1. Amity Business School
Facility Location
Presented by :-
Swati Khemka (B-22)
Udita Vijayvargia (B-24)
Saumyah Singh (B-27)
Shanti Pandey (B-38)

2. Amity Business School
INTRODUCTION
• Branch of operations research and computational geometry .
• Focuses on optimal placement of facilities to reduce costs
associated with transportation, distribution and production.
• Need for Facility Location
1. Start a new factory.
2. Expansion of existing Plant.
3. Plant Relocation.

3. Amity Business School
Location Problem
Selection of
Region
Selection of
Locality
Selection of
Actual Site

4. Amity Business School
Factors affecting Plant location
• Adequate Supply of Raw materials.
• Proximity to the market – Minimum supply time.
• Transport Facilities – Good capacity and speedy transportation.
• Supply of Labor – Cheap Labor Supply.
• Power – Regular Power Supply for operation machinery at full
capacity.
• Supply of Capital – Required for Initial promotion and Expansion.
• Natural Factors – Land, Water, Climate(Agriculture based
Industries).
• Political Factors – Favorable Development Policies.
• Government Subsidies – Exemptions, Rebates and Subsidies.
• Historical and religious factors.

5. Amity Business School
Selection of Location
Selection of Location
Semi-UrbanRuralUrban

6. Amity Business School
Selection of Location - Urban
• Advantages of Urban Areas
- Good transportation, communication services.
- Banking, Credit and Insurance facilities.
- Storage facilities.
- Availability of skilled, unskilled labor.
- Educational, Medical facilities.
• Disadvantages of Urban Area
- High Land Cost.
- High Labor Cost.
- High Attrition Rate.
- Municipal Restrictions, High Taxes.
- Strong Trade Unions.

7. Amity Business School
Selection of Location - Rural
• Advantages of Rural Areas
- Cheap Land and Labor.
- Low Labor attrition rate.
- Lesser Taxes, Municipal Restrictions.
- Sufficient Land available.
- Amicable relations between management and Labor.
• Disadvantages of Rural Area
- Lack of Transportation.
- Warehouse facilities unavailable.
- High Distribution Costs.
- Shortage of Skilled Labor.
- Lack of Banking, Municipal facilities.

8. Amity Business School
Selection of Location – Semi Urban
• Advantages of Semi Urban Areas
- Cheap Land compared to Urban areas.
- Availability of Adequate Land.
- Lesser cost of Distribution as compared to Rural areas.
• Disadvantages of Semi Urban Areas
- Conversion into Urban area with all its merits, demerits.

9. Amity Business School
Selection of Site - Factors
• Availability of cheap land.
• Repair facilities.
• Cost of laying the water supply and providing sewage.
• Cheap facilities for disposing of trade waste
• Fire protection facilities.
• Post and telegraph facilities.
• Cheap facilities for disposing of trade waste.

10. Amity Business School
Decision Techniques
• Qualitative methods
a. Equal weights method
b. Variable method
c. Weights cum rating method
• Quantitative methods
a. Location Break even analysis
b. Bridgeman’s Dimensional analysis
c. Median method
d. Centre of Gravity method

11. Amity Business School
Hypothetical Problem – Company Profile
• Company : Jubilant Life Sciences Limited.
• It is largest Custom Research and Manufacturing Services
(CRAMS) player and a leading Drug Discovery and Development
Solution (DDDS) provider out of India.
• Jubilant Organosys Ltd., headquartered at sector-16, Noida, near
New Delhi in India.
• Jubilant Organosys Ltd. has five existing facilities. The details of the
facilities are given in the table. The company wants to locate a new
facility so that the total transportation cost is the minimum. The
management of the company wants to know about the best possible
location using the median and centre of gravity method.

12. Amity Business School
Hypothetical Problem – Data Collection
Existing Plant Annual Load
(Tons)
Coordinates Cost of 1ton per 1Km
distance (Rs.)
Kochi 350
9.58 N 76.14 E
4
Vadodara 480
22.18°N 73.12 °E
4
Renukoot 275
24.2 N 83.03 E
4
Ghaziabad 370
28.40°N 77.26°E
4
Ludhiana 200
30.55°N 75.54°E
4

13. Amity Business School
Data Analysis Methods
- Median Method.
It is done on an assumption that the movement of load is done on
rectangular/rectilinear pattern. It is useful for single new facilities.
- Centre of Gravity Method.
It is an attempt to establish a ‘ Centre of Gravity’ with respect to
existing ancillary facilities.
Transportation cost = distance*annual load*cost of 1 unit by 1
distance.
Distance = | XJFC - Xmarket |+ |YJFC – Ymarket |

14. Amity Business School
Median method
Total annual load for all markets = 1675
Median = 1675/2 = 837.5
Moving along X-axis:
XJFL coordinate = 76.14 (i.e. the x coordinate of Kochi).
Moving along Y- axis:
YJFC coordinate = 24.2 (i.e. the y coordinate of Renukoot).
Now, transportation cost if operating from coordinate (76.14,
24.2) is calculated.

15. Amity Business School
For distance from my location to Kochi:
|76.14 -76.14| + | 24.2 -9.58| = 14.62
Transportation cost = 14.62*350*4 = 20468
For distance from my location to Vadodara:
|76.14 -73.12| + |24.2 -22.18|= 5.04
Transportation cost = 5.04*480*4 = 9676.80
For distance from my location to Renukoot:
|76.14 -83.03|+ |24.2 -24.2| = 6.89
Transportation cost = 6.89*275*4 = 7579
For distance from my location to Ghaziabad:
|76.14 -77.26| + |24.2 – 28.40| = 5.32
Transportation cost = 5.32*370*4 = 7873.6
For distance from my location to Ludhiana:
|76.14 -75.54| + |24.2 – 30.55| = 6.95
Transportation cost = 6.95*200*4 = 5560
Total transportation cost = 20468+9676.8+7579+7873.6+5560
= 51157.4

16. Amity Business School
Centre of gravity method
Formulae:
X=  Xi Li /  Li
Y =  Yi Li /  Li
X= (76.14*350 + 73.12*480 + 83.03*275 + 77.26*370 +
75.54*200) / 1675
X = 76.58
Y= (9.58*350 + 22.18*480 + 24.2*275 + 28.40*370 +
30.55*200) / 1675
Y = 22.25

17. Amity Business School
For distance from my location to Kochi:
|76.58 -76.14| + | 22.25 -9.58| = 13.11
Transportation cost = 13.11*350*4 = 18354
For distance from my location to Vadodara:
|76.58 -73.12| + |22.25 -22.18|= 3.53
Transportation cost = 3.53*480*4 = 6777.6
For distance from my location to Renukoot:
|76.58 -83.03|+ |22.25 -24.2| = 8.4
Transportation cost = 8.4*275*4 = 9240
For distance from my location to Ghaziabad:
|76.58 -77.26| + |22.25 – 28.40| = 6.83
Transportation cost = 6.83*370*4 = 10108.4
For distance from my location to Ludhiana:
|76.58 -75.54| + |22.25 – 30.55| = 9.34
Transportation cost = 9.34*200*4 = 7472
Total transportation cost =18354+6777.6+9240+10108.4+7472
= 51952

18. Amity Business School
Conclusion
• MEDIAN METHOD:
Coordinates (24.2, 76.14) and Transportation Cost for this
coordinate is 51157.4
• CENTRE OF GRAVITY METHOD:
Coordinates (22.25, 76.58) and Transportation Cost for this
coordinate is 51952
Thus it is seen that transportation Cost by Median method
is less than the Transportation Cost by Centre of Gravity
method
Thus the coordinates (24.2, 76.14) are used for establishing
the facility.

19. Amity Business School