be transported daily from production
centres are 60 and 70 from S1 and S2, while that from go-down to the market
centres D1 and D2 are 40 and 50 units respectively. Suggest the best location
by using simple median method. Also calculate the cost of transportation at the
rate of Re. 1.00 per unit (unit load distance).
After establishing the new location for central go-down, it has become
insufficient after one year. Then the top management of Raju&Co has decided
to construct another New go-down and convert the existing go-down as factory
sales counter whose estimated demand is 40 units. Suggest the best location for
the New Go-down and calculate the total cost.
Solution: First, let us calculate for the first case:
 *D2(60,70)

Load 50

*D1(40,60)

Load 40
New Facility(30,50)
220
130 170

S2(30,10)
*S1(10,50)
Load 70
Load 60
Cum.70

Cumulative Load 60 130 170 220

Figure 6.3: Median Plot

Now, as explained in step1, let us identify the median. The total load to be
moved is 220 (viz.60 +70 +40 +50 =220). As there are four (even number of
loads) points of loads, we have two medians will exist viz. 110 and 111 since
there are 109 above and below this pair of values.
According to step2 & 3 we represent the co ordinates of the loads on the graph

*D2

(60,70)
210 260

*D1

(40,60)
130,170

New Facility (30,50)

*S1
Go-down
(10,50) S2
Cum.70

Load 40
(30,10)

Cumulative Load 60 130,170 210 260

as shown in the adjacent figure 3.3.

Figure 6.4: Median plott

As per step-4, let us determine the X- co ordinate of the new location (i.e.
median load). For this first we place the x-coordinates of the existing facilities
in the ascending order, as we go horizontally from left to right the order of the
 facilities would be S1, S2, D1 and D2 having load to be moved as 60, 70, 40 and
50, respectively. Thus we can understand that the loads 1 to 60 are shipped by
source S1 at x1=10, loads 61 to 130 are shipped by source S2 at x2 =30, from
131 to 170 ad D1 at x3 =40 and for 171 to 220 at D2 at x4 = 60. Since both
medians fall in the interval 61 to 130, therefore, x =30 is the best x - co
ordinate location for the new facility.
Similarly, in step5, we determine the y-coordinate by arranging the y-
coordinates of the existing facilities in the ascending order (vertical passing)
viz. S2, S1, D1 and D2 with y–co ordinates as 10, 50, 60 and 70 respectively. It
can be observed clearly that the loads are shipped as 1 to 70 by S2, 71 to 130
by S1 and so on. The median loads both 110 as well as 111 fall in the interval
71 to 130. Hence the best Y-co ordinate of the new facility should be located at
Y =50.
Thus the coordinates of the new location is (30, 50).
Now, let us compute, the cost of the transportation.
Table 6.9: Calculation of Median
The old Load X-Distance Y-Distance X-Load Y-Load Total Unit Total
location to be from/to from/to distance distance Load cost cost
Si (ai,bi) transp new new =Li |(X- =Li |(Y- distance
orted location location ai)| bi)|
(Li) |(X-ai)| |(Y-bi)|
(1) (2) (3) (4) (5) (6) (7) (8) (9)
= (2)X(3) = (2)X(4) =(5)+(6) =(7)X(
8)
S1 60 |30-10|=20 |50-50|=0 1200 0 1200 1.00 1200
S2 70 |30-30|=0 |50-10|=40 0 2800 2800 1.00 2800
D1 40 |30-40|=10 |50-60|=10 400 400 800 1.00 800
D2 50 |30-60|=30 |50-70|=20 1500 1000 2500 1.00 2500
Total Cost 7300

Now, we calculate for the case after one year.

step1: Here, we have five (odd number) centers altogether, hence there only
one median.
To find Median load
The total load to be moved is 260 (viz.60 +70 +40 +50 +40=260).
Median = 260/2 =130
According to step-2 & 3 we represent the co ordinates of the loads on the
graph as shown in the adjacent figure.
As per step-4, let us determine the X- co ordinate of the new location (i.e.
median load). For this first we place the x-coordinates of the existing facilities
in the ascending order, as we go horizontally from left to right the order of the
facilities would be S1, S2, G, D1 and D2 having load to be moved as 60, 70, 40,
40 and 50, respectively. Thus we can understand that the loads 1 to 60 are
shipped by source S1 at x1=10, loads 61 to 130 are shipped by source S2, 131 to
170 are shipped at existing Go-down at x2 =30, from 171 to 210 ad D1 at x3
=40 and for 211 to 260 at D2 at x4 = 60. Since median falls in the interval 61 to
130, (and 131- 170 is also in the same point) therefore, x =30 is the most
optimal x - co ordinate location for the new facility.
Similarly, in step5, we determine the y-co ordinate by arranging the y-co
ordinates of the existing facilities in the ascending order (vertical passing) viz.
S2, S1, G, D1 and D2 with y–co ordinates as 10, 50, 30, 60 and 70 respectively.
It can be observed clearly that the loads are shipped as 1 to 70 by S2, 71 to 130
by S1, 131 to 170 at existing Go-down and so on. The median load 130 falls in
the interval 71 to 130. Hence the best Y-co ordinate of the new facility should
be located at Y =50.
Thus the co ordinates of the new location is (30, 50) i.e. at the Present Go-
down.
Now, let us compute, the cost of the transportation.
Table 6.10: Computation for Median
The old Load X-Distance Y-Distance X-Load Y-Load Total Unit Total
location to be from/to from/to distance distance Load cost cost
Si (ai,bi) transp new new =Li |(X-ai)| =Li |(Y- dista
orted location location bi)| nce
(Li) |(X-ai)| |(Y-bi)|
(1) (2) (3) (4) (5) (6) (7) (8) (9)
= (2)X(3) = (2)X(4) =(5)+ =(7)X(8)
(6)
S1 60 |30-10|=20 |50-50|=0 1200 0 1200 1.00 1200
S2 70 |30-30|=0 |50-10|=40 0 2800 2800 1.00 2800
G 40 |30-30|=0 |50-50|=0 0 000 0 1.00 0
D1 40 |30-40|=10 |50-60|=10 400 400 800 1.00 800
D2 50 |30-60|=30 |50-70|=20 1500 1000 2500 1.00 2500
Total Cost 7300

Remarks:
1. In a particular problem, if two medians existand if these fall in different
intervals then the co-ordinates of the new facility will be average (midpoint)
of the two points.
For example, in the first case of the above problem, if the loads of S1 is 40
instead of 60, and that of D1is 60 instead of 40, then the median load 110
will fall in the interval 41 to 110, while the median 111 will fall in the
interval 111 to 170 along horizontal pass. Thus, the best x - co-ordinate the
average of 10 and 30, the x-co-ordinates of S1 and S2 respectively.
Therefore, the x- co-ordinate of new location is 20.
Similarly the y- co-ordinate of the new location can be calculated as (50
+10)/2 =30.
Hence, best location for the new location will be placed at the co-ordinates
(20,30).
6.5.2 Gravity Model
The technique is based on the principle of “center of Gravity”. It determines
the low cost location of new facility with respect to the fixed ancillary existing
facilities like source supplies (S1, S2 etc.) and distribution points (D1, D2 etc.)
for which each type of product consumed or sold is known. Let us use the
same data of numeric example -2 (first case) under the median model given
above and thus let us refer to its corresponding figure once again. The only
difference is the mode of interaction between the single new facility and the
existing facilities. Here, in this case, we assume that all goods move in straight
line joining the ancillary facility and the new facility (in Median Model, we
assume the movement is as that of rook in a chess board). This is called
‘Euclidean” mode of interaction and is in fact the shortest distance between
any two reference points.
Thus D = Euclidean Distance = {(x-aj)2 + (y-bj)2}1/2
Thus the total transportation costs in this case are
TTC (Total transportation cost) (Euclidean case) =  (LiDi)
Viz. TTC = Li{(x-aj)2 + (y-bj)2}1/2
Our aim, once again is to determine the location of the new facility at (x, y)
such that the Total Transportation Costs (TTC) are minimum. We will not get
into a discussion on certain analytical problems and difficulties in obtaining
optimal, solutions at this stage/level, but rather present analogue model and
gravity model, which are simple to understand and could be readily applied.
The concept underlying the technique is best visualized as a series of strings to
which are attached weights/corresponding to the loads/weights of raw
materials consumed/dispatched at each source and of finished goods
sold/received at each distribution point/market. The strings are threaded
through holes in a flat plain metallic sheet; the holes correspond to the
ancillary facility locations. The other ends of the string are tied together to a
small concentric ring. The ring will finally reach an equilibrium based on the
principle of equilibrium of coplanar forces. This equilibrium will be the centre
of mass or the ton-mile centre. That is the reason; it is called the Gravity
Model.
X = Li (ai)/ Li and Y =  Li (bi)/ Li
Thus for our example under discussion now from supply sources S1, S2 to the
new facility
 Li = 60 +70 = 130
(Liai) = (60X10) + (70 X30) = 600 + 2100 = 2700
And from new facility to distribution points D1 and D2
 Li = 40 + 50 = 90
(Liai) = (40X40) + (50 X60) = 1600 + 3000 = 4600
X = Sum of all load.distances / sum of all loads = (2700 +4600)/(130 +90) =
33.19
Similarly Y- co-ordinate can be calculated as follows
Y = {(60X50) +(70X10) +(40X60) +(50X70)}/{60 +70 +40 +50} = 9600/220
= 43.63
Thus the gravity model suggests that… …
The new location is to be situated at a point (33.19, 43.63)
For which total transportation costs will be minimum
You might have noticed that we have only discussed the location decision
problems dealing with just a single new facility, which is often termed as
minisium objective of the sum of weighted appropriate distances. There could
be cases when the location as determined above turnout to be non-feasible or
infeasible, because of existence of certain restrictions or limitations. There are
some methods available to solve such problems such as Composite Location
Measure Model suggested by Brown and Gibson, Bridgeman's Dimensional
Analysis etc.
SAQ 3
a) Write short note on the Quantitative models for selection of new
location in a location facility planning.
b) Write the algorithmic steps in selecting the new location by using
Median Model for facility planning.
 c) Explain the Gravity Model used in facility planning to select a new
location.
d) Explain the rationale behind using the principle of simple median in
location planning.
e) What is principle of centre of gravity? How do use this concept in
location planning?
ACTIVITY 6.3
Visit any warehouse in your vicinity and find out what merits and demerits it
has. What are the possible causes and remedies to better the situation?
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
Numerical Problems
1. A company has four factories located at the Cartesian co-ordinates as
A(100,30), B(80,60), C(50,50) and D(30,70). The factories produce 200,
300, 400 and 100 units respectively. The company is looking forward to
establish a storage go-down to stock its products. Use median model to
find the co-ordinates of the go-down location. Also calculate the cost of
transportation if it is charged Rs. 2/- per unit distance-load.
2. For the same data given above, use gravity model and find the co-
ordinates of the new location and hence the cost.
3. P(12,10), Q(2,8), R(10,6), S(5,3) and T(7,9) are the proposed markets
with the demands 100, 60, 50, 80 and 20 respectively for a company.
The company has to establish its production centre now. Find the co
ordinates of the optimum location using simple median. If existing
transportation tariff is as follows, find the transportation cost.
From P: Rs 2/- per unit up to 1000 units of load-distance and Rs. 5/-
above 1000
From Q: Rs. 1/- for first 500 and Rs/-3 for 500 to 1000 and Rs. 5/ for
above 1000
From R: Rs. 3/- for any load-distance
From S: Rs. 2/- up to 800, Rs. 3 for 800 to 1200 and Rs. 4/-
above1200
From T: Rs. 1/ for first 200/ and Re 1/- hike for every raise of 200
units.
4. Use gravity model for the above data and calculate.
5. Use Gravity model and calculate for the Numerical example problem
(Illustration -3.1) solved under median model.

6.6. SUMMARY
Decision making process for selection of location and facility planning is
discussed in this unit. The objectives of facility location planning are
Objectives Related to Design of Work, Place, Objectives Related to Material,
Objectives Related to Performance andObjectives Related to Flexibility. The
process of study and decision making on selection of location and planning
required facilities go simultaneously, hand in hand. Particularly, this exercise
for warehousing is more than a combination of location study and facility
planning because warehouse itself is a facility for an industry or market. There
are three most commonly used subjective techniques while planning for a
facility location. They are Precedence method, Preferential Factor method and
Dominant Factor method. Qualitative and semi-quantitative techniques for
facility – location planning are Equal Weights Method, Variable Weights
Method, Weight– cum – Rating Method, Factor-Point Rating Method and
Composite Measure Method. Several quantitative techniques and models are
available under the operations research and optimization methods to arrive to
best decisions in facility location planning. However, the most relevant and
widely applied two models, namely Median model and Gravity model.

6.7 KEYWORDS
Precedence Method : The basic assumption is that if a location
was best for similar firms in the past, it
must be the best for us now.
Preferential Factor Method : It depends on the individual whims or
preferences.
Dominant Factor Method : In some other cases, the decision of
facility location there could be a certain
dominant factor.
Median Model : This model uses the graphical and
statistical techniques to find the best
location for a new plant.
Gravity Model : It determines the low cost location of
new facility with respect to the fixed
ancillary existing facilities.
Subjective methods : Precedence method, Preferential Factor
method and Dominant Factor method
Qualitative and : Equal Weights Method, Variable
semi-quantitative techniques Weights Method, Weight– cum – Rating
Method, Factor-Point Rating Method and
Composite Measure Method.
Quantitative models : Median model and Gravity model.

6.8 FURTHER READINGS

1. Adam Jr. E.E. and R.J.Ebert. Production and Operations Management,
Prentice – Hall Inc., Englewood-Cliffs.
2. N.V.S.Raju (2018), Operations Research, Theory and Practice, BS
Publications, Hyderabad, India, and CRC Publication (A unit of
Taylor& Francis) ISBN: 978-93-5230-190-4
3. N.V.S.Raju (2013), Industrial Engineering and Management, Cengage
Learning India Pt. Ltd, New Delhi, ISBN-13: 978-81-315-1948-6
4. Banwet, D.K. 1981. Some Studies in Facilities Location Planning,
Unpub. Ph.D. Diss. IIT, Delhi.
5. Buffa, E.S., 1976.,Operations Management: the management of
productive systems, John Wiley, New York.
6. Francis, R.L. and J.A. White., 1974. Facility Layout and Location. An
Analytical Approach, Prentice-Hall Inc., Englewood-Cliff.
7. N.V.S.Raju (2013), Plant Maintenance and Reliability Engineering,
Cengage Learning India Pt. Ltd, New Delhi.
8. Menipaz, E. 1984. Essentials of Production and Operations
Management, Prentice-Hall Inc: Englewood-Cliffs.
9. Monks, J.G. 1977. Operations management: Theory and Problems,
McGraw-Hill: New York.
10. Reed, R. 1965 Plant Location, Layout and Maintenance, Richard D.
Irwin Inc.: Homewood.
11. Tompkins, J.A. and J.A. White., 1984 Facilities Planning, John Wiley:
New York.