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Centre of Gravity Method for Location Decisions

The Centre-of-Gravity Method is a quantitative technique for determining optimal facility locations to minimize transportation costs based on geographic coordinates. It uses a Cartesian coordinate system and considers factors such as market locations, volume of goods, and shipping costs. The method involves calculating weighted averages of x and y coordinates to identify the best placement for new facilities.

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31 views3 pages

Centre of Gravity Method for Location Decisions

The Centre-of-Gravity Method is a quantitative technique for determining optimal facility locations to minimize transportation costs based on geographic coordinates. It uses a Cartesian coordinate system and considers factors such as market locations, volume of goods, and shipping costs. The method involves calculating weighted averages of x and y coordinates to identify the best placement for new facilities.

Uploaded by

allysabianca7
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LESSON 8: LOCATION DECISIONS

Topic: Centre - of - Gravity Method


Key Points:
It is a quantitative technique used in location decision making that seeks to compute geographic
coordinates to determine the most optimal placement of facilities in order to minimize
transportation costs and distance travels from markets.
Advantages: 1. simple to compute, 2. considers existing facilities, 3. minimizes costs
It assumes that transportation costs are directly proportional to the distance and quantity shipped
It utilizes Cartesian coordinate system (x , y) to represent the geographic area
Its main inputs includes the market, volume of goods shipped, and the shipping costs.

Formula:

where,
x̄= the x coordinate for the new facility
ȳ = the y coordinate for the new facility
xi = x coordinate of destination (market) i
yi = y coordinate of destination (market) i
Qi = quantity to be transported to destination I

Procedure

Step 1: Calculate the weighted average of x-coordinates and y-coordinates using the formula

Step 2: The resulting x̄ and ȳ coordinates represents the proposed optimal location

Step 3: Plot the coordinates of the existing market locations and the proposed optimal location

Illustration:

Using the center of gravity method and the information below on


the location of the potential markets, determine where the new facility should
be located to minimize the total transportation cost. Note that a selected point
in the middle of each region is representing the regional market.

Market Volume (Q) Xi Yi


A 600 1 2
B 400 3 4
C 550 6 4
D 800 2 6

Solution:

Volume (Q) Xi
600 1
400 3
550 6
800 2

𝑥̅ = 1(600) + 3(400) + 6(550) + 2(800)


600 + 400 + 550 + 800
𝑥̅ = 600 + 1200 + 3300 + 1600
600 + 400 + 550 + 800
𝑥̅ = 6700
2350
𝑥̅ = 2.85

Volume (Q) Yi
600 2
400 4
550 4
800 6
ȳ = 2(600) + 4(400) + 4(550) + 6(800)
600 + 400 + 550 + 800
ȳ = 1200 + 1600 + 2200 + 4800
600 + 400 + 550 + 800
ȳ = 9800
2350
ȳ = 4.17

The optimal location is at (2.85, 4.17)

Plot the coordinates:


Market A (1, 2)
Market B (3, 4)
Market C (6, 4)
Market D (2, 6)
Optimal Facility Location (2.85, 4.17)

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