Lecture Operations and supply chain management: The Core (3/e) – Chapter 14: Location, logistics, and distribution

Location, Logistics, and
Distribution
Chapter 14
McGraw­Hill/Irwin

        Copyright © 2013 by The McGraw­Hill Companies, Inc. All rights reserved.


Learning Objectives
1.
2.

3.
4.

5.

Describe what a third-party logistics
provider is.
Assess the major issues that need to be
considered in locating a plant or warehouse
facility.
Learn how a factor-rating system can be
used to narrow potential location sites.
Set up the transportation model to analyze
location problems and how to use Excel
Solver to find solutions to these models.
Understand the centroid method for locating
entities such as cell phone communication
towers.

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Logistics






Logistics - the art and science of obtaining,
producing, and distributing material and
product in the proper place and in the proper
quantities
International logistics - managing these
functions when the movement is on a global
scale
Third-party logistics company - an outside
company used to manage all or part of
another company’s logistics functions
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Logistics Decisions

Multimodal
solutions
are the
norm

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Warehouse Activities

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Facility Location Issues

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Facility Location Issues

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Plant Location Methods

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Factor-Rating System











Most widely used
List of factors is
developed
Range of possible points
assigned to each factor
Each site is rated against
each factor
The sums of assigned
points for each site are
computed
The site with the most
points is selected

Example – refinery location factors

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Linear Programming –
Transportation Method




Transportation method is a special linear

programming method
Seeks to minimize costs of shipping n units to m
destinations or its seeks to maximize profit of
shipping n units to m destinations

A
B

5

1
7

9
8

2
6
4

3
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Example 14.1

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Example 14.1

Excel: US Pharmaceutical

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Centroid Method


Used for locating single
facilities that considers
existing facilities, the
distances between them,
and the volumes of goods to
be shipped between them






Assumes inbound and
outbound transportation costs
are equal
Does not include special
shipping costs for less than a
full load

This methodology involves
formulas used to compute

the coordinates of the twodimensional point that meets
the distance and volume
criteria stated above

Cx =X coordinate of centroid
Cy =Y coordinate of centroid
dix =X coordinate of the ith
location
diy – Y coordinate of the ith
location
Vi – volume of goods moved to or
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th
from the i location


Example 14.2

Excel: Centroid
Calculation
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Service Facility Location

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