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Literature Review

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

A. Analysis of flow chart


In the framework of our study, we will lay out the foundation of the business environment
and build applications of location allocation models. Whereas, the strategic location problem may
combine the qualitative data of how information flows, and what demand for new allocation such
as sizes of new facilities, capacity of inventory and functionality of facilities. Typically, we will find
quantitative for location problems to find optimal numbers, minimize costs or maximize the profit.
We will model new location facilities for our brick factories and warehouses in the selected
potential locations. This model not only helps to determine the optimal factory and warehouse
location but also indicates reduced costs of fixed investment for cheaper transportation costs,
especially, maximizing brick capacity supply more efficiently and effectively.

B. Process of model formulation


To make this paper more convenient, we will apply 3 tools to support our research such as
QGIS and Multi level location allocation.
Google Earth
For google earth, we did research about Cambodia geography, which has the amount of land soil
that could support our business and then we did also find the geography of phnom penh city. After
we found out, we took all the data into QGIS.

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.

Multi level location allocation


For Multi level location allocation, we use it to minimize the total cost of locating factories and
warehouses. Within the data of fixed cost for factories (By mixing land cost and construction)
,capacity (we pick the amount of the brick that we produce per day) and transportation cost (from
factories to warehouses and from warehouses to customers). All the cost we have given is based
on the distance between warehouses to customers in the following district in Phnom Penh.
Therefore, We think that Multi level location allocation will solve the problem that we face in this
term paper.
Given
● Transportation costs between factories to warehouses and warehouses to customers
● Factory production capacity and storage capacity of warehouses
● Fixed cost investment for factory and warehouse
● Customer demand are vary depending on locations
● Flow conservative

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

Min 800000X1 + 760000X2 + 550000X3 + 650000Y1 + 600000Y2 + 900000Y3 + 570000Y4 + 35X11 +


33X12 + 40X13 + 48X14 + 43X21 + 51X22 + 42X23 + 35X24 + 35X31 + 50X32 + 44X33 + 46X34 +
28Y11 + 30Y12 + 50Y13 + 35Y14 + 33Y15 + 25Y16 + 40Y17 + 38Y18 + 49Y21 + 20Y22 + 29Y23 +
34Y24 + 34Y25 + 47Y26 + 10Y27 + 39Y28 + 29Y31 + 10Y32 + 37Y33 + 24Y34 + 30Y35 + 42Y36 +
33Y37 + 34Y38 + 32Y41 + 35Y42 + 44Y43 + 34Y44 + 30Y45 + 47Y46 + 38Y47 + 10Y48

Subject to

! Factory Capacity

Fac1) X11 + X12 + X13 + X14 - 150000X1 <= 0

Fac2) X21 + X22 + X23 + X24 - 140000X2 <= 0

Fac3) X31 + X32 + X33 + X34 - 120000X3 <= 0

! Storage Capacity of Warehouse

Ware1) X11 + X21 + X31 - 80000Y1 <= 0

Ware2) X12 + X22 + X32 - 90000Y2 <= 0

Ware3) X13 + X23 + X33 - 100000Y3 <= 0

Ware4) X14 + X24 + X34 - 120000Y4 <= 0

! Distribution amount from warehouse

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

Cus1) Y11 + Y21 + Y31 + Y41 >= 20000

Cus2) Y12 + Y22 + Y32 + Y42 >= 30000

Cus3) Y13 + Y23 + Y33 + Y43 >= 20000

Cus4) Y14 + Y24 + Y34 + Y44 >= 30000

Cus5) Y15 + Y25 + Y35 + Y45 >= 30000

Cus6) Y16 + Y26 + Y36 + Y46 >= 20000

Cus7) Y17 + Y27 + Y37 + Y47 >= 30000

Cus8) Y18 + Y28 + Y38 + Y48 >= 40000


! Flow Conservative

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

C. Data collection method 01. Company and data description


The model is developed and applied with RLRR brick company, manufacturer and
distributor of brick. Thus, bricks are distributed to company’s warehouses or sold directly to
construction enterprises or individual customers. In developing countries, the demand of
construction products continuously increases over years, according to the growth of economic,
social development.
First of all, it is necessary to determine the location of brick factories corresponding to the
sources of material, demand allocations and production capacity. Therefore, three potential
factories are chosen for study. First potential brick factories are located in Kean Svay (Kandal)
(Northeast of Phnompenh), this location concentrates on progressive construction development
and abundant clay supply (Material to produce brick). Kean Svay requires a fixed cost investment
of 800,000 USD and has a maximum production capacity to produce 150,000 bricks per day.
Another potential factory located in Oudong (Kandal) (West of Phnompenh) sits in a perfect
location of real estate construction and has an advantage of road networks but constrained in
labor cost. It requires a fixed investment of 760,000 USD and has a maximum production capacity
of 140,000 bricks per day. Final potential location is based in Viheasur (Kandal), it requires a fixed
investment cost of 550,000 USD and has a maximum production capacity of 120,000 bricks per
day.
Table 1
Fixed cost and production capacity
Maximum Production Land price
Capacity ($/m2)
Factory Locations Fixed cost
Kean Svay $800,000.00 150,000 95

Oudong $760,000.00 140,000 55

Viheasur $550,000.00 120,000 43

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

Transportation cost from warehouse to demand center as shown in table [4]


Table 4
Product unit transportation
cost

Total Product Unit Transport Cost


($/Truck) Demand Centers

Por Sen Cbar Mean Dong Chhroy Ta

SenSok Chey Ompov Chey Kor Changva Kmav Kombol


Warehouse$40.0
LocationsRussey Keo $28.00 $30.00 $50.00 $35.00 $33.00 $25.00 0 $38.00
Ta $10.0
Kmav $49.00 $20.00 $29.00 $34.00 $34.00 $47.00 0 $39.00
$33.0
0
Por Sen Chey $29.00 $10.00 $37.00 $24.00 $30.00 $42.00 $34.00
$38.0
0
Kombol $32.00 $35.00 $44.00 $34.00 $30.00 $47.00 $10.00
Transportation cost from Factory to warehouse as shown in table [4]
Table 5
Product unit transportation cost

Total Product Unit Transport Cost ($/Truck) Warehouse Centers

Por Sen
Russey Keo Ta Kmav Chey Kombol
Factory Locations Kean Svay $35.00 $33.00 $40.00 $48.00

Oudong $43.00 $51.00 $42.00 $35.00

Viheasur $35.00 $50.00 $44.00 $46.00


All data were taken and made estimation based on our assumption and additional data
collection from the cray brick factory. Additional qualitative and quantitative data are researched
for correction, completion and confirmation.

D. Required and type of data


Distance from Factories to Warehouse
Distance from Warehouses to Customers
E. Model assumption
There is some datas that we make assumptions in this term paper in order to make it more
convenient. however , those datas are really acceptable:
- The distance from factories to warehouses and warehouses to customers.we made
assumptions based on the distance in google map from one place to another place.
- The capacity of factories and warehouses: for that data, we decided to make assumptions
depending on the amount of fixed cost of factories and warehouses. For example, factory
1 has a fixed cost 80000$ which is estimated to be 150000 for capacity.
- The actual demand: it’s hard to find the actual demand that the customer wants. Based
on the amount of capacity of warehouses, we did make assumptions in order to use it
more easily. For example, the demand in Khan Porsenchey is 30000.
- Transportation cost: we charge it as one truck, it can store 10000 for brick. We make
assumptions based on the distance from warehouses to customers in those districts in
Phnom Penh. For example, like our warehouse is located in Takhmao and the customer
is located in Chbar Ampov, so we charge $29 because it is near the warehouse.
IV. Result and Discussion
A. Location allocation discussion and results
After applying all the constraints into the Lindo application in order to minimize the cost,
and selecting the best site location for both factories and warehouses, we see the very useful and
reliable result, and we aim to build the factory and warehouse based on the result and value that
Lindo has shown.
The Lindo application has provided us the results as below:
OBJECTIVE FUNCTION VALUE
1) 0.1576000E+08
VARIABLE VALUE REDUCED COST
X1 1.000000 800000.000000
X2 1.000000 760000.000000
X3 0.000000 550000.000000
Y1 1.000000 650000.000000
Y2 1.000000 420000.000000
Y3 0.000000 -3600000.000000
Y4 1.000000 570000.000000
X11 40000.000000 0.000000
X12 90000.000000 0.000000
X13 0.000000 40.000000
X14 0.000000 13.000000
X21 0.000000 8.000000
X22 0.000000 18.000000
X23 0.000000 42.000000
X24 90000.000000 0.000000
X31 0.000000 0.000000
X32 0.000000 17.000000
X33 0.000000 44.000000
X34 0.000000 11.000000
Y11 20000.000000 0.000000
Y12 0.000000 10.000000
Y13 0.000000 21.000000
Y14 0.000000 1.000000 Y15
0.000000 3.000000
Y16 20000.000000 0.000000
Y17 0.000000 30.000000
Y18 0.000000 28.000000
Y21 0.000000 21.000000
Y22 30000.000000 0.000000 Y23
20000.000000 0.000000
Y24 10000.000000 0.000000
Y25 0.000000 4.000000
Y26 0.000000 22.000000
Y27 30000.000000 0.000000
Y28 0.000000 29.000000
Y31 0.000000 11.000000
Y32 0.000000 0.000000
Y33 0.000000 18.000000
Y34 0.000000 0.000000
Y35 0.000000 10.000000
Y36 0.000000 27.000000
Y37 0.000000 33.000000
Y38 0.000000 34.000000
Y41 0.000000 4.000000
Y42 0.000000 15.000000
Y43 0.000000 15.000000
Y44 20000.000000 0.000000

Y45 30000.000000 0.000000


Y46 0.000000 22.000000 Y47
0.000000 28.000000
Y48 40000.000000 0.000000
According to the result that we have received from the Lindo application, we are able to
build the factories at location X1 (Kean Svay) which can reduce the cost 800000 $, and at location
X2 (Oudong) which can reduce the cost 760000 $. More than this, the location for warehouses
will be chosen following the value from the results which are well known as Y1 (Russey Keo
district) that can reduce the cost 650000 $, Y2 (Ta Kmav) can reduce the cost 420000 $, and Y4
(Kambol) can reduce the cost 570000 $. So, we aim to build the factories at Kean Svay, Jbar
Ompov district and at Oudong, Kandal province. And for the warehouse we are willing to locate in
Russey Keo district which (Y1) can reduce the cost 650000, Y2 Ta Kmav city reduces the cost
420000, Kambol district (Y4) can reduce the cost 570000 $

Potential location decision analysis

Final decision location analysis


B. QGIS results and discussion
01. Material Sources data
Clay is the fundamental element for producing brick. Brick factory shall open in the location where
it has abundant clay sources. According to geometric analysis, Alluvial Lithosols,
Alumisois, Basic Lithosols and brown Alluvial Soils are the type of clay soils.
According to this graph, our potential brick factories are located in the blue area, where clay supply
is abundant and cheap. Therefore, we can produce brick at a low cost, reducing transportation cost
of material flow.

02. SEZ data support


Phnompenh Special Economic zone, Kandal SEZ attracts real estate and construction
investors. New housing and factory buildings are being constructed to complement the economic
development, leading to higher demand for brick.

03. Construction and Real estate development


As a result of our visualization, it showed that our warehouses are able to supply their
nearest customers. Thus, national construction projects and factory construction are the magnets
for newly developed construction. Which means, demand will increase, also we can deliver the
product to them on time and lower cost.

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

Jan Moellmann and Valerie M. Thomas, Socio-Economic Planning Sciences,


https://doi.org/10.1016/j.seps.2019.02.009
V. Appendix

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.

Y22 represents the amount transported from a warehouse in Ta Kmav to demand 2.


Y23 represents the amount transported from a warehouse in Ta Kmav to demand 3.
Y24 represents the amount transported from a warehouse in Ta Kmav to demand 4.
Y27 represents the amount transported from a warehouse in Ta Kmav to demand 6.
Y44 represents the amount transported from a warehouse in Kambol district to demand 4.
Y45 represents the amount transported from a warehouse in Kambol district to demand 5.
Y48 represents the amount transported from a warehouse in Kambol to demand 8.

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