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Finding the Lowest-Cost Location Traditional site location theory can be used to show that one or several locations will minimize transportation costs. While most solutions to locational problems currently involve computer analysis, such analysis may not be needed if the relevant parameters are not too complex. Grid systems can be used to determine an optimal location (defined as the lowest cost) for one additional facility. Grid systems are checkerboard patterns that are placed on a map, as in Figure8-1, and the grid is numbered in two directions: horizontal and vertical. Center-of-gravity approach can be used for locating a single facility so that the distance to existing facilities is minimized. Figure 8-1 shows a grid system placed over a map of five existing retail stores. At issue is where a warehousing facility to serve these stores should be located. Assuming that each store receive the same volume and that straight-line distances are used, the best (lowest-cost) for a warehousing facility to serve the five stores is determined by taking the average north-south coordinates and the average east-west coordinates of the retail stores. In this example, the average distance north is (3+1+3+2+3) or 12.This figure is divided by the number of stores (5), resulting in a north location 12/5 or 2.4 miles. The average distance east is (1+2+3+4+6) or 16; 16 divided by 5 equals 3.2 miles. Thus, the best (lowest-cost) location is one with coordinates 2.4 miles north and 3.2 miles east of point zero. Because it’s not likely that each store will place equal demands on a prospective warehousing facility, the center-of-gravity approach can be easily modified to take volume into account ―― the weight center-of-gravity approach. Weighted Center-of-Gravity Approach To illustrate the weighted center-of- gravity approach, consider the preceding five-store example, but modify the assumption that each store receives the same volume. Assume that store 1 receives 3 tons of shipmen
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