LOGISTICS OF

FACILITY LOCATION

A N D ALLOCATION

DILEEP R. SULE
Louisiana Tech University
Ruston, Louisiana

Copyright 2001 by Dekker, Inc. All Rights Reserved.

 ISBN: 0-8247-0493-2

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 Preface

Facility location has long been a subject of interest among industrial engineers,
transportation engineers, management scientists, operations researchers, and
logistics personnel. Major contributors to the ®eld have come from many sources,
but perhaps the largest single source has been well-trained mathematicians. As
such, most of the facility location research published in journals and books has
been mathematical in nature. Although the theorems and proofs that go along
with this research are very important for analyzing the subject matter, the
associated derivations and mathematical rigor can be intimidating to practicing
engineers and business executives. And the same is true with most undergraduate
and ®rst-year graduate students, who may not be so mathematically inclined. Yet
facility location is an important subject with numerous practical applications, and
a happy medium must thus be found between theory and practice. Procedures that
can be easily understood have a higher probability of being used in real life.
This book outlines such procedures for various location and allocation
objectives. To facilitate understanding of concepts, each procedure is illustrated
by a problem and its solution. However, this is not a cookbook. There are
mathematical and logical foundations for the methods; these become apparent as
one follows the necessary steps of the procedures. The idea is to take out the
needless complexity and convey the solution procedure through simple steps. It is
helpful, but not necessary, for the reader to have had one course in operations
research. Many models are formulated as linear programming (LP) models to
illustrate the mathematical structure, but are solved by simpler, alternative
methods. For those with access to a computer program to solve LP problems,
the formulations may be used to verify the results obtained by these alternative
methods. Operations research techniques using the branch-and-bound algorithm,

Copyright 2001 by Dekker, Inc. All Rights Reserved.

 transportation algorithm, assignment algorithm, and dynamic programming are
illustrated before being used in location models.
The book is designed to cover most of the broad topics in location analysis
and can be used as a textbook as well as a reference book. The course can be a
one-semester course for advance undergraduate or early graduate students in
industrial engineering, management science, transportation science, logistics,
systems engineering, or related ®elds. The content of the book includes models
in which facilities may be placed anywhere in the plane (continuous location
theory), at some discrete locations (discrete models), or on a network (network
analysis).
The text has 12 chapters. The ®rst is an introductory chapter; it also
presents an elementary but popular ranking method for location selection.
Chapter 2 presents some of the recent applications of fuzzy logic and the
analytical hierarchy procedure (AHP) in location selection. Some of these
procedures are long, but they can be computerized once the fundamentals are
understood.
Chapters 3 and 4 are associated with continuous location problems for a
single facility. A facility can be located to optimize the number of different
objectives; the optimal location in each case may not be the same. Chapter 3
addresses the objective of minimizing the travel cost, called the minisum
problem. Based on the mathematical expression for travel cost, a number of
different procedures are applicable. Chapter 4 incorporates objectives such as
minimizing the maximum distance, the circle covering problem, working with an
undesirable facility location, and linear path facility development.
Chapter 5 addresses placement of multiple facilities in a continuous
location problem. Unfortunately, it is not a direct extension of a single facility
location problem and requires some effort. This chapter also discusses the
machine layout models for ef®cient material ¯ow analysis.
Chapter 6 is a basic location±allocation model that initiates discrete
location analysis. The objective is to select from among the known locations
the required number of locations to place facilities, and then allocate customers to
receive service from one of these facilities to minimize cost.
Chapter 7 describes facility location in network-based problems. These
problems are typical in transportation planning and other such applications in
which travel is permitted only by a path represented on the network. The chapter
describes, for example, where to place a competitive facility or how to develop a
transportation hub.
Chapter 8 describes the procedures in tour development. In many instances
the objective is to develop ef®cient routes for deliveries and collections of
customer orders. This is a logistical problem of connecting different customers
in sequence to minimize transportation cost. The procedures illustrated in this
chapter accommodate many different modes of operation.

Copyright 2001 by Dekker, Inc. All Rights Reserved.

 Chapter 9 deals with data changes due to such factors as shifts in demand
pattern or foreseen changes in the use of the facilities. Changes are time-
dependent; we often have to decide the initial location of the facility, and
then when and where to move the facility to respond to changing costs and
demands.
Chapter 10 addresses simultaneous facility location or, as popularly called
in the literature, a quadratic assignment problem. Besides the well-known branch-
and-bound procedure, a few easy-to-apply heuristics are explained that lead to a
good, often optimal, solution.
Chapter 11 introduces transportation network±related problems, as it
mainly applies the transportation algorithm to minimize nonlinear transportation
costs as well as the maximum response time from a source to a destination in a
transportation network.
Chapter 12 describes new location±allocation modes in a production
environment. It describes which locations to select if there is a ®xed cost for a
location, if the cost of production varies from location to location, or if there is an
advantage associated with a large-scale production at one place. It also discusses
the machine or facility capacity selection procedure based on the various costs
associated with machines of different capacity. It is an interesting chapter, and
although the procedures seem lengthy at ®rst glance, they can be easily grasped if
the example solutions are followed.
An instructor should have no problem in developing a facility location
course by selecting appropriate chapters that he or she feels are suitable for the
class. Chapters 1, 2, 7, and 11 are independent and require no previously acquired
information from other chapters.

Dileep R. Sule

Copyright 2001 by Dekker, Inc. All Rights Reserved.

 Acknowledgments

I would like to thank a number of students in my facilities location class who

suffered through an incomplete manuscript while it was being developed and
made some useful suggestions for improvement. My special thanks to Rahul
Joshi and Kedar Panse, who spent many days (and nights) developing some of the
topics. Their efforts are sincerely appreciated. My thanks also to Advait Damle,
Vikram Patel, and Amol Damle for proofreading the ®nal copy.
Important suggestions were also made by Horst Eiselt, Trevor Hale, and
Vedat Verter, who served as reviewers. Although not all the suggestions could be
incorporated, the book has bene®ted greatly from their comments. I thank these
reviewers for their time and effort.
The staff of Marcel Dekker, Inc., especially acquisitions editor John
Corrigan and production editor Michael Deters, were very helpful in production
of the book, and I thank them for their support.
And ®nally, to my wife, Ulka, and my children, Sangeeta and Sandeep, my
thanks for their support during this proejct.

Copyright 2001 by Dekker, Inc. All Rights Reserved.

 Contents

Preface

Part I Introduction and Qualitative Methods

1. Introduction and the Traditional Approach
2. Fuzzy Logic and the Analytical Hierarchy Procedure

Part II Basic Quantitative Models

3. Single-Facility Minisum Location
4. Alternative Objectives in Single-Facility Location
5. Multiple Facility Location
6. Basic Location±Allocation Model
7. Network Facility Location

Part III Tour Development Models

8. Logistics in Tour Development

Part IV Additional Quantitative Models

9. Dynamic Facility Locations
10. Simultaneous Facility Location
11. Transportation Network Problems
12. Allocation±Selection Models in the Production Environment
Bibliography

Copyright 2001 by Dekker, Inc. All Rights Reserved.