Qualitative techniques subjective factor rating

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Qualitative techniques: (subjective) * Factor rating * Gravity model (“quick and dirty” method)
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Location Decision Techniques (II) Quantitative techniques: (objective) 1. Optimization: cost analysis/mathematical programming (LP/IP/GP)/transportation model/…….. 2. Non-optimization: heuristics/computer simulation 3. AHP Model Non-optimization methods are widely used in real world problems.
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Location Location Break-Even Analysis Break-Even Analysis Figure 10.2 Figure 10.2 Q (thousands of units) (thousands of units) 0 200 400 600 600 800 1000 1000 1200 1200 1400 1600 1600 2 4 6 8 10 10 12 12 14 14 16 16 18 18 20 20 22 22 A best A best B best B best C best C best Break-even point 6.25 6.25 14.3 14.3 A D B C (20, 1390) (20, 1390) (20, 1200) (20, 1200) (20, 1060) (20, 1060) (20, 980) Break-even point Annual cost (thousands of dollars)
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Location Location Transportation Method Transportation Method Interpreting the Optimal Solution Interpreting the Optimal Solution Figure 10.4 Figure 10.4
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Factor-Rating System Locations Weight Criteria City X City Y 15% Supply of labor 8 10 5 Labor and union regulations 6 4 5 Community attitudes 10 8 5 Government regulations 2 6 10 Quality of life 8 6 60 Annual ROI 6 10 100 Total Rate 6.5 9.0 Rating System: excellent (10), very good(8), good(6), fair(4), poor(2)
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Methods of Locating Facility- I Locating a single facility On-site expansion Keeps management together/ Reduces construction time & cost Avoids splitting up operations/ Diseconomies of scale Poor materials handling/ Increasingly complex production control Lack of space at the present site Building a new plant Does not have to rely on production from a single plant Escape unproductive labor/ Modernize with all new technology Relocate (move out of existing facility) Relocating firms tend to be small They don’t move very far Often are single-plant companies needing space and needing to redesign their production processes and layouts
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Methods of Locating Facility- II Comparing several sites
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