Page 150 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes Table 5.4: Composite Location Scores

Factor Composite Location Scores
Factor
Rating Jammu Chandigarh Gurgaon
Required Amenities 4 12 28 36
Government Regulations 2 20 14 10
Ability to Expand Capacity 3 30 30 18
Easy Availability of Required 1 7 10 4
Land
Availability of Skilled Labour 4 8 24 36
Impact Analysis 4 40 32 24
Ease of Funding 5 25 25 50
Proximity to Market 3 6 15 30
Proximity to Suppliers 5 10 30 45
158 208 253

We can now convert the factor rating and location score into a composite score. This is done
easily by multiplying the factor rating with the location scores. The product is the composite
score for the location. The totals of all the factors are added and compared. The location with the
highest composite location score is the preferred location. This has been worked out in Table 5.4.

Based on the Factor Rating Analysis, Gurgaon is the best site for locating the new plant. It is a
significantly better location than Chandigarh or Jammu based on the factors that were identified
and the salience that was given to these factors.
There is an implicit assumption in this model that either the cost differences between the locations
are not significant or that the benefits also reflect the cost advantages of the location decision.
This assumption may or may not be true. In the example we have discussed above, the cost of
land in Gurgaon could be extremely high, while the historical cost of the Chandigarh land may
be insignificant. The cost of pollution control devices required at Gurgaon may be significantly
higher than that required in Jammu.
It is often better to use this model along with a quantitative model and compare the results
before taking a facility location decision. A number of other models are available and commonly
used that quantify both the benefits and costs of a specific location compared to others.

5.6.2 Centre of Gravity Method

In general, transportation costs are a function of distance, weight and time. The center-of-gravity,
or weight center, technique is a quantitative method for locating a facility such as a warehouse
at the center of movement in a geographic area based on weight and distance. This method
identifies a set of coordinates designating a central location on a map that minimises the weighted
average of the weight transported to all other locations. As such, it implicitly assumes that by
minimising the weight shipped, costs are also minimised.

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