Site Location Methodology: Center of Gravity Method
• Finds location of single distribution center serving several destinations • Considers – Location of existing destinations – Volumes of goods to be shipped between them – Shipping distance (or cost) between them • Involves formulas used to compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above.
Two basic transportation networks
•Point to point •Hub and spoke network
How to use this two basic transportation networks to design business logistics networks?
Y Q
(790,900)
S ho wro o m
No o f Z-Mo b ile s s o ld p e r mo nth 1250 1900 2300
D
(250,580)
A D Q
A
(100,200) (0,0)
X
Question: What is the best location for a new Z-Mobile warehouse considering only distances and quantities sold per month?
Sites Major factors for center location Pt. Range A B
Fuels in region Power availability and reliability Labor climate Living conditions Transportation Water supply Climate Supplies Tax policies and laws
Suppliers overseas A1
transportation
manufacturers
Distribution center truck
IBM
truck
C
D1
A2 A3 Local suppliers （Minolta） Parts, half-finished products Fault parts Inbound logistics network in IBM S1 S2 Konica-Minolta
Chapter 10
Logistics network decision
Learning Outline ： 1. Two basic network models 2. Basic business logistics network 3. Design methods Emphasis: Design methods Case discussion in group: Logistics network design
Issues in Facility Location
(region/community decision)
• Corporate desires • Attractiveness of region (culture, taxes, climate, etc.) • Labor availability, costs, attitudes toward unions • Cost and availability of utilities • Environmental regulations • Local Infrastructure • land/construction costs • Proximity to raw materials and customers • Government Policy
A D Q
Step2 Determining the Coordinates of the New Facility
Compute the new coordinates using the formulas:
2,417,000 100(1250) + 250(1900) + 790(2300) = 443.49 = Cx = 5,450 1250 + 1900 + 2300
Common business logistics networks
1.Direct Shipping: Shipment travels directly from consignor to consignee. consignor consignee
Used primarily for TL shipping or short lead time
Issues in Facility Location
(site decision)
• Transportation modes • Transportation cost • Site size and cost
Methods in Location Decision
• Factor Rating Method
3,422,000 200(1250) + 580(1900) + 900(2300) = 627.89 = Cy = 5,450 1250 + 1900 + 2300
0 to 330 0 to 200 0 to 100 0 to 100 0 to 50 0 to 10 0 to 50 0 to 60 0 to 20
123 150 54 24 45 34 8 45 45
Total pts. 528
558
156 100 63 96 55 14 4 50 Best Site 20 is B
Step1 Determining Existing Facility Coordinates
To begin, you must identify the existing facilities on a twodimensional plane or grid and determine their coordinates.
Common business logistics networks
2.Hub-and-spoke: Large hub terminals are employed for freight consolidation. Medium-volume consignee consignor services are used for spoke-to-hub collection and hubto-spoke distribution. hub Air freight, parcel shipping, LTL and, more recently, ocean shipping is organized in this manner.
region/community decision
• Center of Gravity Method • Linear Programming
site decision
Factor Rating Method
Two logistics centers (A and B) are assigned the following range of point values and respective points, where the more points the better for the center location.
Example of Center of Gravity Method Several automobile showrooms are located according to the following grid which represents coordinate locations for each showroom.
What is the difference between the direct shipping and hub-and-spoke network?
The basic stages of logistics network design
• Divide the whole supply chain into two parts : inbound and outbound • Use the basic network models • Establish the inbound and outbound logistics networks separately • Decide the locations of logistics center (or DC or warehouse)
Y Q
(790,900)
D
(250,580)
A
(100,200) (0,0)
X
You must also have the volume information on the business activity at the existing facilities.
S ho wro o m
No o f Z-Mo b ile s s o ld p e r mo nth 1250 1900 2300
Transportation terms • Direct Shipping: Shipment travels directly from consignor to consignee. Used primarily for TL shipping. • Dead-head: A portion of a transportation trip in which no freight is conveyed; an empty move. • Hub-and-spoke: Large hub terminals are employed for freight consolidation. Medium-volume services are used for spoke-to-hub collection and hub-to-spoke distribution. Air freight, parcel shipping, LTL and, more recently, ocean shipping is organized in this manner. • Pickup and delivery (cartage): Local hauling of freight • Longhaul (or Linehaul): Terminal-to-terminal freight movements • Milk runs: a vehicle route in which a truck delivers (picks up) freight from (for) a single terminal to (from) a number of consignees.