TermPaper
TermPaper
TermPaper
There are many criterias that identified for evaluation of the location. The major criteria can be
infrastructure facilities, the market’s location, land availability, government and industrial support,
labor supply and raw material availability.
● Infrastructure facilities
Highways, railroads, and ports, as well as existing airports and multimodal terminals in the region,
all have a role in determining the capacity of any region. A region having better access to
highways, trains, and other forms of transportation will be better able to accommodate new
logistical initiatives (Lipscomb, 2010).
● The market’s location
The marker's location can be measured by how far it can go in a certain amount of time using a
specific method of transportation. It can also examine how many people can be serviced from a
specific place in a given amount of time by a particular method of transportation (Lipscomb, 2010).
● Land availability
More land and infrastructure will very certainly be required for a new factory development. This
criterion can be determined by classifying a region's land and then determining how much area
can be used for development. Moreover, the land value also indirectly determines the availability
of land, if the land price is low, the more likely it is to be unused and which is the key for the
company to develop a new factory (Lipscomb, 2010). ● Government and industrial support
The development of a new factory will also require government and industry support. The level of
cooperation that can be obtained from both the regional development authority and local industry
can be used to evaluate this criterion. The more government support a factory receives, the more
likely it is to be developed (Lipscomb, 2010).
● Labor supply
The availability of labor supply takes into account the regional demography databases. Generally
the zones that are made up mostly of industrial laborers and have a history of industrial
development (Lipscomb, 2010). ● Raw materials availability
This is particularly true if large volumes of raw materials are consumed, because location near
the raw-materials source permits considerable reduction in transportation and storage charges.
III. Methodology
QGIS
Fundamental analytical tool for strategic location decision. With QGIS, we can manage, access
and visualize selected geographical locations, we can utilize “spatial analysis” and “network
analysis” to evaluate each site location.
We took the data that we collected and then put it into QGIS. For the data, it has phnom penh
data and road network.
To determine
● Decision which factories to open
● Decision which warehouse to open
● Reduced costs
Decision Variables
Objective
The objective of this model is to minimize the cost of the entire supply chain planning horizon.
This shall be achieved by minimizing the fixed cost investment on building new warehouses
and factory facilities, choosing the right location for an optimal transportation cost from factory
to warehouse and from warehouse to customers.
Constraints
There are six types of constraints that have to be formulated in the construction of a model.
I. Factory Capacity Constraints
Meaning that each there are different locations which could be possibly chosen to locate
factories with the amount of capacity and fixed cost.
II. Storage Capacity of warehouse Constraints
For this constraint, there are various places that may be considered for locating factories
with a specific capacity and fixed cost.
III. Distribution amount from warehouse Constraints
Meaning that there are many different locations in which each warehouse could deliver
the goods to the customers.
IV. Customers’ demand Constraints
Meaning that in each demand, they have their own demand point for the brick.
V. Flow Conservative Constraints
It means the number of warehouses and the demand of customers must be equal to the
amount of product in and out.
VI. Integrality and Binary Constraints
The number of factories and locations need to be positive integers. Thus, the variable
whether to open a specific factory and warehouses can be determined by value zeo (not
open) or One (Open).
! Objective function
Subject to
! Factory Capacity
Dis1) Y11 + Y12 + Y13 + Y14 + Y15 + Y16 + Y17 + Y18 - 80000Y1 <= 0
Dis2) Y21 + Y22 + Y23 + Y24 + Y25 + Y26 + Y27 + Y28 - 90000Y2 <=0
Dis3) Y31 + Y32 + Y33 + Y34 + Y35 + Y36 + Y37 + Y38 - 100000Y3 <= 0
Dis4) Y41 + Y42 + Y43 + Y44 + Y45 + Y46 + Y47 + Y48 - 120000Y4 <=0
! Customer Demand
Flow1) X11 + X21 + X31 - Y11 - Y12 - Y13 - Y14 - Y15 - Y16 - Y17 - Y18 = 0
Flow2) X12 + X22 + X32 - Y21 - Y22 - Y23 - Y24 - Y25 - Y26 - Y27 - Y28 = 0
Flow3) X13 + X23 + X33 - Y31 - Y32 - Y33 - Y34 - Y35 - Y36 - Y37 - Y38 = 0
Flow4) X14 + X24 + X34 - Y41 - Y42 - Y43 - Y44 - Y45 - Y46 - Y47 - Y48 = 0
END
INT X1
INT X2
INT X3
INT Y1
INT Y2
INT Y3
INT Y4
Secondly, we have analysed four potential warehouses all located in Phnompenh. First
warehouse located in Russey Keo, which required a fixed cost of 150,000 USD and has a storage
capacity of 80,000 bricks. Another warehouse location based in Ta Kmav, required a fixed cost of
160,000 USD and has a storage capacity of 90,000 bricks. Third warehouse, located in Por Sen
Chey, requires a fixed cost of 170,000 USD and can store up to 100,000 bricks. Final warehouse
location is based in Kambol, requires a fixed cost of 200,000 USD and can store up to 120,000
USD.
Table 2
Fixed cost and inventory capacity
Warehouse Maximum Inventory Land price
Locations Capacity ($/m2)
Fixed cost
$650,000.0
0
Russey Keo 80,000 825
$600,000.0
0
Ta Kmav 90,000 444
$900,000.0
0
Por Sen Chey 100,000 499
$570,000.0
0
Kombol 120,000 583
These warehouse locations are directly supplied by RLRR Brick factory, then distributed
to individual customers or on site construction. The warehouse location decisions were made
based on several factors such as concentration of customers, real estate price, labor cost,
transportation costs. Further assumptions, formulations and calculations of the data are provided
as supplementary data for running location allocation models.
Bricks demand vary depending on the area of new construction development, according
to qualitative data, we have the following demand as shown in table [3]
Table 3
Average demand per day
Total average
demand per day
(units) Demand Centers
Por Sen Cbar Mean Dong Chhroy
SenSok Chey Ompov Chey Kor Changva Ta Kmav Kombol
Demand 20,000 30,000 20,000 30,000 30,000 20,000 30,000 40,000
Por Sen
Russey Keo Ta Kmav Chey Kombol
Factory Locations Kean Svay $35.00 $33.00 $40.00 $48.00
III. Conclusion
In conclusion, choosing the right location for factories and warehouses is a really difficult
and hard decision to make for a new business because it must take deep consideration and some
time. The company could choose the right location to gain benefit and grow the revenue. In this
term paper, we have done analyzing many criteria and used Multi level location allocation and
QGIS to support. Therefore, we could be able to select the proper location for factories that we
are able to open at Kean Svay and Oudong.
Whereas, the locations for warehouses are located at Russey Keo district and Ta Kmav city. Those
locations are really suitable and potential to help the company to minimize transportation cost and
fast delivery to customers in Phnom penh.
IV. References
Europlatforms EEIG. (2004). Logistics Centers Directions for use. United Nations Economic
Commissions for Europe.
Skowron-Grabowska, B. (2008). DEVELOPMENT OF LOGISTICS CENTRES IN POLAND.
Czestochowa University of Technology, Management Faculty.
Lipscomb, R. T. (2010). Strategic criteria for evaluating inland freight hub locations. Missouri
university of science and technology
X1 represents the location of a cray brick factory in Kean Svay, Jbar Ompov district.
X2 represents the location of a cray brick factory in Oudong, Kandal province.
Y1 represents the location of a cray brick warehouse in Russey Keo district.
Y2 represents the location of a cray brick warehouse in Ta Kmav city.
Y4 represents the location of a cray brick warehouse in Kambol district.
X11 represents the amount of transportation from the factory in Kean Svay to the warehouse in
Russey Keo district.
X12 represents the amount transported from the factory in Kean Svay to the warehouse in Ta
Kmav city.
X24 represents the amount transported from the factory in Oudong to the warehouse in Kambol
district.
Y11 represents the amount transported from a warehouse in Russey Keo district to demand 1.
Y16 represents the amount transported from a warehouse in Russey Keo district to demand 6.