Facility Location Decisions

Decisions regarding facility locations have significant qualitative aspects to them. As with customer service, these factors may be challenging to incorporate into a quantitative decision model. Consider the 10 most powerful factors in location decisions, from a 1999 survey of the readers of Transportation and Distribution (T D) magazine (Scwartz, 1999a), listed, not necessarily in order of importance, in the following  

In addition to the case studies we discussed in Section 5.5, a number of real-world applications in supply chain management are available in the Interfaces journal. Interfaces is published bi-monthly, by the institute cf operations research and management science (INFORMS). Each issue contains real applications of Operations Research models in practice. Supply chain management applications appear frequently in this journal. 

1 Explain the differences between set covering and set partitioning models. Give two applications of each. 

2 What is risk pooling How does it affect safety stock and transportation costs For what type of products risk pooling is beneficial  

3 Discuss the differences between the two types of quantity discounts. Is one better than the other If so, under what conditions  

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Canel C, Das SR (2002) Modeling global facility location decisions integrating marketing and manufacturing decisions. Industrial Management Data Systems 102 110-118... 

Current J, Min H, Schilling D (1990) Multiobjective analysis of facility location decisions. European Journal of Operational Research 49 295-307... 

Kathawala Y, Gholamnezhad H (1987) New approach to facility location decisions. International Journal of Systems Science 18 389-402 Kaufman L, Vanden Eede M (1977) A Plant and Warehouse Location Problem. Operational Research Quarterly 28 547-554 Keeney RL (1992) Value-Focused Thinking. Harvard University Press, Cambridge, Massachusetts... 

Of course transportation costs may affect facility location decisions. Review of some optimization problems regarding transportation is in Sect 4.1. 

Abstract Transportation and facility location decisions are crucial in strategic supply chain design. Optimization models guide location decisions giving the optimal site selection under certain assumptions and constraints. It is an art to decide which model to use and how to modify the results based on the needs of a company. This chapter presents some of the important optimization models in supply chain. Mathematical formulations and solution procedures are also given. The models can be expanded for multi-echelon supply chains and/or include multiple products. 

They reveal that facility location problems mostly include inventory and production decisions as well while routing, transportation mode selection, and procurement integrated location decision problems receive less attention in the literature. Facility location decisions are strategic in supply chain design since a company supply chain will need to adapt to changing market needs migrating to new locations for example. They also state that most of the facility location studies consider minimization of costs as the objective. 

What are the pros and cons of discrete and continuous location models in facility location decisions Discuss their practical applications. 

Facility location decisions have a long-term impact on a supply chain s performance because it is expensive to shut down a facility or move it to a different location. A good location decision can help a supply chain be responsive while keeping its costs low. Toyota, for example, built its first U.S. assembly plant in Lexington, Kentucky, in 1988, and has continued to build new plants in the United States since then. The U.S. plants proved profitable for Toyota when the yen strengthened and cars produced in Japan were too expensive to be cost competitive with cars produced in the United States. Local plants allowed Toyota to be responsive to the U.S. market while keeping costs low. 

Harding, Charles F. Quantifying Abstract Factors in Facility-Location Decisions. Industrial Development (May-June 1988) 24. 

Building 5 is low occupancy and does not need to be considered for further evaluation, for the purposes of personnel protection. However, since Building 5 is critical to the long-term continued operation of the facility, the decision was made to keep it in the evaluation pool to see if business risks were created because of its location. 

Meyer-Lindemann (1951) proposed the first segmentation of industrial facility location research in German literature. Based on the research objective, he defined four segments Location selection analyzes the determinants of location decisions, location impact analyzes the effect a given location decision has on its environment, location development analyzes the historical development of site structures and location policy seeks to create economic policy options to influence location decisions of companies. 

While the underlying mathematical optimization problem, also referred to as Steiner-Weber-problem or minisum problem, is one of the classical models discussed in operations research literature on facility location (cf. Drezner et al. 2001), it is much too abstract to be of real value to actual industrial location decisions (cf. Gotze 1995, p. 56). A general criticism of Weber s theory can be found in Behrens (1971, pp. 15-19) and Meyer-Lindemann (1951, pp. 55-67). 

Karakaya F, Canel C (1998) Underlying dimensions of business location decisions. Industrial Management Data Systems 7 321-329 Karkazis J (1989) Facilities location in a competitive environment A PROMETHEE based multiple criteria analysis. European Journal of Operational Research 42 294-304... 

Wirtschaftswissenschaftliches Studium 1 388-393 Tong H-M, Walter CK (1980) An Empirical Study of Plant Location Decisions of Foreign Manufacturing Investors in the United States. Columbia Journal of World Business 15 66-73 Tragantalerngsak S, Holt J, Ronnqvist M (2000) An exact method for the two-echelon, single-source, capacitated facility location problem. European Journal of Operational Research 123 473-489 Triantaphyllou E (2001) Two New Cases of Rank Reversals when the AHP and Some of its Additive Variants are Used that do not Occur with the Multiplicative AHP. Journal of Multi-Criteria Decision Analysis 10 11-25... 

Yang J, Lee H (1997) An AHP decision model for facility location selection. Facilities 15 241-254... 

Key supply chain management decisions include selection of new facility locations, manufacturing quantities, transportation, and information system related decisions. 

In Chap. 2, we dealt with topics in supply chain management. Supply chain management comprises decision making about facility location, production, transportation, and inventory control. Many companies employ optimization as a decision making tool. Here, we will introduce important and core optimization models and solution strategies for some important supply chain problems. 

The models and arguments in this section are mostly based on Watson et al. (2013) s book [4]. Location problem are very diverse. American Mathematical Society (AMS) has specific codes for location problems (90B80 for discrete location and assignment, and 90B85 for continuous location) [2]. General location problems include customers and facilities to satisfy customer demands. Facility locations problems are classified as discrete and continuous ones. Here, we are interested in discrete facility location problems. Also problem distinction is based on being capacitated or not. Melo et al. [2] identify four core features to be included in a facility location model to use in supply chain decisions ... 

The book starts with an Introduction and the second chapter deals with Supply Chain Management. This chapter discusses key decisions in supply chain management and considers planning operations for it. The third chapter introduces Scheduling Models in Supply Chain. The last chapter is Optimization in Supply Chain. Optimization problems and models reviewed are classified under transportation and facility location. 

The RFID-based model to overcome the aforementioned deficiencies involves implementing a facility-wide decision-making model that utilizes RFID data coming from tagged inventory items stored in the buffers. The location of each buffer combined with time-stamped tag ID can be used to capture the actual status of each buffer and incoming and outgoing materials, thus inventory replenishment can be carried out in a more efficient manner. 

A facility located at a safe distance from an emergency site, where the incident commander, key staff, and technical representatives can make decisions and deploy emergency manpower and equipment, i.e., tactical level on-scene incident command functions. It is typically identified by a green rotating or flashing light. 

Finally, Brush et al (1999) report survey results analyzing actual international plant location decisions among large multinational firms, while various company-specific facility network design issues and decision support systems have been discussed in the applications-oriented literature—see the Breitman and Lucas (1987) work on General Motors, Davis (1993) work on Hewlett-Packard, Amtzen et al. (1995) work on Digital Equipment Corporation, and Cowie (1999) work on RCA. 

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