The Blue Horseshoe Blog

The Lion, the Witch, and the Warehouse. Factors to Consider when Completing a Network Design Study

Posted by Blue Horseshoe on Jun 22, 2012 11:52:33 AM

by: Chris Elliott
Many consulting professionals are familiar with the prototypical story of how a manufacturing company selects a location for their new warehouse. In one version, a College Intern spends their entire summer pulling data on customer orders, shipping expenses to customers, transit times, labor rates, and other key data points that drive facility location decisions. The Intern takes this massive data set and pushes her technical abilities to the limit building the model that will predict the best location for the new warehouse.

After months of grueling work, the Intern puts together a presentation. With her manager, they present the location proposal to the CEO of the company. They propose building a new warehouse in a location central to customer demand. This will allow them to quickly service all their customers with the lowest possible transportation cost. At the end of the presentation, the CEO thanks the Intern for her hard work and tells her, “It looks like you put a lot of work into this project and your numbers look good, however, we are going to put the warehouse right next door to this office so I can keep my eye on things.”

For Operations Research minded professionals, the facility location problem typically results in developing a distance function, a cost function, and solving a mixed integer programming problem that will a solution that tells you where to locate the facility. From a technical standpoint, it seems like a very straightforward problem with a straight forward solution. The story of the Intern illustrates that in most cases when the numbers make sense, there are also many, “soft factors,” that go into decisions on warehouse location, size, and configuration that can complicate the facility location problem.

Some of the “soft factors” that you can encounter include:

  1. Land or facilities already owned by the company
  2. Distance to a key customer or supplier
  3. Location in relation to senior management
  4. Environmental, political, or workforce related issues
  5. Opinion of senior management

As you are working on developing a plan for were to locate a new facility?
Have you brainstormed all of the additional factors that will affect your facility location decision?
Do you know where to start?

At TransTech Consulting, a Blue Horseshoe company, we have helped companies across multiple manufacturing and distribution disciplines determine the best location for their facilities. Utilizing our expert knowledge of the hard and soft factors of the facility location problem, we can help you determine the correct location, size, and layout for your facility. We can also help you determine if you have too many or too few facilities and assist your organization with creating a distribution network that meets your company’s customer service objectives.

Tags: Strategy

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